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Why do the lambs remain silent? – by Rainer Mausfeld


James Madison (1751-1836), one of the founding fathers of the constitution, proclaimed that every form of government should be designed “to protect the minority of the opulent against the
majority”. Madison tried to solve the tense relationship between the common people and the elites with a “representative democracy”, a de-facto oligarchy.

extended version of a talk presented at the Christian-Albrechts-Universität Kiel,
22. Juni 2015

Translation by Dr. Daniel Wollschläger

Why do the lambs remain silent? On democracy, psychology,
and the ruling elite’s methods for managing public opinion as
well as public indignation
by Rainer Mausfeld

think about these questions, even if the ruling elites try their best to restrict discourse
about them to a narrow group of “qualified experts”. As “citoyens”, well-informed and
dutiful citizens trying to actively participate in forming our community, we possess what in
the age of enlightenment came to be called “lumen naturale”: We are endowed with a
natural reasoning faculty that allows us to engage in debates and decisions about matters
which directly affect us. We can therefore adequately discuss the essential core of the ways
in which grave violations of law and morality are hidden from our awareness without
having some specialist education. This point is at the heart of the following presentation.
Importantly, our natural reasoning faculty allows us to scrutinize and question the concepts
used to describe, structure, and evaluate social and political phenomena.

As a glaring example, we can look at the neoliberal jargon that tries to veil and hide what it is actually
implying. It would be easy to fill an entire Orwellian dictionary with newspeak terms like
structural reforms, willingness to reform, reducing bureaucracy, de-regulation, stability and
growth pact, austerity, European financial stabilization mechanism (bailout fund), free
market, lean government, liberalization, harmonization, market-conforming democracy,
necessity without alternative, human capital, temporary employment, ancillary wage costs,
social envy, top performer, etc. etc. Such seemingly innocent words come silently bundled
with an ideology whose totalitarian character we need to uncover and point out explicitly.
However, before we can do that, we need to become aware of and identify the hidden
premises, prejudices, and ideological components which are ingrained in the way in which
we talk about social and political phenomena. Otherwise, we might unwittingly and
involuntarily fall for the ideology bundled with the vocabulary. Again, we need not be
experts for this task. We all already have the prerequisite cognitive skills, even if those skills
may need to be trained and honed to be used effectively.

For the sake of staying in power, the ruling elites of democratic nations often hide
important premises and ideological components of their choice of words when presenting
social phenomena and their actions to the public. I will further on try to identify some of
these components. But first, I would like to illustrate the problem of making facts invisible
with a phenomenon in visual perception.

In figure [DW XXXX], we tend to perceive random fragments of objects without being able
to figure out how they relate to each other. Why does this display make it hard to grasp the
meaning of the visible fragments? The answer given by perceptual psychology basically
argues that our visual system cannot apply its natural object-centered categories as it
usually does since the cause of the fragmentation is missing from the depicted scene.
Keeping everything in the scene unchanged except for allowing the cause of the
fragmentation to be identified leads to a dramatic change: We now immediately perceive
how the fragments combine to complete objects and effortlessly pick up their meaning. This
phenomenon reflects a general principle in which our mind works. We will see how this
principle operates in many other situations as well. Presenting several meaningfully related
facts in a fragmented fashion can hide their deeper connections. We then perceive no more
than isolated information fragments without relating them to each other – reading the daily
newspaper typically has this very effect. However, once the cause which made the
information become fragmented appears, we have no trouble to “connect the dots” and
perceive how the pieces of information fit together.

The paradox of democracy
This presentation is about why it is possible to make facts invisible through fragmentation,
and exactly how this can be done. In turn, these questions prompt us to ask who wants facts
to be invisible, and who these facts should be invisible for. To understand these questions,
we need to look at the so-called “paradox of democracy”, really a problem in the
relationship between the political leadership and the general population. The systematic
analysis of this paradox goes back to antiquity. In political discussions, the general
population is often compared to a herd of animals. Since the herd is said to sometimes
exhibit irrational and unpredictable behavior, it is argued that it needs to be controlled. For
the political leadership, it follows that it is important to interpret the silence of the herd and
construe it to be in line with the leadership’s own political actions. Recently, this idea has
become popular through Richard Nixon who interpreted the “silent majority” of the
American people as supporting his militant policy in Vietnam.

The Greek historian Thucydides (454-399 BC) was the first to study these issues
systematically. He was also the first to realize the deep connections between our ideas
about different forms of government and our assumptions about the nature of mankind.
Implicitly or explicitly, every form of government is linked to what we consider the
essential nature of the human mind. Thucydides thought that the general population has a
tendency for acting emotionally, being guided more by raw instinct than by rational
consideration: “Public opinion is erratic and capricious, the general population blames
others for its own failures.” In contrast, Thucydides argues, political leadership is mainly
motivated by its pursuit of power in order to satisfy its dictatorial ambitions. Thucydides
realized that all adequate ways to organize institutional structures must take into account
the psychological weak spots of human nature. He thought that democracy as a form of
government was unfit to comply with this demand. Influenced by the reign of Pericles,
Thucydides instead thought that a form of government would be ideal which on the surface
bears the name of democracy, but really is autocracy, the rule of the first man as single head
of state.

Aristotle’s view was similar. He considered the “timocracy” to be an ideal form of
government, the rule of the distinguished property owners. Aristotle suggested that
democratic and oligarchic elements should be balanced such that neither the poor majority
nor the rich elites would be able to dominate power. For Aristotle, democracy was a
degenerate form of timocracy because the poor majority might decide to divide the capital
of the rich minority among themselves – a possible course of action which Aristotle
considered unjust.

The same idea can be found in the constitution of the United States: James Madison (1751-
1836), one of the founding fathers of the constitution, proclaimed that every form of
government should be designed “to protect the minority of the opulent against the
majority”. Madison tried to solve the tense relationship between the common people and
the elites with a “representative democracy”, a de-facto oligarchy. He thought this would
guarantee that the interests of the rich minority be protected. These examples shall suffice
to show that western school of thought is rife with doubt and even sometimes hostility
towards democracy as a form of government. (1)

Nevertheless, the concept of democracy continues to gain in importance in political
discourse and rhetoric in newer times. Not only is democracy one among several possible
forms of government, it is the only form that allows for legitimate political power. At the
same time, the ruling elites consider democracy a “necessary illusion”. Behind all their
soaring rhetoric of democracy, they are eager to establish the institutional oligarchic
structures necessary to preserve their own interests. They therefore declare real
democratic accomplishments as an “excess of democracy” and try to erode democratic
structures in innocuous ways so as not to arouse public suspicion. This process is currently
accelerating at a frighteningly fast pace. The EU legislative process, the actions of the world
bank and the IMF, the TTIP trade agreement, and the so-called “Troika” are some of the
many indications pointing to this direction.

Establishing oligarchic structures under the veil of democracy has been impressively
successful as western democracies now bear close resemblance to oligarchies. This view is
not only shared among critics of the ongoing process of tearing down democratic elements
of government but also among the ruling elites themselves. In the U.S., Samuel Huntington
contributed to a report on the “crisis of democracy”, there referring to an “excess of
democracy” as diagnosed by the editors. Huntington concluded that the management of
“democracy” was relatively easy under president Truman who was able “to govern the
country with the cooperation of a relatively small number of Wall Street lawyers and
bankers”. Ever since, this “excess of democracy” was diminished wherever possible,
prompting the Washington Times from April 21, 2014 to state: America is no longer a
democracy – never mind the democratic republic envisioned by our Founding Fathers. In an
interview from July 28, 2015, former U.S. president Jimmy Carter called the U.S. an
oligarchy with unlimited political bribery. Evidently, the elites regard the oligarchic
character of the U.S. as an obvious fact. Those who do not place much weight on public
statements of the elite may instead be convinced to recognize the obvious by supporting
scientific evidence. Political scientists Martin Gilens and Benjamin Page (2014) recently
analyzed how much influence the broad body of U.S. citizens exert on political decisions.
Their results show that the actual impact is near zero, and for about 70% of the population,
there is no influence on political decision making whatsoever.

The situation in Europe is very similar. In order to develop a somewhat realistic picture of
the current state of affairs, it helps to take a look at media catering to the elites, such as the
Wall Street Journal. As the financial and economic elites rely on accurate assessments that
are undistorted by partisan political views, these media afford an unclouded view on
political realities. Since these media cater only to the elite, they can dispense with any crude
rhetoric and propaganda found in the mass media consumed by the general population. The
Wall Street Journal from February 28, 2013 soberly states that a democratic process is no
longer able to stop the neoliberal agenda, citing as evidence that the public has voted
against it repeatedly and in several countries, but without consequence. In Europe, the
conviction that the voter has any consequential impact on the results of an election is thus
an illusion, just as it is in the U.S. By voting in an election, voters today cannot anymore
exert influence on decisions that are relevant to the institutional structure of the political

For economic policy, this powerlessness is hardly surprising because neoliberalism and
democracy are deeply incompatible. As Milton Friedman (1912-2006), one of the founding
fathers of neoliberalism, succinctly put: “A democratic society once established, destroys a
free economy” (Newsletter of the Mont Pelérin Society)” – a development which the
economic elite naturally opposes. They regard democracy only insofar as “permissible” as
the economy is protected from any implications from democratic decision making
processes. Which is to say as long as it s not a real democracy. It follows that international
neoliberalism currently is democracy’s worst enemy.

From the perspective of multinational business corporations, democracy mainly is a risk to
their business model and to their revenue. The general population may not agree that
society has to conform to economic constraints and corporate interests which view salaries
and social benefits as negative factors for their accumulation of wealth. Ruling elites then
may have to force adequate “restructuring measures” on the population in order to satisfy
the interests of business organizations.

A society that is thoroughly democratic is thus incompatible with an organization of society
favored by the ruling elites. Conceding that “democracy” is a necessary illusion in political
life, elites prefer it to assume the shape of a “spectator democracy” steered by experts
rather than be a participatory democracy that is a lot harder to control. A spectator
democracy is much more suited to maintain the illusion of democracy while at the same
time ensuring a stable continuity in the status of the political elite.
This very problem is at the heart of the influential report “The Crisis of Democracy”
mentioned above. In 1975, this report was commissioned by the “Trilateral Commission”.
“Trilateral” here refers to the fact that the members of this elite discussion group were
drawn from the main economic forces – North America, Europe and Japan. The Trilateral
Commission has close ties to other elite social networks, especially to the Bilderberg
conference and to the Atlantik-Brücke (Atlantic bridge). German members include Joseph
Ackermann, Gerhard Schröder, Edelgard Buhlmahn and Theo Sommer.

The “Crisis of Democracy” report notes that there is only one possibility to solve the crisis
caused by an “excess of democracy” and to manage democracy in the interests of the elite:
“The effective operation of a democratic political system usually requires some measure of
apathy and noninvolvement on the part of some individuals and groups.” It goes without
saying that those whose apathy and noninvolvement is regarded beneficial for the effective
management of democracy are part of the general population, not the members of the
ruling elite. The elite’s goal of achieving a spectator democracy can thus only be achieved by
depleting the political interests and involvement of the broad body of citizens and instead
foster their lethargy and moral apathy.

Reaching this goal requires employing suitable techniques, especially to induce apathy – be
it through economic worries, fearmongering, consumerism, etc. Other important techniques
are those for managing public opinion and outrage.

Democracy and propaganda
In pondering advantages and disadvantages of different forms of government, U.S. political
scientist Harold Lasswell (1902-1978) came to the following conclusion which nicely
aligned with widely held beliefs of the elite: Democracy should be preferred if it is possible
to make the citizens conform to the political system and agree with the decisions taken by a
specialized political caste in their name. This could be achieved only using suitable
propaganda techniques. Propaganda would thus be an essential and inevitable part of every
“operational” democracy. Lasswell saw techniques to manage public opinion as
advantageous over dictatorial measures of controlling the public because they were
“cheaper than violence, bribery or other possible control techniques.” In this sense,
democracy is an optimal form of government provided that it is firmly guided with
supporting management of public opinion.

Edward Bernays (1891-1995), the most influential propagandist of propaganda, was very
frank in pointing out these issues, for obvious reasons much more so than what is common
nowadays. In his book “Propaganda”, published in 1928, he laid the foundations of modern
propaganda and developed different propaganda techniques. We here regard as
propaganda all systematic attempts at undermining the natural faculty of reasoning to
create attitudes, convictions and opinions which facilitate disenfranchize the citizen at the
benefit of the ruling elites. (4) In “Propaganda”, Bernays states: “The conscious and
intelligent manipulation of the organized habits and opinions of the masses is an important
element in democratic society. Those who manipulate this unseen mechanism of society
constitute an invisible government which is the true ruling power of our country. […] We
are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men
we have never heard of.” What is relevant here is that Bernays is not formulating goals, he
simply comments on the status quo of his time. The described situation has since developed
much further and is even more serious now. Today, propaganda is an essential part of the
indoctrination system in all western societies. The “invisible government which is the true
ruling power of our country” consists of well-connected social networks of different elites
that operate largely unnoticed and without public scrutiny. It is them who “manipulate our
organized habits and opinions”. They steer political decision making and, assisted by mass
media’s “embedded journalists”, portray the results as following from inevitable constraints
that ultimately benefit of all citizens. (5)

How could the elites accomplish this goal of a suitably lethargic population ruled by an
invisible government? Evidently, mass media play a key role. A particularly lucid account of
mass media’s role is given by Paul Lazarsfeld (1901-1976), one of the most eminent
scientists in communication studies and co-founder of modern empirical social science: The
citizens need to be flooded with information to create the illusion of being well informed.
For the average citizen, the illusion of being well informed has the effect that “his social
conscience remains spotlessly clean. He is concerned. He is informed. And he has all sorts of
ideas as to what should be done. But, after he has gotten through his dinner and after he has
listened to his favored radio programs and after he has read his second newspaper of the
day, it is really time for bed.” For Lazarsfeld, mass media therefore are among the “most
respectable and efficient of social narcotics”. According to Lazarsfeld, mass media induce
such a warm and fuzzy feeling of being well informed that, after having read the newspaper
during breakfast, after having checked the online news portal in the afternoon, and after
having watched TV news in the evening, citizens are so overwhelmed by information that
they fail to recognize the root of their own malady. The well-educated social strata are
especially susceptible to this illusion of being informed. Over their lifetime, intellectuals
have obviously been particularly exposed to the doctrine of the currently ruling ideology –
just as they were in Nazi Germany. By silently condoning the actions of the elite,
intellectuals are a major factor in stabilizing and perpetuating the ruling ideology of their
times. There are many examples for narcotizing the general population through affective
measures. (7)

Besides sedating the public, fearmongering techniques are particularly important in the
political domain of exerting affective control over citizens. The rhetoric popularly employed
for legitimizing military “interventions” often follows two strategies simultaneously: While
the well-educated social strata often respond favorably to waging war under the banner of
humanitarian intervention, the remaining parts of society are most easily won over by
inducing fear of evil and violent enemies. A historically famous example with enormous
consequences was Colin Powell who, in his presentation to the UN security council on
February 5, 2003, held in his hand a plastic tube filled with powder. He was supposed to
demonstrate “unambiguous and undeniable evidence” that Saddam Hussein had access to
weapons of mass destruction. Presenting this “evidence” was mainly targeted at the U.S.
population to scare them into supporting a U.S. invasion into Iraq that had long since been
planned. Manipulating the affective state of the population like this proved to be quite
effective, ultimately resulting in the “collateral damage” of killing more than 100000 Iraqi
civilians. More recently, the gravest example of pursuing a hegemonial policy with the aid of
fearmongering is mass media’s coverage of Russia and Ukraine. (8)

In general, short-lived techniques of steering public opinion are inferior to those that have a
lasting effect. In this sense, influencing public opinion is more important than manipulating
the affective state since opinions are typically more stable than emotions. Techniques which
allow manipulating public opinion therefore play a key role. Here, I restrict myself to
discuss only a few relevant aspects. Using the following techniques does not require any
advanced knowledge of psychology, they are routine business in mass media production:

1. Reduce facts to subjective opinions. Hannah Arendt remarked that masquerading facts
as mere opinions is one of the most distressing aspects of totalitarian systems.
2. Present facts which are actually closely related in a fragmented way. This destroys all
context required to understand their meaning and implications.
3. De-contextualize facts – remove facts from their proper context such that they appear
to be isolated single events.
4. Re-contextualize facts – embed facts into a new context with positive connotations.
Make facts lose their proper context which might carry the potential for instilling
public indignation.
Beyond these fairly simple techniques, psychology has identified more subtle cognitive
mechanisms of developing attitudes and taking decisions which can be exploited for
effectively manipulating public opinion. These mechanisms are all the more relevant as they
work pre-attentively and thus are beyond conscious cognitive control. Two examples may
serve as illustration:

1. A number of experimental studies have shown that people rate statements as more
valid or true merely because these statements have been repeatedly made as opposed
to just once. [DW Subjectively more valid statements were also shown to be more
persuasive.] This effect can even be obtained if the experimenter explicitly emphasizes
that the repeated statement is actually false. Processes like this are automatic and
unconscious – we cannot resist them by sheer willpower. The effect remains unchanged
even if the subjects participating in the experiment knows about it in advance: The
more often the subject hears a statement, the more its subjective validity increases.
Innumerable examples for this technique can be readily found in daily newspapers –
writing about the “Greek aversion to economic reforms”, or calling the recent crisis on
the crimea an “annexation by the Russian federation”. Merely re-iterating these
statements over and over makes us believe them more. (9)

2. In areas where we have little expertise, we tend so seek truth in the center among a
broad range of views. This means that a-priori, all opinions are equal to us, and we
simply discard those on the fringes of the spectrum that we call “extreme” – even if
those extreme views happen to be correct. Defining what makes up the acceptable,
still-reasonable region on the spectrum of views is therefore an effective way to
manipulate public opinion: [DW Shifting the perceived extremes also sways the
perceived center among arguments in a debate.] Having the power to control what
counts as the boundary between “still-reasonable fringe ideas” and “unacceptable
extreme views” in the publicly visible range of opinions thus goes a long way in
managing public attitudes. A neoliberal, market-driven conception of democracy
makes it especially important to control how the left fringe of the “acceptable”
spectrum of views is defined, of views that can still be acknowledged as “justifiable”
and “responsible”. For examples, the ruling elites of our “liberal democracy” might
declare that what is expressed by Jürgen Habermas is right on the edge of what we are
willing to accept as reasonable. Positions that are more radical than Habermas and are
more obviously targeted at the heart of power will then be branded as “irresponsible”
because they fall beyond the invisible demarcation of what constitutes “acceptable”
views. Once designated as “irresponsible”, such positions are then barred from
mainstream public discussion.

How can we hide politically inconvenient truths from cognitive and
moral awareness?
Once we have raised our awareness for the aforementioned techniques of manipulating
public opinion, we can analyze an interesting paradox which history supports all too often –
a paradox between our actions and our self perception. Action and self perception may also
diverge on the level of states and nations. Counting on the support of the majority of the
population, states may commit horrible atrocities like torture, mass-murder and genocide,
and yet uphold the view that these actions are somehow morally justifiable. This troubling
phenomenon raises important questions concerning the nature of the human mind. Because
we undoubtedly do dispose of the necessary moral sensibility and capacity to judge what
we consider unjust, at least insofar as it concerns the actions of other people. Said paradox
can only be evoked when our natural moral judgment is sufficiently undermined or blocked,
most easily by making the atrocities committed by our own society morally invisible.
At first, it might seem difficult to let obvious facts become invisible, but magic performances
tell us that hiding things in plain sight is not extremely hard when the audience’s attention
is properly managed.

Hieronymous Bosch’s (1450-1516) painting “The Conjurer” skillfully
and aptly illustrates the general principles: Some obviously well-to-do persons gather
around a table to watch the fascinating performance of a conjurer. The conjurer commands
some rather simple yet effective skills to capture the audience’s attention for his own
benefit. Some members of the audience are gawkers or voyeurs, others appear to be casual
bystanders. One conspicuous person is dressed in the traditional costume of a religious
order, wearing a pince-nez. This means that he obviously knows how to read, the definitive
sign of an intellectual. The intellectual quickly realizes how the lack of alertness of the
audience can be exploited for his own interests: He quickly steals the money purse of the
man in front of him who seems to be hypnotized by the conjurer and who leans in to get a
better view of the pearl in the conjurer’s hand. The thief is what came to be known as a cut-
purse in the middle ages. Bosch’s painting illustrates how easy it is to use misdirection to
manipulate human attention such that the obvious becomes indetectable, and striking facts
become invisible. As I am going to show, this is also true in the political domain, with the
same remarkable and worrying effectiveness. I will make use of some facts that directly
bear on the paradox between our actions and our self perception, that is, on the serious
moral transgressions of our own political communities. In doing so, I would like to reverse
the conventional political perspective: Instead of inquiring about the alleged or true
motives behind our governments’ crimes, I would like to focus on the citizens, that is on
ourselves. Why do we not react to these crimes with a moral outrage as it would be

Since the facts themselves shall serve only as a background for examining this question, I
will provide just a few examples. These examples are chosen according to the following
three criteria: 1. They refer to actions where the responsibility lies with us – the political
community which we belong to. 2. They refer to clear-cut crimes and severe violations of
moral norms – actions which we would not hesitate to morally condemn and feel
indignation about if committed by our enemies. 3. They are undisputed and well
documented with extensive coverage by mainstream media – even thou

Making minor facts invisible
“Minor” facts are especially easy to hide from moral evaluation because inherently, they
have little “moral visibility” – be it because they have limited scope, little political weight, or
because they concern relatively abstract issues. Mass media may cover these “minor” facts
without concern, such facts may be visible in the literal sense yet are invisible to our moral

Serious transgressions of moral norms may still be made invisible without much effort if caused
by abstract institutions. In contrast to tangible and visible violence, structural
violence somehow circumvents our natural moral sensibilities. Examples include effects of
globalized financial oligarchies which act beyond any democratic control. The human mind
is not well equipped to perceive abstract causes, they often remain undetected even when
their effects are massive. In 2012, Jean Ziegler, former UN Special Rapporteur on the Right
to Food, gave an interview to German newspaper “Junge Welt” in which he remarked: “It
took German fascism six years of warfare to kill 56 million people – something which the neoliberal
economic system has no trouble accomplishing in about a year.”

Even when it is easy to directly point the finger at a cause, we still struggle to react with moral
outrage if that cause is an abstract institution: The World Bank is tasked with providing loans for
long-term projects serving the development and improvement of local economic structures.
For years, international human rights organizations condemn violations of human rights
committed by the World Bank. Sometimes, this issue even makes the news in our local mass
media. Major German newspaper “Süddeutsche Zeitung” wrote on April 16, 2015: Many
African infrastructure projects financed by the World Bank include bulldozing slums
without advance warning, forcing residents to migrate or become homeless. On the same
day major German weekly newspaper “ZEIT” ran the headline “World Bank violates human
rights world wide” and reported: In the last decade alone, “3.4 million people have lost their
homes or livelihoods as victims of more than 900 projects financed by the World Bank.”
Informing the public about these devastating facts poses no risk to public peace – as long
they are not put in context, these crimes are difficult to understand and hence neither
arouse much interest nor trouble the population.

It is something else entirely with tangible crimes like torture. Torture always has a human
personal offender. If the cause of a crime is not abstract, but instead there is a real human
perpetrator, our moral sensibility is activated much more easily, as is our natural capacity
for moral indignation. Nevertheless, fragmentation and de-contextualization can make even
these crimes morally invisible.

Uzbekistan serves as another example: Uzbekistan is one of the most repressive
dictatorships in the world with a regime that routinely commits the most brutal violations
of human rights like mass murder, torture, and forced child labor. However, since Germany
operates an air force base in Uzbekistan and therefore has a strategic interest in
maintaining friendly relations, tolerating torture and mass murder is among Germany’s
vital national interests. (10) We can easily find more such inconvenient facts which are
hidden from our moral faculty.

Making substantial facts invisible
How about ways to make substantial facts invisible, which at first seem to be impossible to
hide for their large scale alone? This feat requires big efforts, in politics as well as in stage
magic. Still, David Copperfield has famously shown in 1983 that he can make the statue of
liberty disappear in front of his audience. That kind of magic trick requires an involved and
refined technical apparatus. Manipulating public opinion also requires the large apparatus
of mass media to make facts disappear, and the process is in a sense costly, but it relies on
psychological techniques which are not overly sophisticated.

One of such facts is the number of civilian casualties since World War II killed in U.S.
military “interventions”. Officially, the U.S. is often designated Germany’s “closest ally”, and
Germany’s Office of Foreign Affairs sees the transatlantic relationship as being based on a
set of shared core values. Facts on human cost of lives in U.S. warfare therefore concern a
policy domain for which “we” share responsibility.

Adding up the civilian casualties from U.S. military interventions leads to about 10 to 15
million from the wars in Vietnam and Korea alone with an additional 9 to 14 million from
warfare in Afghanistan, Angola, Congo, East-Timor, Guatemala, Indonesia, Pakistan, and
Sudan – partly fought by U.S. accomplices or “allies”. In total, official estimates from human
rights organizations put the number of civilians who died after World War II in U.S.-led
attacks on other countries between 20 and 30 million.

These crimes are typically accompanied by a choir of self-congratulatory, self-aggrandizing
western politicians, willing journalists and intellectuals who see these acts as “world’s
greatest force for peace and freedom, for democracy and security and prosperity”, as U.S.
president Bill Clinton claimed on April 28, 1996.

In the past 15 years alone, 4 million Muslims died at the hands of the western community of
values, killed to rid the world of terrorism. Their deaths mark the most recent of many
chapters in the history of the western “community of values”. The historical continuity
spans from European colonialism with its “civilizing mission”, over the Vietnam war where
1 to 2 million civilians were murdered to “liberate” them from communism, to today’s
“humanitarian interventions” and “civilizing missions for promoting democracy and human
rights”. To hide facts on that enormous scale and conceal their historical continuity from the
public, it takes considerable effort on the part of mass media. Media fragment and radically
de-contextualize their presentation of these crimes as a “fight for democracy and human
rights”. The documentation of all these crimes is extensive and easily accessible, yet
conspicuously absent from public consciousness.

In his acceptance speech for the 2005 Nobel Prize for literature, Harold Pinter asked “How
many people do you have to kill before you qualify to be described as a mass murderer and
a war criminal?” He reminded us that for politicians to maintain their “power it is essential
that people remain in ignorance, that they live in ignorance of the truth, even the truth of
their own lives. What surrounds us therefore is a vast tapestry of lies, upon which we feed.
[…] It never happened. Nothing ever happened. Even while it was happening it wasn’t
happening. It didn’t matter. It was of no interest.”

This brings up an alarming question: How can somebody induce a moral apathy of that
extent? “What has happened to our moral sensibility? Did we ever have any? What do these
words mean?” The answer brings us back to magic tricks because nurturing such moral
apathy is “a brilliant, even witty, highly successful act of hypnosis.” Evidently, the most
important medium for this collective hypnosis is language. Whoever is in control of
language, of the concepts, notions and categories that make up the building blocks which
we use to think and talk about social and political issues, will have little difficulty in
controlling us as well. “Language is actually employed to keep thought at bay.” (11)

Exploiting the relatively simple psychological mechanisms illustrated in figure [DW XXXX],
it is possible to morally obscure even extensive facts. We almost cannot recognize anymore
such techniques as being consciously employed – since they became so deeply rooted in
how mass media work, they may be regarded as one of their most vital characteristics. The
manipulation mechanisms do not necessarily have to be actively implemented on behalf of
a central power. Instead, they may simply unfold in a process that can be summarized as
“He who pays the piper calls the tune”. [DW hier lohnt m.E. eine Fußnote analog zur
Diskussion nach dem Vortrag: Among those who create media content for a living, the
incentive system of media outlets as well as selection and socialization forces may act to the
same effect as centrally imposed censorship. Newspaper writers who openly express
dissent with neoliberal economic doctrine act counter to the interests of the corporations
who buy newspaper ads and thus keep the press financially afloat. TV journalists who
criticize members of the ruling elites too much will cease to be invited to their meetings and
will thus be cut off from news-worthy privileged information. Such journalists will not find
it easy to maintain their employment, much less so to rise to the top of their respective
media outlet. When Springer, who, among others, publishes Germany’s most important
tabloid “Bild”, sued AdblockPlus in September 2015 over lost revenue for their online
business, their coporate lawyer explained the “balance” between journalistic content and
influence from marketers as follows: “The core business model of [Springer] is selling
advertisements. Journalistic content is merely a vehicle to attract the audience’s attention
for promotional website content.”] From knowing the politically desired “tune” for
“informing” the public, the techniques ensue almost automatically.

The necessity to manage public indignation
From the point of view of the ruling elites, some situations may be especially dangerous to
the stability of the system because they carry the potential for a social chain reaction. These
situations are typically triggered by events that affect the moral sentiments so forcefully
that the public responds with outrage. The elites then have to react quickly and must
effectively defuse the tense situation. Techniques that are targeted more towards long-term
manipulation of public opinion here may prove ineffectual and thus have to be supported
by specialized techniques to control and manipulate the imminent outrage. The publication
of images depicting torture in U.S. operated Iraqi prison in Abu Ghraib provides a typical
example: This “unfortunate incident” was able to affect public moral sentiment so strongly
that it created public indignation. (12)

If the population shows outrage that reaches the level of becoming a threat to the stability
of the political system, e.g., over torture or revelations of mass surveillance, the elites want
to quickly fence in the protest and re-direct the moral outcry towards decoy targets.
Sometimes, public outrage in allied nations can start to threaten political “stability” as well,
with “stability” being newspeak for the elite’s hegemonial interests. Such outrage in other
countries needs to be suitably suppressed just like domestic reactions. This is particularly
true if the outrage manifests itself as organized collective action. In that case, methods to
control the public’s menacing reaction become “counterinsurgency measures”. An entirely
different situation ensues when the public shows outrage against the government of non-
allied nations where western powers have a strategic interest in subverting the current
political leadership. The insurgency then needs to be kindled instead of suppressed, and
managing the outrage is aimed at directing it towards suitable targets which block western
interests. We then call such protests “color revolutions” and guide them in order to
“promote democracy and human rights”.

Over the last years, “counterinsurgency measures” or “low intensity conflict” have become
the most important and most widespread kind of military intervention, surpassing the
impact of conventional warfare by far. According to official definitions of “terrorism”, many
counterinsurgency measures are just that – terrorism: “calculated use of unlawful violence
or threat of unlawful violence to inculcate fear. It is intended to coerce or intimidate
governments or societies […] [to attain] political, religious, or ideological goals.” (13)
Despite clearly meeting this definition, terrorism in the form of “counterinsurgency” is
called “counter-terrorism”.

Whether the same act of violence is declared counter-terrorism or terrorism therefore is
chiefly a matter of who commits the violence – us or our enemies. The notion of “terrorism”
is thus deeply ideological. The same holds true for the concept of “counterinsurgency”. It is
based on silent premises which are important to spell out explicitly: The word “insurgent”
implies taking the perspective of those who are in power. We call “insurgents” those who
threaten to de-stabilize a regime which we support. In contrast, we call “freedom fighters”
those who endanger the stability of an enemy regime.

Counterinsurgency techniques are drawn from a wide range of methods which are
continuously updated and refined – with contributions from the academic community as
well. These methods cover “information operations”, i.e., methods to manipulate public
opinion, as well as “population-control measures” and rapid domination or “shock and
awe”-tactics. The bloody aspects of counterinsurgency are the business of specialized
military and intelligence units like the CIA’s “Special Operations Division” or the many
special operations forces under control of the Joint Special Operations Command. Under the
headline “A Secret History of Quiet Killings and Blurred Lines”, the New York Times on June
7, 2015 gave a detailed and extensive account of the specialized units tasked with
“counterinsurgency” and called them a “global manhunting machine”. What little has come
to light includes a long list of “killing fests” with civilian victims. According to Jeremy
Scahill, the specialized units have funds of about 8 billion dollars annually at their disposal.
While the New York Times report led to some short-lived public indignation, it also
corroborated the belief of many citizens that in our democracy, every misdeed will
eventually come to light. As such, there was essentially nothing to worry too much about. In
addition, the report also framed the cruelties yet again as “regrettable, yet isolated
incidents” thus adding to the historical fragmentation that hides the long-standing tradition
of violence of these military units. Bloody methods of counterinsurgency were mainly
explored in Vietnam, the Tiger Force being a prime example. Notwithstanding these facts,
the methods are practically invisible to public awareness. (14)

Sparking an insurgency
A radically different strategy is pursued when insurgencies overthrow regimes that are
unpopular in the “western community of values”. If these insurgencies promise to achieve a
system change that is in our strategic interests, we portray the actions as the outburst of a
deep longing for freedom on the side of the population. We then strife to support the
insurgents’ actions as part of our campaigns for “democracy promotion”.
After attaching the label “color revolution” to it, such a system change has many advantages
over the traditional approach of CIA-supported military coups which the U.S. has practiced
extensively in the last decades: The “color revolution” seems to be rooted in the middle of
society without overt military support from foreign countries. Moreover, covertly staged
system changes are cheaper, they also have vastly higher acceptance rates among western
nations and international governments. A regime that has come to power by seemingly
peaceful means with the will of the people allegedly behind it is already considered to
possess democratic legitimacy.

There is a large network of private non-profit organizations with powerful financial backing
which prepare and support covertly staged system change. The official agenda of these
organization is to support “democracy and human rights” in countries that are hostile to
western values and forms of government. The National Endowment for Democracy is one of
the most influential of these organizations, it supports a number of private NGOs like
Freedom House and George Soros’ Open Society Institute. Thankfully, NED president Allen
Weinstein was bluntly honest in emphasizing the continuity between the coups organized
by the CIA and his organization’s activity around current insurrections. “A lot of what we do
today was done covertly 25 years ago by the CIA.” Indeed, there is a long list of
authoritarian, yet U.S.-friendly regimes in Central and South America that seized power
non-violently thanks to support from NED. Today, NED’s main focus is more on “democracy
promotion” and “leading the struggle for freedom” in Eastern Europe.

All these activities serving western hegemonic interests are supported by highly specialized
global corporations that call themselves PR firms but essentially create propaganda. All U.S.
interventions over the last decades were prepared for and accompanied by propaganda
these firms sell. Even though these firms have a powerful impact on mass media, they
largely go unnoticed in public. Examples include Hill & Knowlton Strategies – infamous for
their incubator baby hoax of 1990 in preparation of invading Iraq, and Burson-Marsteller or
Rendon Group. They have been very successful not only in selling the public on wars, but
also in having the public belief in a specific, politically-desired “reality”.

The larger political context and historical continuity of the actions surrounding U.S.-backed
system change around the globe over the last decades remain hidden to the public because
mass media has been so successful in their fragmentation mission: Each single case is
portrayed as if the military intervention is all about bringing freedom, democracy and
human rights. Each insurrection in Eastern Europe and primarily Islamic States is made to
appear as expressing the will of the people longing for a system change that happens to be
aligned with “our” global strategic interests.

The art of deception
Both, public opinion and the public’s potential for moral rebellion can be seen as resources
that are too precious to be left to chance or to society as a whole. To overcome our natural
moral sensibilities and achieve control over the potential for moral rebellion, it is necessary
to first create a sufficient level of moral apathy in the general public. Furthermore, our elite
has to dispose of techniques to morally cover up all those facts that may endanger the
process of narcotizing the general public. Important facts that need to be taken care of in
this way are systematic and brutal human rights violations because they afford to affect our
natural moral sensibilities.

Realpolitik implies that all references to democracy, human rights and moral norms are
only considered as rhetoric shells with the only value being their utility to effectively
manipulate the general population. Such manipulation relies on suitable techniques to
deceive the public about the factual discrepancy between political rhetoric and political
reality. Its goal is maintaining the stability of the current political system. The more it takes
into account psychological principles of human information processing, the more effective
the deception becomes.

Over the last decades, psychology has amassed new results and deepened our insights in
understanding how our mind works. Many of these insights can be abused to refine political
propaganda and deception techniques.

In light of the historical evidence, it is not surprising that many psychologists are willing to
put their science to work for such deceitful programs, thus earning recognition and praise
of powerful political circles. One example is given by the American Psychological
Association (APA), world’s largest professional organization for academic psychology. In
2003, the APA co-organized a workshop together with the CIA on the science of deception.
The workshop’s goal was stated as discussing the most recent psychological findings on
effective ways to deceive the public in the interest of national security, and put those
experimental findings to use. (15)

Other state’s intelligence agencies are also interested in results from psychology that may
allow them to develop more sophisticated techniques for public manipulation and
deception. The documents leaked by Edward Snowden revealed a manual written by the
British Government Communications Headquarters (GCHQ) entitled “The Art of Deception”
(The Intercept, February 25, 2014). This manual discusses how the GCHQ may exploit
current psychological knowledge about the mechanisms of cognitive processing in order to
deceive the public and hide facts from their awareness. Quite fittingly, the manual’s title
page shows Hieronymus Bosch’s image “The Conjurer” (Figure [DW XXXX]).
The GCHQ manual meticulously lists relevant domains of cognitive processing and some of
their main characteristics that may be useful for achieving deception.

Can we protect ourselves against attempts to systematically
manipulate our attitudes, beliefs and opinions?
The development of more efficient manipulation techniques rests on identifying
psychological “weak spots” – those intrinsic design aspects of our mind and principles of
human information processing that can be exploited for manipulation purposes. Most
importantly, such principles are, by the very nature of our cognitive architecture, beyond
conscious control. Once we have been targeted by techniques that are based on
psychological weak spots, we almost automatically fall for them – unwillingly,
unconsciously, and without noticing that we are being manipulated. Unfortunately, even
knowing precisely how these manipulation techniques work, and what principles of the
human mind they exploit does not offer protection against falling for them. The techniques
trigger internal processes that proceed automatically without reaching the level of
conscious awareness and thus without being subjected to conscious control. Once activated,
it is futile to try to avoid their consequences.

In principle, these aspects of cognitive processing share their essential characteristics with
those of perceptual processing: So-called visual illusions illustrate cases where there is no
way for conscious control to modify and correct visual impressions that are knowingly
“wrong”. Motion perception provides a particular example that can be experienced after
coming to a halt in a train station, and remaining seated in the stopping train. When looking
out of the window onto a departing train, it often seems like one’s own train is actually
moving backwards. Such effects unfold unconsciously and do not disappear even if one is
well aware of how they work. Avoiding situations that trigger such illusory psychological
processing is the only way to avoid being affected by them.

The same holds true for specific characteristics of human information processing that are
exploited for their potential in deceiving and manipulating the public. Once triggered in a
certain situation, they also unfold without our awareness and without conscious control.
Again, the only way to avoid being manipulated by these psychological mechanisms is to
avoid as best as we can the situations where they are activated. This means that in order to
maintain whatever cognitive autonomy we have left, we need to recognize manipulative
contexts and must actively dodge media that carry manipulative content.
By deliberately exposing ourselves to manipulative contexts because we hold the mistaken
belief that, by and large, we are competent enough to distinguish between factual content of
mass media and deception attempts, we actually set the stage for successfully being

In conclusion, our mind has many hard-wired weaknesses that can be exploited for
manipulative purposes, that facilitate our utilitarian abuse by the political and economic
elites for maintaining and expanding their power. However, we also innately dispose of a
rich repertoire of ways to use our reasoning capabilities to recognize manipulative contexts
and to actively avoid them. This repertoire is akin to a natural cognitive immune system
against being manipulated, but we have to take the deliberate decision to actually use it.
The central tenet of the age of Enlightenment was “sapere aude” – dare to be wise, dare to
recognize. Or, as Kant famously put in 1784, show the resolution and courage to use your
own reason and intellect without the guidance of others. To stand a chance of evading the
sophisticated manipulation attempts we must summon the courage to use our own
intellect, we must overcome our induced moral apathy, and we must stop contenting
ourselves with the mere illusion of being well-informed, with the illusion of democracy, and
with the illusion of freedom. This will not be easy, but ultimately, it is this decision we have
to take. It is our decision, and ours only.

About the author
Rainer Mausfeld, born in 1949, studied psychology, mathematics and philosophy. He works
in cognitive science and analyzes the innate semantic categories that form the fundamental
building blocks of human information processing. Currently, Mausfeld is professor for
general psychology at the University of Kiel, Germany.

(1) The Athens democracy during the reign of Pericles was characterized by far-ranging
powers of the general population. For this reason alone, this kind of democracy is not
what the current elites aspire to – contrary to frequent claims in political rhetoric. “In
Athens’ democracy, the general population held full powers over legislation,
government, and courts of law. Therefore, the Athens democracy was a regime with
direct and unmitigated rule of the people, based on widespread participation of all
citizens without economic discrimination. […] The people of Athens thus possessed an
unrivaled amount of power concentrated in their hands. Legislative, judicial, and
executive powers originated from the general population and stayed with it. Ruling and
being ruled were one and the same thing, or, according to Aristotle, ‘alternated’.”
(Vorländer, 2004, p. 10-11)

(2) Martin Gilens and Benjamin Page (2014) note: “The preferences of the average
American appear to have only a miniscule, near-zero, statistically non-significant
impact upon public policy. When a majority of citizens disagrees with economic elites
and/or with organized interests, they generally lose. […] even when fairly large
majorities of Americans favor policy change, they generally do not get it.” Based on
their findings, Gilens and Page state that “It is no longer possible […] to believe in the
original dogma of democracy.” This conclusively summarizes the current discrepancy
between political rhetoric and political reality.

(3) The Wall Street Journal from February 28, 2013: “That is democracy in today’s euro
zone. The French, Spanish, Irish, Dutch, Portuguese, Greeks, Slovenians, Slovakians and
Cypriots have to varying degrees voted against the currency bloc’s economic model
since the crisis began three years ago. Yet economic policies have changed little in
response to one electoral defeat after another.”

(4) In numerous political and economic propaganda campaigns, Bernays himself later
proved just how effective these techniques are. In 1954, he was instrumental in
creating successful propaganda in support of a CIA operation which Washington used
to topple the first democratic government of Guatemala. This coup cost more than
250000 civilian lives and was orchestrated because with its land reform and far-
ranging social welfare programs, Guatemala was deemed “increasingly threatening” to
the “stability” in Central America. Bernays’ book “Propaganda” is still considered a
classic in political circles and marketing. Since Goebbels was also fond of the book,
Bernays later considered the term “propaganda” tainted and preferred to call it “public

(5) Attempts to lift the veil on this “true ruling power of our country” are quickly
discredited as mere “conspiracy theories” – one of the most successful strategies in
political propaganda cultivated by the CIA. “The CIA’s campaign to popularize the term
‘conspiracy theory’ and make conspiracy belief a target of ridicule and hostility must
be credited, unfortunately, with being one of the most successful propaganda
initiatives of all time.” deHaven-Smith (2014, p. 25) Allegations of promoting
“conspiracy theories” are an excellent instrument to maintain the secrecy of those who
actually do conspire against the public’s interest. Another important tenet of
propaganda is to never obviously appear as propaganda. This insight was explicitly
expressed many times, by Bernays, Goebbels, and U.S. president Eisenhower. The
efforts to obscure propaganda have been so comprehensive and successful that Alex
Carey concludes in his book “Taking the Risk out of Democracy”: “[…] that we are free
from propaganda is one of the most significant propaganda achievements of the
twentieth century.”
[DW Ad embedded journalists könnte man m.E. einen Satz ergänzen zu Uwe Krügers Studie
“Meinungsmacht. Der Einfluss von Eliten auf Leitmedien und Alpha-Journalisten”, “Die
Anstalt” vom Mai 2014 -> SZ Stefan Kornelius und ZEIT Theo Sommer Verwobenheit mit
Elite-Netzwerken und Think Tanks http://www.heise.de/tp/artikel/41/41841/1.html]

(6) “Exposure to this flood of information may serve to narcotize rather than to energize
the average reader […] His social conscience remains spotlessly clean. He is concerned.
He is informed. And he has all sorts of ideas as to what should be done. But, after he has
gotten through his dinner and after he has listened to his favored radio programs and
after he has read his second newspaper of the day, it is really time for bed.” Paul F.
Lazarsfeld & Robert K. Merton (1948). Mass communication, popular taste, and
organized social action. In: L. Bryson (ed.), The Communication of Ideas. New York:
Harper, S. 95-118.

(7) A random example for the narcotizing effect is a photo chosen for Reuters’ “picture of
the day” that was taken on June 8, 2015 during the G7 summit at Schloss Elmau
(Germany). It was highly publicized by German mass media and was featured on the
title page of major daily newspaper Sueddeutsche Zeitung. With a beautiful mountain
range as a romantic backdrop, the picture shows visibly relaxed German Chancellor
Merkel together with U.S. president Obama in causual pose with his back to the
camera, both taking in the idyllic scenery. With a sweeping gesture, Angela Merkel
conveys the impression that things are under control. This picture has no
informational value, but on an emotional level, its narcotizing effect could not be
stronger. We can rest assured that world’s most pressing problems are in good hands,
and besides, “it’s really time for bed”.

(8) Mass media’s systematic fearmongering is more than just a journalistic sin or a simple
attempt at increasing the newspapers’ circulation. Fear induction is an essential
component of affective manipulation of the public by the ruling elites. In his 1927
classic “Propaganda Technique in the World War”, Lasswell concisely concludes that
“There must be no ambiguity about who the public is to hate.” If engendering hatred is
met with obstacles, emphasizing enemy atrocities can stoke public anger. Hatred can
be bred especially well when persons are declared targets. Comparisons to Hitler may
serve as a popular and flexible instrument. Breeding and directing hatred against
abstract targets like communism or “radical islam” is more difficult. It requires
continuous and concerted propaganda efforts, ideally including educational
institutions. However, the benefit of this approach is the possibility to induce fear that
is much more sustained.

(9) Informal daily observations support the psychological evidence for this cognitive
predisposition. Joseph Goebbels, head of Nazi Germany’s Reich Ministry of “Public
Enlightenment and Propaganda” once stated that sooner or later, people will believe
every lie if you repeat it frequently enough.

(10) Uzbekistan is regarded as one of the world’s most repressive dictatorships, an
assessment shared, e.g., by German daily newspaper Tagesspiegel on January 15, 2015.
Year in, year out, human rights organizations report that systematic torture is deeply
entrenched in Uzbekistan’s legal system. In addition, there is widespread forced labor
and child labor organized by Uzbekistan’s government, especially in the cotton
industry where Uzbekistan is among world’s biggest export nations. In 2005, the
regime under president Islam Karimov carried out a massacre killing protesting
citizens in Andijan. In June 2015, Amnesty International wrote: “A decade ago, the
Uzbek city of Andijan was home to spontaneous mass uprising against Uzbekistan’s
authoritarian regime. The military shot several hundred protesters, most of them
unarmed: Children, women, men were killed. There has never been an independent
investigation into this massacre.” Obviously, this called for international sanctions
against Uzbekistan. The European Union indeed did impose sanctions against
Uzbekistan in 2005. Additionally, the EU put a travel ban on then interior minister
Sokir Almatov who was one of those responsible for the Andijan massacre. Even
though the travel ban also covered Germany, Almatov traveled to Hannover for
medical treatment without interference from the German border police. Germany has
strategic interests in Uzbekistan because it is operating an air force base in Termez
that played an important role in the logistics for the war fought in Afganistan. Germany
therefore pushed for EU sanctions to be eased. Then Secretary of State, Frank-Walter
Steinmeier was the first of western Secretaries of State to visit Uzbekistan after the
massacre. He disapproved of sanctions which he considered not an end in itself and
argued that they would only serve to alienate Tashkent (ZEIT, May 13, 2015).
Steinmeier has repeatedly shown that he disposes of the right amount of moral
elasticity in judging human rights abuses that someone doing Realpolitik would need,
at least if the cruelties are carried out by the “good” side. All this was reported in
German media outlets, but the facts remain cognitively and morally invisible:
Cognitively, because no relationships are drawn to cases where sanctions following
severe human rights violations are considered absolutely necessary. Morally, because
reports of systematic torture and of the Andijan massacre were put into a context
which made it seem like having little political importance, and furthermore not
touching our administrative responsibility. In conclusion, tolerating torture and mass
murder in Uzbekistan is in Germany’s national interest because of the strategic
importance of the country.

(11) Evidently, it was not difficult to morally hide Pinter’s Nobel Prize acceptance speech
either. It is little wonder that mass media reported next to nothing about its content,
and when it did, condescendingly so. For example, major German newspaper
Frankfurter Allgemeine Zeitung (FAZ) on December 8, 2005 accused Pinter of being
“extremely one-sided”. Although nothing is more one-sided than torturing and killing
fellow human beings, mass media and intellectuals will readily argue that pointing out
such atrocities is one-sided, but not actually committing them.

(12) This example is instructive for the role of mass media in similar situations. After
Amnesty International on July 23, 2003 and on March 18, 2004 published extensive
reports on torture and prisoner abuse in U.S. prisons including electric shocks, sleep
deprivation, beatings, and tying up genitals, major German media outlets decided to
not report on these crimes and let them remain invisible to the general population.
Even though state-operated TV stations ARD and ZDF gave an account of the crimes on
their internet website, their TV news shows “Tagesthemen” and “heute” kept quiet
about them. Only after the first pictures showing acts of torture had surfaced on April
28, it was no longer possible for media outlets to keep their silence. On April 30, 2004,
daily newspaper FAZ ran the headline “No scandal without pictures” and explained
how these crimes had been systematically concealed by leading newspapers and TV
channels. The article also reported on the purported reasons later given for not
covering the torture and prisoner abuse before April 28, 2004. Major German weekly
news magazine “SPIEGEL” argued that there was “insufficient evidence” despite the
clear and extensive reports by Amnesty International. Daily newspaper Sueddeutsche
Zeitung was convinced that the Amnesty report about electric shocks, beatings, and
tying up genitals did not provide “specific information”. Weekly yellow press magazine
STERN thought that official U.S. denials of the accusations were sufficient to discredit
the Amnesty report. Since flat out denial of what happened in Abu Ghraib was no
option after publication of the photographic evidence, media outlets decided to make a
virtue of necessity and hurried up to portray the earlier systematic lack of news
coverage as an unfortunate exception in their journalistic practice. FAZ described the
behavior of the media as a “chronicle of collective failure” and thus mis-characterized
as an ostensible exception what is really mass media’s business as usual.

(13) The 2001 U.S. Army Field Manual gives this definition: “calculated use of unlawful
violence or threat of unlawful violence to inculcate fear. It is intended to coerce or
intimidate governments or societies […] [to attain] political, religious, or ideological

(14) In the Phoenix program coordinated by the CIA during the Vietnam war, more than
40000 civilians were murdered, most of them women and children. Details about this
program were published in leading German media outlets, e.g., in weekly news
magazine SPIEGEL on April 16, 2004. In his book “War whithout front lines. The U.S. in
Vietnam”, Bernd Greiner writes: Over seven months, the Tiger Force left behind a trail
of blood and destruction in Qang Tin and the Song-Ve valley. Unprovoked, they killed
peasants in the field and randomly murdered people on their way. They tortured
detainees and led them to be executed alone or in groups. Late at night or early in the
morning, they attacked villages, killing everybody in sight with gunfire from automatic
weapons – peasants who had set down for dinner or who slept, children playing,
elderly villagers taking a walk. […] They looted and pillaged, clubbing their victims to
death or raping them to the point of unconsciousness. They shot villagers who
complied with the request to evacuate made by the fliers they were still holding in
their hands. They organized “target shootings” on persons who happened to be in the
wrong place at the wrong time. Neither wounded nor ill people were spared. From
short distances, they used their M-16 assault rifles like handguns.” Like everything,
fighting people who are unwilling to subject themselves to our ideals has its price. No
member of the military units responsible for this brutality was ever brought to trial.
The historical continuity of past and present methods for “counterinsurgency” warfare
is obscured in the coverage of mass media, e.g., in the NYT article. The media’s
fragmentation and de-contextualizing hides the historical continuity from the public’s

(15) The APA has a long history of cooperation with the CIA. The APA was also involved in
the development and implementation of methods for torturing detainees in
Guantanamo which it publicly justified as serving legitimate national security purposes.

Posted in 2011 | Leave a comment

Inflation in the Age of Finance Capitalism by Stephan Schulmeister


The shift of profit-striving from the real- to the financial-economy lowered economic growth Unemployment and atypical jobs soared. The welfare state was weakened. At the same time, financial wealth grew exorbitantly (the DAX increased 14-fold since 1988). The development of financial derivatives made possible profiting from short-term changes in stocks, currencies and bonds.

Inflation in the Age of Finance Capital
by Stephan Schulmeister
[This article posted in June 2022 is translated abridged from the German on the Internet, WSI Mitteilungen.]

The current inflation is the result of the dominant form of capitalism. While the striving for profit concentrated on creating goods in the 1970s (“real capitalism”), financial-, raw material, and real estate assets have been the most important sources of profit since the 1980s (“finance capitalism”) – from asset inflation to flow inflation. Price increases for indispensable goods
make profits soar – whether one looks at the “fossil speculators” (OPEC plus non-OPEC), raw material trading houses in Switzerland or retail chains. The breeding ground for this is the uncertainty in a multi-dimensional crisis.

From Real- to Finance-Capitalism

Experiences from the world economic crisis led to new macro-economic conditions after 1945. The financial markets were regulated and the commodity markets were gradualized and integrated. Therefore, the profit-striving could only develop in the real-economy. The welfare state was built and investments and consumption boomed. Under these “real-capitalist”
incentive conditions, full employment was reached and inflation began to increase, especially in southern European countries. Inflation remained moderate in Germany (1969: +2%). Businesses did not entirely shift the piece-labor costs to prices.. The profit rates were enormous…

The framing conditions changed in the 1970s. The transition from real-economy to financial market capitalism occurred step by step. This process began with the abandonment of fixed exchange rates by the US (1971) accompanied by two massive inflation spurts. By 1973, the dollar lost 25% of its value. The oil exporters reacted with the first “oil price shock” and the world inflation rose dramatically. This sequence was repeated in 1976 and led to the second “oil price shock” in 1979. This time the inflation push was fought with a radical high-interest policy and wage reserve. The economy collapsed and unemployment skyrocketed.

Finance-capitalist incentive conditions were established. The instability of exchange-rates and raw material prices along with interest-rates permanently above the growth rate made real-economic activities unstable and increased the attraction of speculation on the financial markets. This certainly had consequences.

The shift of profit-striving from the real- to the financial-economy lowered economic growth Unemployment and atypical jobs soared. The welfare state was weakened. At the same time, financial wealth grew exorbitantly (the DAX increased 14-fold since 1988). The development of financial derivatives made possible profiting from short-term changes in stocks, currencies, bonds and raw materials – whether the prices rose or fell. One only had to bet on the
right direction. Businesses did not depend on prices increases as an instrument in the distribution battle. The profit rates rose, the tax burden of the higher earners sand and financial- and real-estate assets gained in value.

However this hope did not last. In 2007/2008, the asset inflation (“bull markets”) with stocks, real estate and raw materials capsized into an asset deflation (“bear markets”) – for the first time since 1929. The threefold asset devaluation caused financial crisis and economic breakdown.

Inflation in a multi-dimensional crisis

The Euro-crisis followed the financial crisis. While the economy in southern Europe collapsed recently, Germany gradually changed its political-economic course. The (extreme) wage reserve was abandoned, social benefits were raised, minimum wages introduced and investments in the “energy turn” were encouraged. With a delay, redistribution in favor of profits came to a halt in other countries.

An important step in combating global warming occurred with the Paris Agreement (2015). Slowly it became clear to the “fossil speculators:” their business was a phase-out model. When the cost of CO2 constantly increased through taxes or the emission trade, the industrial states could pocket profits from the higher prices of fossil energy. Raising prices would be hard for the “fossil-speculators” on account of the global oversupply. The reserves of crude oil and natural gas amount to 50-times the annual consumption and coal is even 150-times. “Fossil speculators” can only make more profit from their “toxic treasure” until the end of the fossil age – in this transformation phase.

No country has a greater interest in this than Putin’s Russia. Its technological backlog can only be reduced and its world power ambitions continued in this way. Negotiations with Saudi Arabia about production cuts broke down at the end of 2019. The Saudis “punished” Putin by increasing their demand and letting the oil price fall.

Together with the economic collapse from the Corona-pandemic, all “fossil speculators” were stricken by the disastrous development. In April 2010, the oil price fell to $18. This shock made one thing clear to them. Supply-fears had to be fomented by continuously higher prices of fossil energy whether through hard facts (Russia supplied less natural gas, Saudi Arabia throttled oil production etc), through fake news (oil companies reduce investments) or through production of insecurity (Nord Stream II, Iran-conflict etc).

This strategy was very successful. The prices for crude oil and natural gas rose fourfold by November 2021. Thus, the escalation of the Ukraine conflict is not only part of Putin’s neo-imperial ambitions but also his economic strategy. This agrees with the interests of other “fossil speculators” and energy companies. Saudi Arabia could cut the price of oil in half but decided against that. Reducing quantities and driving up prices is a better profit strategy.

The producers and intermediaries of other raw materials also understand this. Their prices rose before the Ukraine invasion, even if “only” around 50%. Energy prices skyrocketed again (natural gas prices “exploded”). The other raw materials were expensive, especially food.

“Homemade” components of inflation join these political-economic framing conditions. The uncertainty on account of the economic consequences of the Corona-pandemic, the turbulence on the stock markets and the Ukraine war led entrepreneurs to raise their prices sharply corresponding to rising costs for energy and raw materials to draw an extra profit. This was the case with indispensable goods like natural gas, fuels, electricity and foods. The more inflation
spread, the more a chain reaction occurred – as can be seen now. More and more businesses move and raise their prices whether because their input costs were higher or because they saw other businesses raise their prices. The expectations of further price increases trigger hamster purchases that strengthen the process of raising prices…

Measures against the global price upswing

(1) First of all, interventions like a transactions tax could counter speculation on the raw material derivative markets, particularly for crude oil and natural gas. Weakening the power of the “de facto cartel” of OPEC and non-OPEC could be just as important – through long-term bilateral agreements with smaller producer countries and/or through abandonment of sanctions against Iran and Venezuela (both countries have enormous oil- and gas reserves).

(2) Combating inflation on the EU plane is not less important. Here the short-term goal of containing inflation should be combined with the medium-term goal of avoiding a grave shortage of energy and the long-term goal of a climate-neutral economy.

These first two goals require a break with the past practice of establishing electricity- and natural gas-prices on the exchanges. Services for households and businesses must be available at affordable prices. These are drawn up in network economies where market logic is only restrictedly valid because the networks represent natural monopolies. Agreement of production and consumption is essential in electricity production (otherwise blackouts threaten) and cannot be guaranteed as stable or inexpensive by the stock market.

This is especially true in crises like our present crisis. Austria illustrates the consequences. Although nearly 80% of its electricity production comes from water-, wind- and solar-power plants, the energy suppliers expect a much higher exchange price. Therefore, the provision of the population occurs (again) through public electricity- and gas-businesses at average costs. The agreement of production and consumption happens through technical solutions (clearing houses on the natural and EU planes).

The third goal of the overall strategy, a constant reduction of CO2 emissions, requires the insight of all actors that fossil energy will have a moderate but steady higher price from year to year. If this is guaranteed, every household and every business can calculate what costs can be saved in the next 10, 20 or 30 years if the respective household or business switches to renewable energy. The most important sources of profit of such investments are the costs of fossil energy available in the future.

This expectation of a constantly higher price of fossil energy and of CO2 emissions cannot be anchored either through CO2-taxes or through emission trading because the prices of crude oil, coal, natural gas and also CO2-prices fluctuate much too strongly. So the diesel-price in Germany has fallen three times in the last 15 years around 30%… There would be planning
security over all investments in CO2 avoidance if the EU would agree on a long-term price path where crude oil, coal and natural gas increase 5% to 7% per year…

In the present situation, a concerted action is needed of all stakeholders in which everyone agrees on the following guidelines:

– To keep the distribution of gross incomes stable, the cost of living must be oriented in the BIP (gross domestic product)-deflator.

– Since businesses already raised their profit rates, they should accept wage increases corresponding to the gross domestic product, inflation and the higher work productivity.

– This is similarly true for renters. A limited moratorium on rent increases would be sensible to calm or stabilize the inflationary climate.

-Securing existence is central in the lower income third endangered by poverty. Their social benefits and wages should be valorized with the VPI (Consumer Price Index)…

Posted in 2011 | Leave a comment

The US empire and the complicity of intellectuals


Interventions have always been dictated by the geopolitical and economic interests of the country. In fact, the United States is no exception to this rule. On the contrary, every empire acts in this way (see, for example, the invasions of Russia by Napoleon and Adolf Hitler). History also shows that imperial interests have often led to the suppression of aspirations for self-determination.

The US empire and the complicity of intellectuals
by Boaventura de Sousa Santos
[This article posted on 4/9/2023 is translated from the German on the Internet, Das US-Imperium und die Komplizenschaft der Intellektuellen.]

Imperial states like the United States act brutally all the time. With well-meaning intentions, wars are sold. The silence of the “intellectual elite” on this is nothing but complicity with the warmongers. (Part 2, conclusion)

Today we are witnessing a confrontation between American, Russian and Chinese imperialism. There is also the morbid pretension of the United Kingdom which, despite its abysmal social and political decline, has not yet realized that the British Empire has long since come to an end.

I am against all imperialism, and I admit that Russian or Chinese imperialism may prove to be the more dangerous in the future, but there is no doubt in my mind that U.S. imperialism, with its military and financial superiority, is currently the most dangerous of all.

Boaventura de Sousa Santos is professor emeritus of sociology at the University of Coimbra in Portugal.

Of course, superiority is not enough to guarantee its longevity. Indeed, with reference to North American institutions (such as the National Intelligence Council), I have argued that it is an empire in decline, but it may be that its very decline is one of the factors that help explain why the United States is particularly dangerous at present.

I have condemned Russia’s invasion of Ukraine from the beginning, but since then I have also pointed out that the U.S. has actively drawn Moscow into this conflict in order to weaken Russia and contain China. The momentum of U.S. imperialism seems unstoppable, fueled by the perpetual belief that the destruction one sets in motion, promotes, or provokes will occur far from one’s own borders because the country is protected by two great oceans.

The U.S. claims that its interventions are invariably for the good of democracy, but in reality they end up leaving a trail of destruction, bringing about dictatorships or chaos. The most recent and probably most extreme manifestation of this ideology can be found in the book by neoconservative Robert Kagan (Victoria Nuland’s husband) entitled “The Ghost at the Feast: America and the Collapse of World Order, 1900-1941.”

The central idea of the book is that the U.S. – in its efforts to bring welfare, freedom and prosperity to other nations, and to fight corruption and tyranny wherever they exist – is a unique country. The U.S., he said, is so immensely powerful that it could have prevented World War II if timely military and financial intervention had been made to force Germany, Italy, Japan, France, and Britain to join the U.S.-led New World Order.

Any U.S. intervention overseas, he said, had been driven by altruistic motives, for the benefit of the people who lived there. According to Kagan, U.S. military intervention beyond its own continent – since the Spanish-American War of 1898 (which was waged with the goal of dominating Cuba that remains valid today) and the Philippine-American War of 1899 to 1902 (which was waged to prevent self-rule for the Philippines, resulting in more than 200,000 Filipino deaths) – has always been animated by altruistic goals and a desire to help people.

Added to this hypocrisy and the erasure of inconvenient truths in interventions is the tragic fate of indigenous peoples and black populations in the United States, who, when people were supposedly liberated by military interventions abroad, were cruelly discriminated against and exterminated. The historical record exposes the cruelty of mendacity.

Interventions have always been dictated by the geopolitical and economic interests of the country. In fact, the United States is no exception to this rule. On the contrary, every empire acts in this way (see, for example, the invasions of Russia by Napoleon and Adolf Hitler).

History also shows that imperial interests have often led to the suppression of aspirations for self-determination, freedom as well as democracy, and the support of murderous dictators, resulting in devastation and death.

A long list of crimes about which silence is kept

The list of examples is long:

From the Banana War in Nicaragua (1912), to the perpetuation of Cuban dictator Fulgêncio Batista and the 1961 Bay of Pigs invasion, to the coup against former Chilean President Salvador Allende (1973);

from the coup against Mohammad Mossadegh, former democratically elected president of Iran (1953), to the coup against Jacobo Árbenz, former democratically elected president of Guatemala (1954);

from the invasion of Vietnam, ostensibly to respond to a communist threat (1965), to the invasion of Afghanistan (2001), presumably an act of defense against terrorists who attacked the Twin Towers in New York (none of whom were from Afghanistan), and this after twenty years of American support for the mujahideen against the Soviet-backed communist government in Kabul;

from the 2003 invasion of Iraq to topple Saddam Hussein and destroy his (nonexistent) weapons of mass destruction, to the intervention in Syria to defend rebels who were (and are) largely radical Islamists;

and from the 1995 intervention in the Balkans, carried out by NATO without United Nations authorization, to the 2011 destruction of Libya.

There were always “well-meaning reasons” for such interventions, which relied on accomplices and allies at the local level.

What will be left of the martyrs in Ukraine when the war ends (because all wars end eventually)? What will be the situation in the other European countries, especially Germany and France, which are still dominated by the false idea that the Marshall Plan was an expression of self-sacrificing philanthropy on the part of the United States, to which they owe endless gratitude and unconditional solidarity?

And what about Russia? What will be a final balance sheet, apart from the death and destruction that every war brings?

Why is there not a strong movement emerging in Europe for a just and lasting peace? Could it be that, despite the fact that the war is being waged in Europe, Europeans are waiting for an anti-war movement to emerge in the U.S. that they can join with a clear conscience without running the risk of being seen as Putin’s friends or even as communists?

Why so much silence on all this?

Perhaps the most incomprehensible silence is that of intellectuals. It is incomprehensible because intellectuals often claim to be more perceptive than ordinary mortals.

History has taught us that in the times immediately preceding the outbreak of wars, all politicians speak out against war, while their actions help to cause it. Silence is nothing but complicity with the warmongers.

Unlike at the beginning of the 20th century, today there are no well-known intellectuals making loud declarations for peace, “independence of mind” and democracy. When the First World War broke out, three imperialisms existed side by side: Russian, English and Prussian imperialism. Nobody doubted that Prussian imperialism was the most aggressive of the three.

Surprisingly, there were no significant German intellectuals speaking out against the war at that time. The case of Thomas Mann is interesting. In November 1914, he published an article in the Neue Rundschau entitled “Thoughts in War,” in which he defended the war as an act of “culture” (i.e., Germany, he clarified) against civilization.

In his view, culture was the “sublimation of the demonic” and stood above morality, reason, and science. Thomas Mann concluded by saying, “The law is the friend of the weak, would like to flatten the world, but war makes the force appear.”

Mann considered culture and militarism as brothers. In the years 1918 to 1920, he published “Reflections of an Unpolitical Man,” a book in which he defended the policies of the Kaiser and claimed that democracy was an anti-German idea.

Fortunately for mankind, Thomas Mann later changed his mind and became one of the harshest critics of National Socialism. In contrast, the voices of Russian intellectuals – from Peter Kropotkin to Leo Tolstoy, from Fyodor Dostoevsky to Maxim Gorky, who opposed Russian imperialism – were always heard.

There are many questions that intellectuals are obliged to answer. Why have they remained silent? Do intellectuals still exist, or have they become weak shadows of what they once stood for?

The article is published in cooperation with the Globetrotter media platform. The first part of the analysis was recently published on Telepolis.

Boaventura de Sousa Santos is professor emeritus of sociology at the University of Coimbra in Portugal. His most recent book is Decolonizing the University: The Challenge of Deep Cognitive Justice.

Posted in 2011 | Leave a comment

Can state-capitalist China inherit the USA as hegemon? by Tomasz Konicz, May 2023


China’s growth is also running on credit, and the People’s Republic is as highly indebted as the descending Western centers of the world system.10 The Chinese deficit economy is generating even far greater speculative excesses than was the case in the U.S. or Western Europe, as the distortions on the absurdly inflated Chinese real estate market in 2021 made evident.

New Old World Order?

Can state-capitalist China inherit the hegemony of the outdated USA?

Can state-capitalist China inherit the USA as hegemon?

by Tomasz Konicz

[This article posted in May 2023 is translated from the German on the Internet, https://exit-online.org/textanz1.php?tabelle=aktuelles&index=0&posnr=860.]

If one believes the declarations of Russian-Chinese summits and Western assessments, the 21st century will be defined by an era of Chinese hegemony. At their Moscow war summit in mid-March, Putin and Xi advocated a “just multipolar world order” that would put an end to the era of U.S. hegemony.1 A British government report, on the other hand, warned of a world of “danger, disorder and division” that Beijing was creating in open, “epoch-shaping challenge” to the liberal, “rules-based world order. “2 It should be difficult for British analysts to see the crisis-ridden late capitalist world as anything other than “danger, disorder, and division. Such assessments are obviously simple projections. But this does not necessarily mean that they are completely wrong – as a cursory glance at the carnage in Ukraine and the saber-rattling over Taiwan illustrates.

The talk of a multipolar world order is thus, on the one hand, the ideology of all those authoritarian states of the semiperiphery that seek, by means of imperialist power and war policies, to inherit the eroding United States in order to achieve at the regional or global level a supremacy or dominance similar to that enjoyed by Washington in the second half of the 20th century. The rise of regional interstate conflicts is precisely an expression of this very real multipolar world disorder in a global crisis phase in which there is effectively no longer a world hegemon. Whether it is Russian imperialists, Iranian mullahs, Turkish neoottomaniacs, or German full-on Nazis and cross-frontists, it is above all envy of Washington’s disintegrating means of power that motivates this latest stage of anti-Americanism. And this is especially true of the U.S. dollar. The greenback, as the world’s reserve currency based primarily on the oil trade, gave Washington the option of borrowing in the value of all commodities to finance its military machinery, for example. If, on the other hand, Erdogan turns on the money press, inflation simply rises.

That is why the latest monetary agreements between China, Russia and a number of semiperipheral states are causing a stir. In mid-March, during a state visit to Riyadh, head of government Xi touted a switch in oil trade with Saudi Arabia to the Chinese yuan to counter the “increasing weaponization of the dollar. “3 Riyadh is said to be seriously considering the symbolic move to unwind some of its oil trade with Beijing. In warring Russia, the yuan has risen to become the most traded currency in the face of Western sanctions.4 Beijing has been able to strike similar bilateral currency deals with Brazil,5 Pakistan6 and Venezuela7 . The last BRICS meeting in February even discussed the creation of an alternative currency system for “emerging markets. “8 The Financial Times warned as early as March that Western functional elites should prepare for a “multipolar currency world order”-which would mean the loss of Washington’s “extraordinary privilege” to borrow in the world’s reserve currency.

On the one hand, these increased movements away from the dollar can be traced back to the U.S. sanctions against Russia at the start of the war of aggression against Ukraine, since this was the first time that Russian foreign assets were frozen (Lavrov spoke of “theft”), which was carefully registered by all regimes that must prospectively reckon with coming into conflict with Washington. But this tendency toward de-dollarization and de-globalization can be fully understood only against the background of the imperial decline of the United States and the historical crisis process. Only after this does it become clear why China will not be able to inherit the United States as hegemon.

Giovanni Arrighi, in his fascinating work ‘Adam Smith in Beijing’, has described the history of the world capitalist system as a succession of hegemonic cycles. A rising power gains a dominant position within the system in an ascendant phase based on commodity-producing industry; after a signal crisis, this hegemonic power enters an imperial descent in which the financial industry gains importance, to be eventually replaced by a new hegemon with greater means of power.

And this sequence can be traced empirically in the case of both Britain and the United States. The English Empire, which rose to become the ‘workshop of the world’ in the context of industrialization in the 18th century, transformed itself into the world’s financial center in the second half of the 19th century, before being replaced in the first half of the 20th century by the economically ascendant U.S., which in turn experienced its ‘signal crisis’ during the crisis phase of stagflation in the 1970s. After this, the deindustrialization and financialization of the U.S. set in, leading to the economic dominance of the U.S. financial sector. The indebtedness of the descending hegemon to the imperial ascender, which Arrighi also addressed, can be seen both in the case of Britain to the U.S. and through the deficit cycle of the United States to China.

The dollar thus gained its world position in the context of the postwar Fordist boom, when the Marshall Plan in devastated Europe also cemented the hegemony of the United States. And it was precisely this prolonged period of Fordist expansion that formed the economic foundation of U.S. hegemony. With the end of the postwar boom in the stagflation phase, financialization and the implementation of neoliberalism, the economic basis of the Western hegemonic system changed: In the systemic crisis of exploitation, the increasingly indebted United States became the “black hole” of the world system, absorbing the surplus production of export-oriented states such as China and the FRG through its trade deficits – at the price of advancing deindustrialization. Beijing and Berlin thus had every reason to tolerate U.S. hegemony and the dollar as the world’s reserve currency, since without the American sales market China’s rise to become the new “workshop of the world” would not have been possible.

Late capitalism, choking on its own productivity and increasingly running on credit, chained the “production locations” and deficit states to one another within the framework of this globalization of deficit cycles and the corresponding bubble economy, but at the same time the potential for conflict continued to increase due to socioeconomic disintegration processes. This crisis tendency was very concretely personified in Donald Trump, who was elected by an eroding white middle class and wanted to reindustrialize the U.S. by means of protectionism – and thus unintentionally accelerated the decline of the dollar, which was accepted precisely because of the deficits of the dollar area. Actually, since Trump, there is no longer any U.S. hegemony. The United States now holds its position only by means of naked dominance, primarily because of its military-industrial sector, which is the true backbone of the dollar – and it is this that makes a military confrontation between China and the United States likely. The U.S. has its back against the wall globally in much the same way that Russian imperialism did in the post-Soviet space on the eve of the Ukraine war. This was also evident in the current banking quake triggered by, of all things, U.S. government bonds.9

The crisis-induced increase in protectionism thus seems to be doing the rest to the world’s reserve currency, the dollar. And yet, because of the unfolding world socio-ecological crisis of capital, the 21st century will not be able to bring an epoch of Chinese hegemony. The yuan will not inherit the dollar. The hegemonic ascendancy of the People’s Republic, marked by the dominance of commodity production, occurred within the framework of the aforementioned global deficit cycles, in which debt dynamics in the West generated demand for Chinese exports-and it ended with the crisis surge of 2008. With the bursting of the real estate bubbles in the U.S. and Europe, the extreme Chinese export surpluses declined (with the exception of the U.S.), while the gigantic stimulus packages Beijing launched at that time to support the economy led to a transformation of China’s economic dynamics: exports lost weight, and the credit-financed construction industry, the real estate sector henceforth formed the central drivers of economic growth.

Thus, China has obviously already put its ‘signal crisis’, which marks the transition to a financial market-driven growth model, behind it in 2008. China’s growth is thus also running on credit, and the People’s Republic is similarly highly indebted as the descending Western centers of the world system.10 The Chinese deficit economy is generating even far greater speculative excesses than was the case in the U.S. or Western Europe, as the distortions on the absurdly inflated Chinese real estate market in 2021 made evident.11 Economically, the hegemonic descent of the People’s Republic due to the global systemic crisis has already begun, although it has not yet even been able to gain its hegemonic position geopolitically.

This lack of a new leading sector, of a mass wage-labor exploiting accumulation regime in commodity production, in which the inner barrier of capital manifests itself, forms the great difference between the present China and the USA at the end of World War II. This is especially evident with regard to Beijing’s foreign policy ambitions, where the “New Silk Road” initiated an ambitious global development project modeled on the Marshall Plan – and which brought the People’s Republic its first international debt crisis.12 Of the roughly $838 billion Beijing invested to build a China-centered economic and alliance system in developing and emerging countries by 2021, some $118 billion is said to have been at risk of default after the current spate of crises (pandemic and Ukraine war) erupted.13

There is no global economic spring in sight, only over-indebtedness14 and inflation.15 Thus, China’s collapsing debt towers at home and abroad make it look as if it were in decline even before it achieved hegemony. Added to this is the external, ecological barrier to capital, since the People’s Republic rose to become the largest emitter of greenhouse gases in the course of its state capitalist modernization, which makes a similar development path for other countries of the global South pure ecological insanity due to the threat of climate catastrophe (And at the same time, it would be simply perverse to preach renunciation to the global South from within the centers). The historical hegemonic cycle of the capitalist world system is thus superimposed on the socio-ecological crisis process of capital, it interacts with it and allows China’s hegemonic rise and decay to merge.

A hegemonic system, in which the position of the hegemon would be tolerated, is no longer feasible due to the increasingly manifest internal and external barriers of capital, due to the economic and ecological double crisis. Imperialism in the present crisis phase, in which the historical expansionist movement of capital has turned into a contraction leaving behind Failed States, amounts to foreclosure and pure resource extractivism. The foreclosure against the socio-economic collapse areas, which no longer play a role as sales markets, goes hand in hand with the brutal struggle of the states for the melting raw materials and energy sources, which have to be supplied to the sputtering exploitation machine.16

There is clearly a historical tendency to be noted here. The drive for direct control of colonies and protectorates in the 19th century, in the era of English hegemony, transitioned in the 20th century to informal imperialism as practiced by Washington through overthrows and the installation of dependent regimes. In the final phase of the capitalist world system, imperialist rule seems to amount to mere maintenance of infrastructural extraction routes through which resources and energy carriers are to be transported from the areas of economic and ecological collapse to the remaining centers.

What is unfolding in the current crisis imperialism17 is thus a logic of last man standing, in which the consequences of the crisis are passed on to the competition. These power struggles between state subjects, which have now reached the point of open war, execute the crisis process that is objectively advancing. It is a geopolitical power struggle on the sinking late capitalist Titanic, in which there are in fact no winners. That is why all the apparent alliances are so fragile, as was most recently evident from the EU’s moves to distance itself from the U.S. on the Taiwan issue.18

And yet, against the backdrop of the socio-ecological crisis, the struggle between Russo-Chinese Eurasia and the United States’ Oceania, in which Ukraine and Taiwan form an acute and a potential focal point, can certainly also be understood as a struggle between the future and the past. It is a struggle between the declining era of neoliberal county government and the looming age of openly authoritarian rule,19 in which authoritarian formation and social disintegration interact, as is almost paradigmatically visible in Russian state oligarchy and mafia rule.20 The crisis is literally driving the eroding late-capitalist state monsters into confrontation, so that the unloading of capital’s growing autodestructive tendencies in a full-scale war is quite possible.



China: Multiple Crisis instead of Hegemony

Why the state capitalist People’s Republic will not be able to inherit the USA as a hegemonic power
by Tomasz Konicz
[This article posted in October 2022 is translated from the German on the Internet, EXIT! Krise und Kritik der Warengesellschaft.]

Launched in 2013, the “New Silk Road,” an ambitious investment program by Beijing in developing and emerging economies, was supposed to usher in an era of Chinese hegemony and make the 21st century a Chinese secular era – after the 20th century went down in history as the hegemonic period of the United States. Beijing budgeted more than a trillion U.S. dollars for this strategic development program, which evokes memories of the U.S. Marshall Plan in devastated postwar Europe. Just as Washington used the Marshall Plan funds after 1945 to simultaneously become the undisputed leading power of the West in the second half of the 20th century in the reconstruction of Europe, the enormous Chinese loans to many countries on the periphery were motivated by a similar strategic calculation.

According to this calculation, the infrastructural development boost that the construction of power plants, railroads or roads in the “developing countries” was supposed to trigger would be accompanied by close strategic ties between these countries and China. Beijing would thereby buy geopolitical dominance through credit-financed economic development in many regions of Asia, Africa and even Latin America. China, which long ago emerged as the leading trading power in most regions of the global South, would thus become the most important lender and strategic partner, able to build its own alliance system centered on the People’s Republic, similar to the “West” with the United States as the leading power.

A gigantic investment program and its debt spiral

By the end of 2021, the People’s Republic has invested the equivalent of $838 billion in this ambitious development program, according to the Financial Times (FT),1 making China “the world’s largest bilateral lender.” This preeminent position is especially true for the periphery of the world system, as Beijing lent more than all other “bilateral creditors combined” in the 74 countries qualified by the World Bank as low-income countries. The Belt and Road Initiative, as the “New Silk Road” investment strategy is known in English, was not only the People’s Republic’s biggest foreign policy venture since its founding in 1949, but also the “largest transnational infrastructure program” ever undertaken by a single country. Even the Marshall Plan, whose expenditure today would be equivalent to around 100 billion dollars, pales2 in comparison with the dimensions of the “New Silk Road”.

And it is precisely this gigantic investment program that has brought China its first major international debt crisis. More and more of the debtor states on the “New Silk Road” feel compelled to ask China to defer loans or renegotiate loan terms. According to calculations by U.S. think tanks, Chinese loans amounting to some $118 billion are said to be at risk of default, which is equivalent to about 16 percent of total investments in the framework of the “New Silk Road. “3 Countries in Africa, South Asia and Latin America are affected – the Financial Times (FT) went on to say – which have been set back economically by the recent crisis surge initiated by the pandemic. According to the report, Beijing had to renegotiate the terms of $52 billion worth of foreign loans in the 2020 and 2021 pandemic years, compared with only $16 billion worth of debt in 2018 and 2019 – before the outbreak of the pandemic.

Negotiations between Beijing and borrowers from the global South revolve around partial write-downs of the loan amount, payment delays or interest rate cuts. In addition, Beijing is increasingly having to make emergency loans to maintain the solvency of its borrowers on the periphery of the world system. As a result, according to the FT, China increasingly sees itself in a “role usually played by the International Monetary Fund IMF” in many large-scale credit-financed investments under the “New Silk Road.” Ironically, the IMF, whose crisis loans have been linked to draconian austerity measures for decades, called on China and other creditors in mid-July to make concessions to stumbling debtor countries as large parts of the global South threaten to collapse in the face of a dramatic debt crisis. According to the IMF, “one-third of emerging market economies and two-thirds of developing countries are in distress because of high debt. “4

Meanwhile, Beijing has emerged as a “serious competitor for the IMF” after the People’s Republic had to extend secretive “emergency loans” and bailout packages worth tens of billions of dollars to over-indebted countries to prevent defaults or debt crises, the FT said, citing studies by U.S. research institutions.5 According to the report, Beijing’s three largest debtors alone-Pakistan, Sri Lanka, and Argentina-have received bailout packages worth $32.8 billion since 2017. The list of countries that Beijing has had to stabilize through crisis loans includes Kenya, Venezuela, Angola, Nigeria, Laos, Belarus, Egypt, Turkey, and Ukraine. For the most part, these emergency loans have prevented the insolvencies of infrastructure projects financed under the New Silk Road.

Through this, Beijing has often been able to prevent failed large-scale projects from leading to payment crises or sovereign bankruptcies. And China is a more popular creditor than the IMF because, according to the FT, the People’s Republic “keeps its debtor states afloat with ever new emergency loans” without requiring debtors to “restore economic policy discipline” or carry out those infamous “restructuring processes” with which the Monetary Fund has economically devastated large parts of the periphery of the world system since the debt crises of the 1980s. There is a suspicion that countries in payment difficulties prefer Chinese loans to “avoid going to the IMF,” which demands “painful reforms,” one Western analyst told the FT. But this would only delay the inevitable “adjustment” and make it “even more painful.” Many of China’s Silk Road loans would in any case follow a geopolitical logic of building dependencies with debtor countries to curtail “the strategic options of the U.S. and the West.”

Geopolitical dimensions of investment

The geopolitical component of China’s investment strategy is most evident in its heavy lending in the post-Soviet space, where Beijing invested a good 20 percent of its funds earmarked for the “New Silk Road. “6 At $125 billion, the largest share of Chinese loans has gone to Russia, followed by Belarus with eight billion and Ukraine with seven billion. These gigantic investments by Beijing are now threatened by the war in Ukraine, which Russia currently appears to be losing – and which could well lead to a collapse of Russia’s sphere of influence. China’s investment strategy in this region literally depends on the outcome of the war. After all, even in such a case, Beijing can hope to recoup some of its loans by paying them in kind. Under loan agreements, Russia can settle outstanding payments in oil or natural gas, making total defaults on loans extended to Russia unlikely.

Another focus of Chinese investment activity is sub-Saharan Africa, where the People’s Republic has extended loans worth around $78 billion, according to Western estimates.7 Although this represents only a small share of around 12 percent of the external debt of the largely economically isolated region of the world, as Western private lenders still hold a dominant position with 35 percent of total debt, China has been able to gain ground here in recent years. Between 2007 and 2020 alone, Beijing lent $23 billion in public-private partnerships in the sub-Saharan region, while the United States, Japan, Germany, the Netherlands, and France together invested only $9.1 billion.8 China is in demand as a lender in the region because Beijing’s lending terms are far more favorable than the conditions imposed by Western institutions. Interest rates on Western loans are said to be twice as high as loans extended by the People’s Republic.

And it is not only developmentally nonsensical, corruption-ridden prestige projects, as was the case with Sri Lanka, that are being implemented in Africa. Chinese capital, for example, financed a railroad line in Ethiopia that cut travel time between the capital and neighboring Djibouti from three days to 12 hours. In Kenya, a new line was built between Mombasa and Nairobi; a new rail link between Tanzania and Zambia also dramatically reduced travel time; dams were built in Uganda; and roads and infrastructure projects for water supply and electrification were advanced in Africa or Central Asia. The Chinese strategy of accumulating geopolitical influence through economic development certainly seemed to be working in Africa until the recent spate of crises.

The illusion of catch-up development

However, even projects that make sense in terms of development policy are increasingly reaching their economic limits due to the increasing global crisis tendencies: The rail line between Nairobi and Mombasa, which was built by the state-owned Chinese Road and Bridge Corporation within four years, is said to have incurred a loss of about $200 million within three years. Meanwhile, China is said to have accumulated by far the most non-performing loans in sub-Saharan Africa. More than a hundred loan agreements had to be renegotiated in this region, compared to 21 in Asia and only 12 in Latin America.9 A prime example of the shattering of this Chinese development and hegemonic strategy in the face of late capitalist crisis realities is South African Zambia, which went broke on its $17 billion in foreign debt in the pandemic year of 2020. China had previously built a rail line to Tanzania, a hydroelectric plant, two airports, two sports stadiums, and a hospital in Zambia in six billion dollar investment projects.

Outside Africa and the post-Soviet space, it is Pakistan, not Sri Lanka, that has seen a particularly rapid influx of Chinese investment in recent years. In Sri Lanka, Chinese loans add up to just five billion dollars, representing only ten percent of the total liabilities of the economically collapsed state, where corruption and mismanagement culminated in absurd investment projects,10 which contributed to the catastrophic worsening of the current crisis episode. To Pakistan, which as a counterpart to China’s geopolitical rival India has always been of high strategic importance to Beijing, $62 billion flowed from the coffers of the Belt and Road Initiative.

Beijing’s investment activity ranged from infrastructure projects, with funds flowing into power generation and transportation, to the strategically important expansion of the port in Gwadar, to the establishment of manufacturing facilities in Pakistan to take advantage of the very low labor costs in the country.11 This development of “extended workbenches” in Pakistan, to which labor-intensive manufacturing activities were outsourced, sometimes took place not only in Pakistan’s economic centers, but precisely in the unstable periphery plagued by Islamism and “tribal struggles,” such as the province of Chaibar Pachtunchwa.

Hopes of capitalist modernization were dashed by 2020 at the latest, as some of the Chinese investment projects were put on hold after the outbreak of the pandemic and the resulting economic crisis surge, while the crisis quickly made Pakistan’s debt burden unsustainable. Work on the Gwadar port project, for example, is said to have been largely halted.12 To avoid national bankruptcy as a result of the unfolding economic downward spiral,13 in which inflation, rising borrowing costs, and collapsing government revenues rapidly eroded foreign exchange reserves, Islamabad had to resort to emergency loans from both the IMF and China-in July 2022, Pakistan’s foreign exchange was only enough to cover the cost of the country’s imports for just two months. Chinese banks had extended “a number” of loans to the FT on an ongoing basis, most recently $2.3 billion in mid-2022, to boost the country’s melting “stock of hard currency.” The IMF, meanwhile, is committed to Islamabad with crisis loans of more than seven billion.

In early August, at least, acute state bankruptcy seemed to have been averted in the impoverished country plagued by Islamism and state erosion processes, after a renewed loan agreement was reached with the IMF, accompanied by the usual harsh cuts such as subsidy cuts for energy and higher taxes.14 But then came the historically unprecedented flood, characteristic of the weather extremes that are increasing with the climate crisis.15 About one-third of Pakistan’s land area was inundated, and more than 33 million people were affected by the floods. The country now faces a hunger crisis and rising extremism,16 while its economy is on the verge of collapse.17 In initial estimates, Pakistani government ministers put flood damage at around ten billion dollars.18

The increasingly manifest interaction of debt crisis and climate crisis,19 of internal and external constraints on capitalism’s ability to develop, devastated – largely ignored by the West – whole swaths of Pakistan in August that were already suffering from a severe economic crisis. This is the global crisis environment of a late capitalist world system breaking down from its contradictions, in which China launched its great attempt to build its own alliance system by means of an ambitious investment program in order to rise as the new hegemon. Ever-higher piles of global debt and the escalating climate crisis are putting a crimp in Beijing’s imperial calculus, which actually sought to emulate the post-World War II rise of the United States.20

Washington’s hegemonic rise after the end of World War II, however, occurred against the backdrop of the long Fordist boom of the 1950s and 1960s, the “economic miracle” idealized in Germany. Mass motorization and the total penetration of all sectors of postwar societies by the logic of exploitation, which was heralded in the total mobilization of the war economies,21 was able to exploit gigantic masses of labor over nearly two decades in the labor-intensive accumulation process organized on the basis of the Taylor system. This Fordist accumulation regime, with car manufacturing as its leading sector, formed the economic basis of the hegemony of the United States until its phasing out in the 1970s22 , to be replaced under neoliberalism by the financialization of capitalism – in effect, the increasing global deficit accumulation leading to ever new financial bubbles and debt crises.

The U.S. was able to rise to become the unchallenged and accepted leading power of the “West,” the hegemon, during the “Cold War” not least because the long-lasting economic boom enabled Washington to grant its allies room for economic development – which Japan and West Germany also made ample use of in the course of the “economic miracle” to soon outstrip U.S. industry in terms of quality. The rapidly rising tide of Fordism lifted all boats. As long as capital could expand into new markets (automobiles, “white goods,” consumer electronics, etc.) that had only emerged during Fordism, competition between “economic locations” remained in the background – even in the face of “systemic conflict.”

The impossibility of a new hegemonic system in the crisis of capitalism

China, on the other hand, must operate in a crisis-ridden world system in which the enormous global productivity level of commodity-producing industry has led to a systemic crisis of overproduction, resulting not only in the ever-increasing mountains of debt, since the hyperproductive system is effectively running on credit. Moreover, the lack of a new leading sector and accumulation regime leads to the increasing export fixation of economic policy and the corresponding trade wars, in which the capitalist core countries try to prop up their economies with export surpluses – at the expense of the competition, which often reacts with protectionist measures. The pursuit of export surpluses, perfected above all by the FRG within the framework of this beggar-thy-neighbor policy, with which the systemic overproduction crisis is in fact to be “exported,” is thus the source of permanent interstate tensions among the “economic locations” threatened with decline.

And it is precisely from this that the barely surmountable hurdles that stand in the way of the construction of a hegemonic system in the current world crisis of capital also result. Hegemony, i.e. the leadership position accepted or tolerated by the subordinate powers of a power system, is now only conceivable at the price of credit financing, since there is no economic foundation for this in the form of a new accumulation regime. China’s foreign exchange reserves have already shrunk from four trillion dollars to three trillion dollars, according to the FT, partly due to the massive investments in the “New Silk Road,” and Beijing’s lending abroad is also said to have collapsed massively. While the People’s Republic extended more than 55 loans worth more than $1 billion each in 2015, by 2021 the number was less than ten. However, the drying up of Beijing’s generous financial flows, which used to stimulate economic activity in Africa and Asia, is exacerbating the current crisis surge in the periphery of the world system. China can thus lend in the short term, over quite a few years, and thus gain influence, but it cannot, because of the high level of global productivity, create a new leading sector out of the ground that would utilize masses of wage labor in commodity production.

And China is itself affected by the world crisis of capital as part of the world system. This is evident precisely from the tendencies toward beggar-thy-neighbor policies, since the state-capitalist People’s Republic is also concerned with achieving the highest possible export surpluses at the expense of its competitors, which counteracts the formation of hegemony. Due to the smoldering debt crisis23 in China’s anemic real estate sector24 and the pandemic-related economic slowdown in the domestic market, export surpluses are gaining more and more economic policy weight, also for Beijing. Last June alone, China achieved a trade surplus of $98 billion – a new record!25

Yet it is not only the United States where China’s surpluses materialize in the corresponding deficits. The group of ASEAN countries in China’s immediate Southeast Asian neighborhood recorded a deficit of $17 billion in trade with China during the period. Instead of building a hegemonic system in which China’s neighbors also benefited economically from the rise of the People’s Republic, a hard-fought battle for market share is now in the offing, as they find themselves in a world where “absolute demand” is falling and there will be “brutal price wars” for shares of the “shrinking pie,” Reuters noted.

China’s changing position in the global economy

Thus, the “workshop of the world” seems to be returning to the origins of its meteoric rise, which in its initial phase was driven precisely by an extreme export orientation, by the achievement of gigantic export surpluses. Until the world financial crisis of 2007/2008, which was triggered by the bursting of the transatlantic real estate bubble in the U.S. and the EU, the export industry functioned as China’s most important economic driver. The extreme Chinese trade surpluses compared with the “deficit economies” of the U.S. and some parts of Europe, which were running on credit, not only drove the export industrialization and modernization of the People’s Republic, but also went hand in hand with debt exports, as the FRG, as a multiple “export surplus world champion,” also did until recently.26

However, the Chinese accumulation model changed fundamentally with the crisis surge of 2008, the bursting of the real estate bubbles in the United States and Europe, which was countered globally with enormous economic stimulus measures. In fact, the massive government demand boost that Beijing unleashed through a number of stimulus packages made the Chinese economy the global economic locomotive in 2009.27 However, the gigantic support measures implemented by the Chinese government in response to the crisis surge of 2008 also provided the initial spark for a transformation of China’s economic dynamics: Exports lost weight, the credit-financed construction industry, infrastructure and the real estate sector subsequently formed the central drivers of economic growth – up to today’s absurdly high GDP share of 29 percent.28 China’s export-driven modernization with its debt export, which at times made the U.S. the People’s Republic’s largest creditor, thus turned into a state-fueled deficit economy – which has long since escaped state control.

China’s real estate bubble

The Chinese deficit economy, which fabricated a gigantic real estate bubble, experienced its first major crisis surge in the summer of 2021, when one of China’s largest real estate groups, Evergrande, was on the verge of bankruptcy. The group, which was saved from bankruptcy by the Chinese state in early 2022 through a “restructuring program, “29 has accumulated $300 billion in debt, $20 billion of which is owed to foreign investors. Domestically, more than 1.5 million homebuyers are waiting for homes planned and paid for at 500 construction sites to be completed. Meanwhile, the group’s creditors are fighting over who will have to take the inevitable losses.30

So how big is the real estate and debt bubble that Chinese state capitalism fabricated – and can it stand comparison to the 2008 real estate speculation in the United States? In a study that looked at these speculative dynamics, U.S. economist Kenneth Rogoff concluded31 that China’s construction and real estate sectors generate about 29 percent of China’s gross domestic product (GDP) through direct and indirect effects. This means that the bubble in the state-capitalist “People’s Republic” need not shy away from comparison with the West, not only in absolute terms but also in relation to its economic output. In Spain, at the height of the transatlantic real estate bubble in 2006, the real estate sector accounted for around 28 percent of GDP, while in Ireland it was around 22 percent.

The situation is even more dramatic when the price level on the most important real estate markets in the People’s Republic is put in relation to the wage level. In Beijing, Shanghai and Shenzhen, more than 40 annual average incomes are needed to buy a property, whereas in London, one of the most expensive cities in the West, the figure was 22, and in New York “only” 12. Rogoff spoke of a “breathtaking” and, for large economies, “unprecedented” dimension to which China’s financial market-driven state capitalism drove its real estate bubble. This is also evident from the ratio of living space to population, which, according to Rogoff, has long since reached the level of France and Great Britain in the People’s Republic – and even exceeds that of Spain. If the construction fever were really about providing people with living space, China’s real estate market would have been saturated long ago.

Thus, the Evergrande debacle is really just the proverbial tip of the iceberg in an authoritarian Chinese state capitalism that shares a fundamental crisis tendency with its Western competitors: it runs on credit. In 2020, all of China’s accumulated liabilities (government, private sector, financial sphere) amounted to about 317 percent of the People’s Republic’s GDP,32 just shy of the global average of 356 percent.33 Despite declarations by the leadership in Beijing and intensified efforts to curb lending, China’s debt mountains have grown faster than the gross domestic product of the “workshop of the world” since 2008-just as they have in many of China’s debtor countries.

At the same time, all of Beijing’s official figures should be taken with a grain of salt, as much is simply swept under the rug in China. A gigantic mountain of debt is also said to weigh on China’s municipalities, which according to Goldman Sachs could add up to 8.2 trillion U.S. dollars – the debt has been outsourced to “financial vehicles “34 so as not to show up in the statistics.35 That would be around 52 percent of the GDP of the People’s Republic. Incidentally, the over-indebted municipalities have tapped an important source of financing in the course of the real estate boom: they sell land to real estate corporations, which build their speculative properties on it. The officially unrecorded mountain of debt that China’s shadow banks are said to have accumulated amounts to an estimated $13 trillion.36

Multiple Crises as an Expression of the Crisis of Global Capitalism

Thus, China’s leadership must confront not only an external but also an internal debt crisis, which is not only strikingly similar to the real estate bubble that burst in the West in 2008, but also reminiscent of the distortions in many debtor states of the People’s Republic. So far, Beijing has managed to delay the bursting of this bubble through ever new interventions and financial injections, but at some point the devaluation process will inevitably have to take place – especially as the political fallout from China’s internal debt bubble increases: Most recently, for example, there were clashes between bruised bank customers and police forces in Zhengzhou, the capital of central China’s Henan Province, who demonstrated against the freezing of their accounts after the local banks became embroiled in a scandal and went into disarray.37 Moreover, the Chinese Communist Party has had to contend with a mortgage strike sparked by disgruntled property buyers who stopped making mortgage payments en masse as they still wait for their homes to be completed.38

Finally, the climate crisis does not stop at the People’s Republic, whose global investment program seeks to export its own fossil fuel modernization model, which has made China the world’s largest emitter of greenhouse gases, to the periphery and semi-periphery of the world capitalist system, as the new “regenerative” industries that were supposed to enable the ecological transformation of capitalism are too capital intensive and utilize too little labor.39 Not only Pakistan, which is in debt to China, but also the People’s Republic suffered a historically unprecedented weather extreme this summer with a combination of prolonged drought and an extreme heat wave40 that put pressure on energy supplies, economic activity, and food security.41 The unbearable heat literally led to production shortfalls that not only leave China’s growth prospects diminished, but could once again strain global supply chains.42

Thus, the struggle against climate-induced societal collapse that emerged in this year’s summer of horrors, not only in China but also in the EU and the U.S., is likely to make the very idea of global hegemony seem absurd in the years ahead. With inter-state tensions and struggles increasing due to the crisis, escalating into a neo-imperialist war in Ukraine, the rotten late-capitalist state monsters will be more concerned in the coming years with shifting the consequences of the crisis onto their competitors in order to delay their own collapse.

Posted in 2011 | Leave a comment

Re-nationalizing Soviet History and Who breaks the international rules? by Leo Ensel


The construction of differentiated historical narratives that overcome one-dimensional perpetrator-victim polarizations in discourse with other affected nations and integrate one’s own complicity step by step is an extremely laborious, painful process. It will probably take decades, as the struggle to come to terms with the past in Germany has shown.

Re-nationalizing Soviet History

Communism? Only the Russians are to blame! – The posthumous re-nationalization of Soviet history
by Leo Ensel
[This article posted on May 15, 2023 is translated from the German on the Internet, Kommunismus? Daran sind nur die Russen schuld! – Die posthume Renationalisierung der Sowjetgeschichte.]

At least since the end of the Soviet Union, a lively reassessment of over seventy years of communist rule has begun in all successor states, rarely free of national egoisms. At the same time, all sides are not exactly squeamish about their own involvement in the state crimes of the Soviet era: as a rule, they trivialize or simply deny them! By Leo Ensel.

Street fighting is raging in Kiev and other Ukrainian cities. No, this time we are not talking about the defensive or reconquest battles against the Russian invaders. It is about “derussification”, “decommunization”, in other words: “decolonization” of Ukraine. (Needless to say that these terms – at least from the Ukrainian point of view – are synonymous!) In Kiev alone 296 streets are to be renamed.

The monuments to Lenin have long since fallen, the street names of victorious generals of the Red Army were renamed years ago in favor of Ukrainian nationalists from the interwar period – the fact that Nazi collaborators and Jew killers from the Bandera camp were often among them: Bygones! -, and the day of the victory over Hitler’s Germany has been brought forward from May 9 to May 8, compatible with the EU and NATO. In contrast, the monument to the victims of the “Holodomor” (is it a coincidence that this word echoes another?), the famine catastrophe of 1932/33, has been standing in front of the St. Michael’s Monastery in Kiev since the early 1990s.

Something similar can be observed in another post-Soviet country with NATO ambitions. For some years now, a “topography of terror” has been located not only around the former Reich Security Main Office in Berlin, but also in the Georgian capital Tbilisi – built with the kind support of the Heinrich Böll Foundation. What is meant here is the red terror, in particular the Stalinist terror. A series of buildings and squares meticulously demonstrate how the Georgian population suffered under the communist reign of terror.

In the successor states of the USSR, which are speculating on EU and NATO membership, decommunization is in full swing. At the same time, new national historical narratives are being crafted, and they usually boil down to an unspoken simple sentence: Only the Russians were ever to blame for communism!

So it was not representatives of a certain ideology who were the perpetrators, but representatives of a certain nation. The same applies to the victims: Victims were not kulaks, small farmers, aristocrats, priests, dissidents, disagreeable scientists and artists, but simply all peoples of the former Soviet Union – except the Russians! (A perspective that is readily taken up in the West.) In a word: We are witnesses of a remarkable historical revisionist process, which one could somewhat academically and cumbersomely call ‘posthumous renationalization of Soviet history’.

Only the Russians?

Of course, these voluntaristically constructed slanted narratives are not correct at all: Stalin and his notorious secret service chief Lavrentiy Beriya, for example, were Georgians. Representatives of other nationalities, such as the butcher of the Kronstadt sailors, Leon Trotsky, the founder of the notorious Cheka, Felix Dzerzhinsky, the directors of the Stalinist show trials Vyshinsky and Yagoda, and the Katyn killer and genocide perpetrator Anastas Mikoyan, were also criminals of the Soviet regime.

In the Georgian birthplace of Stalin, Gori, located about 60 kilometers west of Tbilisi, there is still today a Stalin museum exclusively dedicated to ‘the great son of Georgia’, whose original Soviet stench, including ‘Stalin wine’ as a merchandising product, probably surpasses everything that still exists in Russia in terms of analogous buildings and memorials – but nowhere appears in the Georgian “Topography of Terror”! And at the beginning of the 1930s there was also starvation outside Ukraine: not least in the fertile Kuban and black earth regions, in the North Caucasus and in Kazakhstan. Russians also fell victim to this state-induced famine by the hundreds of thousands.

But the new narratives serve not only to whitewash the country’s own history. They can also be instrumentalized for the ideological debate in the New West-East Conflict in general and, of course, especially with regard to Russia’s war of aggression against Ukraine. Thus, when at the beginning of March last year a Russian shell hit the Kiev radio station on Melnikova Street, a few hundred meters from Babiy Yar, where at the end of September 1941 SS task forces with logistical support from the Wehrmacht and Ukrainian auxiliary policemen had shot 33,771 Jews within two days, the media said that the Russians had shelled Babiy Yar. Andriy Yermak of the Ukrainian Presidential Office sounded a full-throated note on Twitter: “These criminals are killing the victims of the Holocaust for the second time.” Later, they went one better. Now it said, “The whole of Ukraine has now become Babiy Yar!” The own complicity at this place and the bloody anti-Jewish pogroms by the Ukrainian population during the invasion of the Wehrmacht in Eastern Galicia (today’s Western Ukraine), to which alone in Lviv about 4,000 Jews fell victim, were kept quiet.

This did not diminish the caring mothering by the West. In the course of the Crimea crisis and the armed conflict in eastern Ukraine in the spring of 2014, the Greens had already tried – in vain – to push through a resolution in the Bundestag on Germany’s “historical responsibility for Ukraine. (Today, they would certainly be more successful in this regard.) According to this resolution, it was not the Soviet Union but Ukraine that was invaded by the Wehrmacht on June 22, 1941. Involuntarily, one asked oneself at that time: ‘Where does that leave Belarus, which famously lost a quarter of its population in World War II?’ But at that time, not enough Belarusians had taken to the streets against President Alexandr Lukashenko, so Belarus would have to wait until the summer of 2020 to enjoy special green welfare as well.

The choice of words is decisive

How the post-Soviet states come to terms with the era of the Soviet Union is their own business. For the discussion in Germany, I suggest the following use of language: Not Ukraine (alternatively Belarus, Russia) was victim of most serious German crimes in the II World War, but on the territory of today’s Ukraine (alternatively Belarus, Russia) most serious crimes were committed by Germans in the II World War! This choice of words is a little bit more awkward, but it is resistant against posthumous nationalistic appropriations.

The construction of differentiated historical narratives that overcome one-dimensional perpetrator-victim polarizations in discourse with other affected nations and integrate one’s own complicity step by step is an extremely laborious, painful process. It will probably take decades, as the struggle to come to terms with the past in Germany has shown.

In the meantime, all sides – especially during wartime – should at least refrain from overly simplistic accusations of guilt.


Who breaks the international rules?
[This article posted on 5/13/2023 is translated from the German on the Internet, https://german.cri.cn/2023/05/13/ARTI48ugnX5oWkWyyxmect1E230513.shtml.]

Several Japanese media have recently reported that China will be asked to abide by international rules at the upcoming G7 summit in Japan. The international community is baffled: what international rules are we talking about here? How can a few Western countries like the U.S. accuse China of not abiding by international rules?

When it comes to international rules, there is only one set of rules in the world, namely the basic norms of international relations based on the goals and principles of the UN Charter. But from the mouths of some Western countries, represented by the United States, “UN Charter” is rarely heard. Among them, the term “rules-based international order” is often used. It is an ambiguous term that does not appear in the UN Charter, in the declarations of heads of state and government at the UN, or in the resolutions of the General Assembly and the Security Council. A Chinese representative has openly asked the question in the Security Council, “What kind of rules is the so-called rules-based international order based on? What is the relationship between these rules and the international order?”

These questions have not yet been clearly answered by the United States and some other Western countries. Are they afraid of the answer? Or are they simply incapable of answering? The concept of these rules looks great, but in reality it is a cover for the G7 to interfere in the internal affairs of other countries, cause global unrest, and foment confrontation between camps, and it is the rules that draw boundaries according to ideology and values. Such rules serve the interests of a few countries, like the United States, rather than the common interests of the international community.

We have seen the United States and other countries violate and break international rules at will under the banner of the so-called “rules-based international order.”

The principle of non-interference in internal affairs is an important principle of the UN Charter and a fundamental norm of international relations. In recent years, however, the United States has promoted the “New Monroe Doctrine” in Latin America, instigated “color revolutions” in European and Asian countries, and the “Arab Spring” in West Asia and North Africa, leading to chaos and disaster in many countries. The wars in Afghanistan, Iraq and Syria, in which the U.S. continues to intervene in the 21st century, have produced a total of 27 million refugees.

Both history and reality show that the U.S., Japan and other countries are the biggest violators of international rules. Who is breaking the international rules? This “small circle” should perhaps take a look in the mirror.

Posted in 2011 | Leave a comment

Michael Hudson on de-dollarization


Michael Hudson on de-dollarization

[This interview posted on 5/10/2023 is available on the Internet, https://geopoliticaleconomy.com/tag/paul-krugman/.]

(The following is a lightly edited transcript.)

BEN NORTON: Hi everyone, I’m Ben Norton and this is Geopolitical Economy Report.

I’m joined by the economist Michael Hudson, a friend of the show, a brilliant economist, the author of many books, and also the co-host of the program Geopolitical Economy Hour here with Radhika Desai.

Today we’re going to be talking about de-dollarization. Michael and Radhika just did a series on the decline in the US dollar system and the move by countries around the world to seek alternatives to the dominance of the US dollar.

Specifically, I wanted to bring on Michael today to respond to articles that were published in the New York Times by the economist Paul Krugman, arguing against de-dollarization, arguing in defense of the US dollar system.

We’re going to look at two articles that Krugman wrote, one in April and the other in May.

Michael, I’m going to start with the article that Paul Krugman published in April, called “International Money Madness Strikes Again“. He has this very dismissive tone in this, saying that it’s “madness”.

And essentially in this article, he creates a straw man, where he says that if you think that the dominance of the US dollar is in decline, that you think that there’s going to be hyperinflation in the United States.

He refers to these people as “Weimarists”, referring to Weimar Germany, where there was hyperinflation in the 1920s.

So he essentially says that if you don’t believe that the US dollar will stay dominant, you believe that it’s going to become toilet paper. It’s a straw man argument.

He also compared the dollar to the British pound. And he said, this is a quote from his article, he says, “In sum, there’s no reason to be terrified of the consequences if the dollar should lose its special international status. But that said, it’s really hard to see that happening in the first place”.

So his argument is that it’s not going to happen, but even if it did happen, it wouldn’t be important, because look what happened in Britain; the British pound was the international global reserve currency, and yet it no longer is, and Britain still is a significant economy, he argues.

So what do you make of Krugman’s arguments?

MICHAEL HUDSON: It’s not a straw man argument; it’s deliberate ignorance. You have to really have tunnel vision and not understand the most basic economic history to make the misrepresentations that Krugman said.

And if I hadn’t met him, and I didn’t know how really stupid he is as a person, I would think he’s deliberately lying, but I have met him and he really is that stupid.

In my [book] Super Imperialism and my book Trade, Development and Foreign Debt, I explained the Weimar inflation.

Every hyperinflation in history has come from an attempt to pay a debt in a foreign currency. When Germany was settled with reparations debts in the 1920s, it owed dollars and sterling and French francs.

The problem is that the United States and other countries immediately erected tariff barriers so that Germany could not earn the money to pay the foreign debts. The debts were way beyond Germany’s ability to pay because the European governments wanted to punish Germany.

So Germany made an attempt to print Reichsmarks, throw it onto the foreign exchange markets in a desperate attempt to buy the dollars to pay the allies, England, France and other countries, who then would take these dollars and they would pay the inter-ally debts that the United States insisted on for the arms that they had sold Europe before America entered into World War I.

So the hyperinflation collapsed the exchange rate of the German mark. And, as the exchange rate went down, that meant that import prices went way up.

So first of all, the exchange rate went down, then import prices went up and import prices were an umbrella over the general price level.

And then the Reichsbank had to print more domestic currency in order to enable the economy to buy and sell food and other basic needs at the higher prices that were all being forced up as a result of trying to pay foreign currency debts.

Well, the United States doesn’t owe a foreign currency debt. America’s debts are in dollars and it can always print them. It doesn’t have to throw them on the exchange market to buy rubles or yen or other currencies.

So Krugman doesn’t understand the difference between paying a domestic debt and paying a foreign debt. And that’s because he doesn’t understand foreign trade.

If he understood foreign trade and debt, he never could have won a Nobel Prize. A precondition for winning the Nobel Prize is not to understand how international finance works so that you can act to preserve the kind of financial superstition that’s taught in the universities like the University of Chicago.

And under the monetarist views that are taught in Chicago and parroted in the New York Times and the Wall Street Journal and the other major media, the governments print too much money, usually to pay workers or to pay social security or social purposes, and that increases wages and that results in inflation and that makes the currency decline as inflation makes exports less competitive.

This gets the whole system in reverse. The problem doesn’t begin with the government just creating money to spend domestically.

It starts with foreign debt and trying to pay debt beyond the ability of a country to earn the foreign exchange, the dollars, in which its debt is denominated.

And if you don’t understand that, the government should take away Krugman’s PhD on the grounds that he doesn’t know what any European historian would learn or anybody who’s read what I’ve described in Super Imperialism.

I’ve written books about this very phenomenon. Needless to say, I’m sort of the name that must not be spoken when it comes to talking about international financial crises.

So Krugman’s misrepresenting the Weimarist and hyperinflation to begin with because he doesn’t want the government to spend money domestically on social security, on labor, on social spending.

He wants it spent on, as he said again and again, we need the money to spend in Ukraine. We need the money to fight Russia and China. He’s become a neocon, which is why he’s on the editorial page of the New York Times.

And you can just look at whatever he says as the product of an ignoramus who’s become a neocon and is a useful idiot to convince people that, well, we’ve given him the Nobel Prize, sort of like the emperor’s new clothes, to somehow legitimize his wrongheadedness when it comes to how inflation works, how economies work, and how the balance of payments work.

So then we get into what you said, the dollar’s demise. Nobody’s talking about the dollar’s demise because the United States will use dollars and American companies own affiliates all over the world.

And of course they do their own business in dollars. They don’t do it in foreign currency. So nobody’s really talking about that.

What really is happening isn’t simply a currency crisis. It’s not just a problem of not accepting the dollar.

It’s the fact that America grabbed $300 billion worth of Russian foreign exchange reserves and told [America’s] satellite, the Bank of England, to grab Venezuela’s gold stock and turn it over to Mr. [Juan] Guaidó, who America said should be the Venezuelan president.

And the rest of the world, what President Putin calls a global majority, is now realizing, — We cannot do our own trade with each other in dollars because if we trade in dollars, the United States can grab our dollars.

Obviously, Saudi Arabia and the Arab countries are thinking this. They’ve said, — We’d better get out of dollars as quick as possible if America and Israel attack Syria and Iraq, they’re just gonna grab all of our money. Let’s move our money into safety.

So just as in the United States, the large bank depositors are moving their money out of small banks into the big systemic banks like Chase into safety, other countries are moving their money, the governments are moving their money, out of the dollar into their own currencies, developing currency swaps and trying to develop a BRICS bank to finance their mutual trade and investment because the world economy is breaking into two halves.

Well, that’s what Radhika and I have been talking about in our shows with you on the Geopolitical Economy Hour.

We’re talking about how what appears to be a monetary problem, what appears to be a financial problem, is actually the fact that the world is breaking into two different economic systems, finance capitalism in the United States and industrial capitalism evolving into industrial socialism in Eurasia.

And if you don’t realize the context of the balance of payments and trade and how central banks are holding their monetary reserves, [and how] in this context [governments are asking themselves]:

How are they going to develop their economies domestically?

How are they going to develop their economies to keep their economic surplus at home instead of turning it over to the United States like the NATO countries of Europe do?

[If you don’t realize this context,] then you’re really somehow imposing a tunnel vision on yourself and not seeing the political context of the economic picture.

BEN NORTON: Well said. And another point that Krugman made, in this article in April in defense of US dollar hegemony, is that Charles Kindleberger, the famous economic historian of MIT – and, in fact, Krugman studied with Charles Kindleberger – he had argued that there are three main advantages for the US dollar.

And I should point out by the way that Kindleberger, who worked at the US Treasury, was the founder of the academic discipline known as hegemonic stability theory. So he basically is a kind of imperial court economist or court historian, defending US economic hegemony around the world.

But he argued, Kindleberger, who taught Krugman, and Krugman is echoing him, they argue that the US dollar has three advantages:

One, incumbency – simply the fact that so many people are already using it.

Two, US financial markets are open – and Krugman contrasted that to China, which regulates its capital markets.

And then finally, what Krugman referred to as the so-called rule of law. And this is such crude propaganda.

Krugman wrote – I mean, it’s just laughable – but Krugman wrote, “Unless you’re a dictator planning to commit major war crimes, you needn’t fear that the U.S. government will impound your assets”.

So what do you make of Krugman’s argument, citing Kindleberger, that those three main points – incumbency, open financial markets, and rule of law – are what undergird the hegemony of the US dollar?

MICHAEL HUDSON: Well, I’ve met over the years a number of classmates of Krugman in Kindleberger’s class. And one of them told me that he had a conversation with Krugman.

And Krugman said, the one thing we’re told is, don’t discuss money. Don’t discuss the character of money. And so he never did.

Don’t question things that will somehow rattle the status quo narrative. And he’s learned that. It’s true that there’s inertia for using the dollar.

That was America’s great strength, that it’s really hard to replace one financial system and economic system and political system with another.

It takes a huge effort to sort of get over the hump of, okay, we’re actually going to design a different system.

Well, once the United States threatened to cut Russia and other Eurasian countries off from SWIFT, the bank clearing settlement system, Russia and China put money into developing their own alternative systems.

Now they’ve done it. They’ve also developed their own credit card system domestically. So they don’t have to use the dollarized Visa system or Master Card system. They’re now developing another system.

Krugman has adopted the language of President Biden, who says the world is dividing between democracy and autocracy.

So when a Kindleberger or Krugman say, well, China and Russia are run by autocrats, an autocrat is what used to be called a democrat. Somebody trying to develop their act on behalf of their own economy to raise living standards and to raise productivity and to raise basically the economic output.

By democracy, he means what used to be called an autocrat. Democracy is what they have in Ukraine. That used to be called Nazism. And it’s still called Nazism throughout much of Eurasia and the global majority.

So we’re having an Orwellian terminology here and Krugman is trying to convince people to use this Orwellian terminology where countries trying to protect their economy from American financial aggression of cutting off their banking system, cutting off their credit card system, seizing their foreign reserves, imposing sanctions against them, that somehow they’re autocrats instead of trying to defend their economy against American NATO financial aggression.

The other point he makes is that, well, an open economy, people can put all their money into dollars and they can’t put them into China and keep safe. Well, of course that’s the case.

China has no need for the kleptocrats of the world, the drug dealers, the criminals, the warlords, to lend money to China that somehow is going to do them the favor of protecting. The United States did that.

I’ve described in a number of my books how I was working for Chase Manhattan in 1967.

A former State Department person came to me and gave me a document explaining that the United States wanted to become the new offshore banking center, the new flight capital center, saying that, well, what if America could become the Switzerland?

They asked me to calculate how much the United States could get if it provided safety to the world drug dealers, to the world’s criminals, to the world tax avoiders, to the world dictators.

They said, — If we can have the United States set up banks offshore in the Caribbean and other countries, then we can have Chase Manhattan and other banks set up offices in these countries to take the deposits, and then they will take these deposits and they will send them to the head office.

— And that is how we’re going to finance the Vietnam War and foreign military spending.

And that’s exactly what the United States did.

The United States, by having an open economy, has said, — We will protect all of the savings of the criminals of the world, the kleptocrats, the client dictators that we support, the money that President Zelensky of Ukraine keeps, and that’s true.

America is the protector of dictators, not China, and that indeed makes the dollar more attractive to dictators because the United States has criminalized the financial system. It’s criminalized the balance of payments as a means of financing its military spending abroad.

And I quote the documents in the various books that I’ve written. They were handed to me in an elevator, and I gather they’re not really secret, so I was able to discuss them.

And there was a book by Tom Naylor of Canada called Hot Money, where he describes exactly how it was the United States that sent up the offshore banking centers, making America to be the safe haven for criminals throughout the world.

And Paul Krugman says, this is what’s saving the dollar. Criminals are us. If we can attract all the criminal capital to the United States, there’s so much crime that we support by supporting our dictators and calling them democrats, that we can stabilize the dollar by criminalizing the entire dollarized economy.

That’s Paul Krugman’s defense of the dollar in a nutshell. And of course, he’s right when he says that.

If America can criminalize the global economy and destroy any attempt by Russia, China, Iran, the Eurasian countries, Pakistan, India, Saudi Arabia, to be economically independent, if it can insist that there’s only one currency and a unipolar economy, then America will win, and it can reduce the entire world economy to feudalism.

That’s certainly the neocon ideal.

The global majority of the world reject this ideal, but what they’re saying, again, is not fit to be seen in the print of the New York Times or other media. So you’re not getting the context.

BEN NORTON: Now, I want to also briefly respond to Krugman’s follow-up article that he published in the New York Times in May, and it was even more dismissive in tone. The headline is, “What’s Driving Dollar Doomsaying?”

Here, you can see this kind of neoconservative ideology that you mentioned. He blames the increasing discussion of de-dollarization on what he calls “Putin sympathizers, who want us to believe that America will be punished for, as they see it, ‘weaponizing’ the dollar”, he wrote, in scare quotes.

So he is very dismissive of the idea, which is an objective fact, that the US government uses its currency as a geopolitical weapon.

He also ironically blames de-dollarization on the “crypto cult”. And I mean, we’ve been very critical of the crypto Ponzi scheme. The idea that anyone who is critical of US dollar hegemony is a crypto supporter is laughable.

And he blames Elon Musk.

It’s a very similar article, but he makes two other main points I want to ask you about.

The first point he makes is he says, again, US dollar hegemony is not in danger, but even if it were, he says, quote, “the importance of controlling the world’s reserve currency is greatly overrated”.

And then he says, “Why, exactly, should America care whether a contract between Chinese exporters and Brazilian importers is written in dollars as opposed to yuan or reais?”

And he asks how the fact that the US dollar is the global reserve currency benefits the US economy.

He estimated, writing, “considering all this together, dollar dominance is worth more to America than a fraction of 1 percent of GDP”.

What is your response to that argument?

MICHAEL HUDSON: Well, basically he’s criticizing the Biden administration and the entire American government’s policy to say, — Why are you fighting so hard to preserve the dollar centrality if it’s only 0.1%?

— Why did you bomb Libya and steal all of its gold when President Gaddafi said he wanted to have a gold-based currency for the African countries?

— Why did you go to war with them if it’s only 0.1%? Why is NATO going to war with Russia over Ukraine and threatening China for using their own currency if it’s only 0.1%?

— Why is America spending 4% of its GDP on militarily fighting countries that are seeking to become independent of U.S. financial domination if it’s only 0.1%?

What is Krugman missing here? Well, it used to be, when the status quo of beneficiaries met critics, they’d call them commies.

Well, you don’t call them commies anymore because there isn’t any communism really. You call them Putin sympathizers.

But the fact is, the CIA itself calls themselves realists. Are you going to be a realist? And if you say, a realist is a Putin sympathizer, then reality is what Putin is saying.

Then for reality, read Putin’s speeches and especially read the speeches of Foreign Secretary Sergey Lavrov that spells out exactly what the logic is.

This is what the realist school is talking about, and they call themselves the realist school in the United States. They’re the school that are being sidelined by Mr. Blinken and Victoria Nuland and Biden’s foreign state department and CIA group.

But the fact is that the whole rest of the world seems to have a reason for wanting all of their governments to have their own currency.

Well, let’s look at what difference it makes whether China and Saudi Arabia do their oil trade in yen or dollars.

If you’re doing your oil trade and other foreign trade in dollars, then you have to save up dollars to have the money to pay for the oil. You have to have a U.S. bank account. You have to hold U.S. dollars.

And that means you take your domestic currency, your domestic yen or whatever the currency is, and buy dollars, buy dollars, and that supports the dollars exchange rate.

And it provides the United States central bank with the foreign exchange coming in so that it can afford to pay for the military balance of payments costs of keeping military bases all around the yen countries that use the yen or the ruble or other foreign currencies.

So it makes a very big difference. If Saudi Arabia pays for its oil in Chinese yen, then it’s going to have to save in Chinese yen, and it will have to accumulate yen, which indeed it’s doing in its foreign reserves.

And China will hold Saudi Arabian currency in its foreign reserves instead of holding the dollar. So there will be a mutual inflow of savings into each other’s currency in order to finance their own savings investment.

And this inflow will not go into Silicon Valley Bank or Chase Manhattan or other banks to be turned over to the U.S. Treasury as part of its foreign exchange reserves. That’s the difference.

And if you leave gunboats out of the picture, if you look at an economy that exists without military spending, without balance of payments deficits imposed by having 800 military bases all over the world, then you’re missing the quantitative impact of what actually determines exchange rates and currency values and ultimately international economic power.

BEN NORTON: You mentioned a key point, which is balance of payments.

The other point that Krugman made in this article defending U.S. dollar hegemony is, he insisted that the U.S. constant current account deficit, the constant U.S. trade deficit with the rest of the world, is not related to U.S. dollar hegemony.

In fact, what he is essentially doing here is he is arguing against the idea of exorbitant privilege. That’s a term that was created in the 1960s by France’s finance minister [??Valéry Giscard d’Estaing].

And [d’Estaing] argued that the fact that the dollar is the global reserve currency, and that only the United States can print dollars, gives the U.S. an exorbitant privilege.

Well, Krugman says, no, that’s not true.

Krugman argues that the dollar doesn’t help the U.S. maintain large balance of payments deficits, because if you look at different countries with their current account deficits as a percentage of GDP, technically Britain, Australia, and Canada have larger current account deficits as a percentage of GDP than the United States does.

How do you respond to Krugman’s argument there?

MICHAEL HUDSON: The trick that Krugman uses, and he’s being deliberately deceptive here, he talks about the current account deficit. The current account is not the balance of payments.

The balance of payments has capital account, and it also has transfer payments. And he leaves that out.

What is reported as the current account deficit of trade and services vastly exceeds the actual financial flows.

For instance, the Americans report the trade deficit of oil, huge trade deficit. And yet most oil is imported from U.S. firms.

And yes, it pays a lot for the oil, but very little of this payment for oil is paid in foreign currency, because the firms remit their profits to the United States.

They buy the imported capital goods that they need in the United States. They pay U.S. management in the United States.

I’ve written a monograph on distinguishing the financial flows of the balance of payments from the GDP approach as if all of these things were monetary.

So Krugman deliberately leaves out the fact that America makes an enormous amount of money on capital account.

For instance, the fact that most of the global majorities’ foreign debts are in dollars, not their own currency.

This is why the IMF forces them to depreciate their currency and impose a chronic hyperinflation on Latin American and African debtor countries.

It’s because if you look at the capital account, including the enormous inflow of the world’s criminal capital through the offshore banking centers, then you’re going to understand that the balance of payment is something utterly different than the fictitious picture that Mr. Krugman states.

And you can look very simply. You can look at the Treasury Bulletin, and you can look at U.S. liabilities to foreigners.

Look at U.S. liabilities to their own branches in the Caribbean countries and the other offshore banking centers, and you’ll see an enormous inflow of foreign currency from these offshore banking centers into the dollar accounts of the head offices of these banks.

The statistics are all right there in the Treasury Bulletin.

And when Krugman, instead of looking at the Treasury Bulletin, looks at the Commerce Department’s trade and current account figures, he’s distracting attention from what really is important. Currency values are not determined by trade.

They’re determined by capital investment, by debt service especially, and by capital flight and crime.

And if you don’t realize that capital flight, crime, warfare is the key to the balance of payments, but only goods and services, then you’re under the same illusion that Krugman is in in the American economy, that the financial sector is all about banks lending money to factories to pay workers to produce the goods and services that they buy, leaving out the stock market, the bond market, the real estate market, the commercial banking system, the private capital, and everything else that is a blank area to Mr. Krugman.

BEN NORTON: Yeah, I do have to say it is pretty incredible seeing that this is a Nobel Prize winning economist writing in the New York Times, and he conveniently leaves out any mention of the capital account.

He does not mention the capital account one time in this lengthy article.

Yet anyone who has taken a macroeconomics 101 class knows that the inverse of the current account is supposed to be the capital account. No mention of that.

No mention of all of those dollars being recycled back into the United States.

So while the US maintains this massive trade deficit, those dollars go out in the world, but they’re recycled back into buying assets in the United States, which helps keep the whole bubble afloat.

MICHAEL HUDSON: That’s why he was given the Nobel Prize, because he was able to create a seemingly readable fairy tale about how the economy would work if it didn’t have any money, if it didn’t have any debt, if there weren’t any gunboats, if there were not any crime, if the financial sector did not control the government, but governments were elected to represent the interests of the people in getting better wages and living standards.

If he can somehow provide a readable mythology, like a fairy tale, that seems to make sense, and wouldn’t it be nice if this were true, then you get the Nobel Prize. Then you get applauded, and you get hired by the newspapers that themselves are representative of the financial oligarchy that runs the country.

BEN NORTON: Very well said. Well, a final note to end on here, Michael, is probably the most insipid, frankly stupidest point in Krugman’s article, which really reflects his main talking point, which is simply that the dollar is powerful because it’s powerful.

Krugman wrote, to conclude his article, he wrote, “The bottom line in most of this analysis is that the dollar is widely used because it’s widely used — that all of the various roles the dollar plays create a web of self-reinforcement, keeping the dollar pre-eminent”.

This is a tautology. The dollar is powerful because it’s powerful, and it’s going to always be that way.

This is the ideology of people like Paul Krugman and Charles Kindleberger.

It’s, of course, why they’re elevated in the US media. It’s why they’re given awards and prizes. But it also just shows how vacuous their arguments actually are.

And I think maybe deep down, he probably knows that he doesn’t have much to argue. Because if an undergraduate submitted that argument, I mean, a philosophy professor would rip it to shreds, but maybe an economist, a neoclassical, neoliberal economist would probably take it seriously. They’re the only ones.

MICHAEL HUDSON: Well, what does “widely used” means?

Just ask yourself for a minute, why doesn’t Venezuela use dollars? Why does Russia not use dollars and moved away from it? Or euros? Why did China say we’ve got our moving away from the dollar?

Why did Saudi Arabia make the arrangements with China and other BRICS countries to trade in their own currencies, not dollars?

If you don’t acknowledge the fact that other people have another idea, then you’re very biased.

Why is it that central banks of Russia, China, and all over the world are buying gold in the last, especially in the last few months? Why are countries deciding, we’re going to sell dollars and are going to buy gold?

There must be some logic there. Why doesn’t he explain at least what the logic is?

He can say that there are counter arguments, but you have to acknowledge the fact that other people must have a reason for what they’re doing.

So Krugman is saying that other people have no reason at all for what they’re doing. And when they move out of the dollar, there’s no reason for them to do it.

And obviously, if you read the speeches of what these countries, foreign ministers and central bankers say, they explain just why they’re doing what they’re doing.

And you don’t get a word of that in the New York Times any more than you get a word of what Seymour Hersh wrote about why the United States blew up the Russian Nord Stream gas lines to Germany.

There are certain things that you just can’t discuss in polite society.

BEN NORTON: Well, that’s a great note to end on. I want to thank you, Michael Hudson, a brilliant economist, the author of many books. His website is michael-hudson.com.

And Michael also hosts a regular program here with Radhika Desai, which is Geopolitical Economy Hour.

Michael, thanks so much for joining me.

MICHAEL HUDSON: It’s really good to be here. I love these discussions. Somebody has to talk about them.

BEN NORTON: It’s always a pleasure. Anytime.

In this article:Charles Kindleberger, de-dollarization, dollar, hyperinflation, inflation, media, Michael Hudson, neoliberalism, New York Times, Nobel Prize, Paul Krugman

Posted in 2011 | Leave a comment

US corporations in the wings for post-war Ukraine


The IMF granted large loans to the invaded country and enforces the so-called neoliberal “Washington Consensus”[1]. In a major privatization campaign, the Ukrainian government is selling off state assets. U.S. corporations such as ExxonMobil, Chevron and Halliburton participate in negotiations to take over the oil and gas industry of the Eastern European country.

U.S. corporations in the wings for post-war Ukraine
by Ben Norton

IMF and oil companies are already negotiating privatization and investment-friendly conditions with Ukraine.
Protests against the IMF’s austerity policy: After the war also in Ukraine, as here in Argentina in 2022

[This article posted on 5/7/2023 is translated from the German on the Internet, US-Konzerne in den Startlöchern für die Nachkriegs-Ukraine – infosperber.]

US-Konzerne in den Startlöchern für die Nachkriegs-Ukraine

Countrywide privatization campaign.

The IMF granted large loans to the invaded country and enforces the so-called neoliberal “Washington Consensus”[1]. In a major privatization campaign, the Ukrainian government is selling off state assets. U.S. corporations such as ExxonMobil, Chevron and Halliburton participate in negotiations to take over the oil and gas industry of the Eastern European country. Kiev wants to increase production to replace energy imports from Russia.

Recently, President Volodymyr Selensky sent a friendly video message to a U.S. business lobby group, thanking companies such as BlackRock, JP Morgan, Goldman Sachs, and Starlink and promising other “big deals.”

In September, Selensky also symbolically opened the New York Stock Exchange via video and announced that his country was “open for business.” Ukraine, he said, was offering U.S. companies more than $400 billion for “public-private partnerships, privatizations, and private companies.”

The Ukrainian government used the war as an excuse to impose some of the most anti-worker laws in the world. The director of the Kiev-based nongovernmental organization Labor Initiatives warned of a “major attack on labor rights in Ukraine” and wrote in a German government-sponsored journal that “the war must not be used as a justification for the disenfranchisement of workers.”

While China advocated peace talks and Brazil’s President Lula da Silva supported Beijing’s efforts, the West vehemently rejected all attempts at diplomatic negotiations. Instead, the West helped escalate NATO’s proxy war against Russia by sending fighter jets and tanks to Ukraine.

Ukrainian state energy company Naftogaz is courting the Halliburton corporation, which already profited from the Iraq war

Ukrainian officials now treat their country like a for-profit company and frequently travel to the United States in search of lucrative business opportunities. In April of this year, the CEO of Ukraine’s state-owned energy company Naftogaz, Oleksiy Chernyshov, flew to Washington DC to meet with U.S. political and business representatives. As reported by the Financial Times, Chernyshov met with representatives of ExxonMobil and Halliburton, having already had a similar meeting with Chevron in January. The newspaper reported, “The negotiations with major oil and gas companies are part of a strategic push to boost natural gas production. This could help replace Russian supplies to Europe in coming years, according to Ukrainian officials.”

Halliburton is also the world’s largest provider of fracking services and hydraulic fracturing, a controversial form of gas extraction that is so environmentally damaging it has been banned in the United Kingdom.

In response to the Financial Times report, former Greek finance minister and economics professor Yanis Varoufakis tweeted, “And here we have it. Exxon, Halliburton & Cheveron are now taking over Ukrainian oil and gas fields after Iraq. They plan to introduce fracking on a large scale – a clear and immediate threat to Ukrainian agriculture.”

Yanis Varoufakis criticizes fracking plans

Chernyshov, the chief executive of Ukrainian state energy company Naftogaz, told the Financial Times:

“We want them [Halliburton] to dramatically expand their presence. We definitely want them there – present on the ground … We will welcome them … We can do joint gas production and conclude a PSA agreement [production sharing agreement]. They can get a license and produce themselves. We will support that.”

In November, Joe Rainey, president of Halliburton and responsible for the Eastern Hemisphere, traveled to Ukraine to meet with Chernyshov. Naftogaz published a press release on its website boasting,

“strengthening its strategic cooperation with the American company Halliburton, one of the world’s largest providers of oilfield services, in order to develop the full potential of Ukrainian oilfields.”

For his part, Chernyshov stated:

“Your support and visit to Kyiv are a strong signal to the entire market and the world … I am grateful to the U.S. government, the American people and to you personally for your comprehensive support to Ukraine. We appreciate it very much. Our cooperation is extremely important, and we are doing our best to improve and expand it.”

Halliburton has been virtually synonymous with corruption in the United States since the 2000s. Mostly, it involved large government contracts. In 2017, the company was fined $29.2 million by the U.S. Securities and Exchange Commission. It had violated the Foreign Corrupt Practices Act with highly profitable contracts for oilfield services in Angola.

Vice President Dick Cheney, who served under former President George W. Bush, had worked for years as Halliburton’s chairman and CEO. Cheney, a hardliner among the neoconservatives, was one of the main architects of the U.S. invasion of Iraq in 2003 in violation of international law, the same year Halliburton got a deal that National Public Radio NPR called a “‘sweetheart’ deal in Iraq.” NPR informed then as follows:

“Oil services company Halliburton is under intense scrutiny for its multibillion-dollar contracts with the U.S. military in Iraq. Critics in Congress want to know if the company is gold-plating contracts, that is, driving up costs and pocketing the difference. Other critics charge that Halliburton appears to have become another branch of the U.S. military, while the company’s former chief executive, Dick Cheney, is now vice president. In the first of a three-part NPR series on the complex relationship between the defense contractor and the federal government, NPR’s John Burnett examines the scope of Halliburton subsidiary Kellogg, Brown & Root, better known as KBR,’s contracts in Iraq. America’s war on terrorism has made KBR a lot of money. Since Sept. 11, 2001, the company has set up base camps in more than 60 locations throughout the Middle East and South Asia. Under its agreement with the Pentagon – known as the ‘logcap’ contract – KBR is the preferred company to provide troops in Iraq with everything from portable toilets to Internet cafes.”

A decade later, the International Business Times reported that Halliburton subsidiary KBR had won more Iraq-related contracts than any other private company in the first decade of the war.

The newspaper wrote:

“The company [KBR] was awarded $39.5 billion worth of Iraq-related contracts over the past decade, with many of those contracts awarded to competing companies without competitive bidding. For example, a 2010 contract extension worth $568 million to provide shelter, meals, water, and sanitation for soldiers; a contract that led to a Justice Department lawsuit alleging kickbacks.”

Ukraine interested in natural gas deposits off Crimea

The Financial Times reported that the Ukrainian government wants to drill for natural gas in the Black Sea off Crimea. However, Kiev cannot access this gas.

Crimea was annexed by Russia in 2014 after a referendum in which 97 percent of participants voted in favor of annexation to the Russian Federation in a turnout of 83 percent. Western governments disputed the vote. But a poll by the U.S.-based Pew Research found that 91 percent of Crimean residents thought the referendum was free and fair. 88 percent of Crimean residents wanted Ukraine to recognize the result.

Despite Crimean residents’ overwhelming support for incorporation into the Russian Federation, Ukraine and its NATO backers insist on retaking the region. Not only because of its valuable offshore gas reserves, but also because of its great geostrategic importance to Russia.

Russia has only one warm-water naval base, the Sevastopol base in Crimea. This is the most important base of the Russian Black Sea Fleet. Without it, the sea would be virtually controlled by NATO. For Moscow, this is a vested security concern that is not motivated by economic ulterior motives. Even the U.S. military-backed think tank RAND Corporation acknowledged this, publishing a report in April 2022 titled “Russia Does Not Seem to Be After Ukraine’s Gas Reserves.”

RAND wrote:

“Ukraine does indeed have the second-largest known natural gas reserves in Europe, nearly 80 percent of which are located east of the Dnipro River. However, these deposits represent less than 3 percent of Russia’s total natural gas reserves. And while Ukraine could theoretically have significant shale gas reserves, they remain largely unexplored. Russia currently has neither experience nor technologies for shale gas production.”

Naftogaz CEO meets U.S. ambassador involved in 2014 coup

During his trip to Washington in April this year, Naftogaz CEO Chernyshov met not only with company executives, but also with high-ranking government officials, such as former U.S. Ambassador to Ukraine Geoffrey Pyatt. The latter represented Washington in Kiev during the violent U.S.-backed coup in 2014, which overthrew Ukraine’s democratically elected, geopolitically neutral government and installed a pro-Western regime.

An infamous leaked phone conversation by top State Department official Victoria Nuland revealed that U.S. officials were deciding at the time who would lead the Ukrainian government after the coup. The phone call with Nuland involved none other than Pyatt.

Today, Pyatt is U.S. Assistant Secretary of State for Energy Resources and also coordinates cooperation between the G7 and Ukraine. In a press release about Chernyshov’s meeting with Pyatt, Naftogaz proudly wrote that it was “working to attract American companies – their technologies, know-how, and investments – so as to increase production in Ukraine.”

For his part, Chernyshov said, “We discussed a number of issues. From Ukraine’s new role in Europe’s energy security system to the implementation of corporate governance reform.”

Naftogaz participates in IMF structural adjustment program

During his trip to Washington, Naftogaz CEO Chernyshov also met with representatives of the International Monetary Fund (IMF). This is a U.S.-dominated financial institution known for imposing neoliberal economic policies on indebted countries.

In March of this year, the IMF decided to grant Ukraine a $15.6 billion loan. Never before had the IMF provided funding to a country at war. A reporter for the U.S. semi-governmental media outlet NPR acknowledged that the IMF had to make a “rule change” that was “obviously politically motivated.”

IMF credit

Ben Norten fears that Ukraine can only service the IMF loan with neoliberal austerity policies. © B.N.

Naftogaz stated in a press release that “successful and consistent cooperation with the IMF is crucial for Ukraine’s resilience during the war.” Using racist rhetoric that called Russia “uncivilized,” Chernyshov stated:

“Cooperation with the IMF is crucial for the stability of our country in times of war. The fact that we have a loan program is a signal to the civilized world that the country is moving in the right direction. Ukraine has made its civilizational choice. Naftogaz has fulfilled its part of the conditions for our country to receive the IMF program. This proves that we are a reliable partner. Naftogaz will not let the country down.”

Naftogaz’s press release did not disclose what those “conditions” were, but a February IMF press release made clear that they included neoliberal reforms. The IMF reported that the talks with the Ukrainian authorities.

“the medium-term macroeconomic framework, fiscal policy, the financing mix, financial sector policies, and governance”

concerned. Regarding the IMF’s conditions, the media release said:

“In particular, reform initiatives to boost private sector productivity and competitiveness need to be advanced to lay the foundation for robust post-war growth against the backdrop of progress toward EU accession.”

Reforms to “boost private sector productivity and competitiveness” are a euphemistic way of saying that Ukraine needs to press ahead with privatizing state-owned industries and divesting public assets.

In its statement, the IMF stressed, “The private sector is also expected to contribute to the reconstruction effort.” The Fund also commented favorably on “draft tax laws aimed at raising revenues,” calling for “shoring up tax revenues” and “creating fiscal space for war-related repairs.” It goes on to say, “Efforts to expand issuance in the domestic bond market should be pursued to ensure a stable financing mix and eliminate reliance on monetary financing.”

In short, the IMF’s conditions for Ukraine are a typical reflection of the Washington Consensus[1]: Neoliberal austerity measures increase the burden on Ukrainian workers. And while their living standards fall and they have fewer and fewer rights, U.S. corporations are offered profitable opportunities to buy up public assets.


This post appeared on Geopoliticaleconomy.



[1] According to Wikipedia: The structural adjustment programs should be understood as the implementation of the Washington Consensus, which was the political program of the hegemonic economic policy forces in the United States at the time, organized in the IMF, the World Bank, the U.S. Treasury, and the numerous Washington think tanks. Since the rise of liberal-conservative politicians (Reaganomics, Thatcherism), the hegemonic economic policy ideas mainly included ideas such as supply-side policies, free trade, and export-oriented economic policies.

None. Ben Norton is an investigative journalist and analyst. He is the founder and editor of Geopolitical Economy Report and lives in Latin America.

Posted in 2011 | Leave a comment

Why China wont replace the US as hegemon. Chaos instead of hegemony


China’s growth is also running on credit; the People’s Republic is similarly indebted to the descending Western centers of the world system. This trend toward de-dollarization can only be properly understood against the backdrop of the imperial descent of the United States in the context of the global crisis process.
Why China won’t replace the U.S. as hegemon
Chaos instead of hegemony

The U.S. is in crisis as a hegemonic power, but that does not mean China will inherit it. Still, authoritarian dictatorships in
by Tomasz Konicz
[This article posted on 4/20/2023 is translated from the German on the Internet, Chaos statt Hegemonie.]

Xiangyun, one of China’s largest vacant new cities

If that’s not a signal crisis set in concrete. Xiangyun, one of China’s largest vacant new construction cities, in 2020.

The rise of the People’s Republic of China is changing the world. Felix Wemheuer showed what different left positions there are on China (10/2023). Ralf Ruckus argued that China’s characterization by capitalist relations of violence must be the starting point of left criticism (11/2023). Michael Heidemann criticized the disregard for civil liberties in many left-wing discussions about China (12/2023). Ernst Lohoff warned that China is striving to impose its illiberal model of rule internationally (14/2023). Hauke Neddermann believes that German leftists should not forget the role of European colonialism in the current criticism of China (15/2023).

If one believes the declarations of Russian-Chinese summits, the 21st century will be defined by an era of Chinese hegemony. At bilateral Moscow war summits in mid-March, Russian President Vladimir Putin advocated “building a more just multi-polar world order” that would put an end to the era of U.S. hegemony.

Talk of a multi-polar world order is the ideology of all those authoritarian states of the semi-periphery that seek, by means of imperialist power and war policies, to inherit the declining United States in order to achieve at the regional or, like China, even at the global level, a supremacy or dominance similar to that enjoyed by the United States in the second half of the 20th century.

The current increase in regional interstate conflicts is an expression of this multi-polar world disorder in a global crisis phase in which there is effectively no longer a world hegemon. Whether it is Russian imperialists, Iranian mullahs or Turkish neo-Ottomanists, it is primarily envy of the dwindling means of power of the United States that motivates their ideological anti-Americanism.

The dwindling power is evidenced above all by the U.S. dollar. As the world’s reserve currency, it gave the U.S. the opportunity to run up enormous debts, not least to finance its military machine. When Turkish President Recep Tayyip Erdo?an starts the printing press, however, inflation in the country only increases.

That is why the latest monetary policy agreements between China, Russia and a number of semi-peripheral states are causing a stir. In mid-March, during a state visit to Riyadh, Chinese President Xi Jinping touted a switch in oil trade with Saudi Arabia to the Chinese yuan to counter the “increasing weaponization of the dollar.” Similar bilateral currency arrangements are under discussion between China and Brazil, Pakistan, and Venezuela. The Financial Times warned back in March that Western leaders should prepare for a coming “multi-polar currency world order,” even though the dollar is still clearly the most widely used currency in international trade at present.

China’s growth is also running on credit; the People’s Republic is similarly indebted to the descending Western centers of the world system.

This trend toward de-dollarization can only be properly understood against the backdrop of the imperial descent of the United States in the context of the global crisis process. However, this also makes clear why China is unlikely to be able to inherit the United States as hegemon.

In his work “Adam Smith in Beijing,” the Italian sociologist Giovanni Arrighi described the history of the capitalist world system as a succession of hegemonic cycles: A rising power gains a dominant position within the system in an ascendant phase characterized by commodity-producing industry; after a “signal crisis,” the imperial descent of the hegemonic power begins. In this process, the financial industry gains in importance. Finally, the replacement of the old hegemon by a new one with greater means of power takes place.

This sequence can be traced empirically in the case of both the United Kingdom and the United States. The United Kingdom and its empire, which rose to become the workshop of the world during industrialization in the 18th century, transformed into the world’s financial center in the second half of the 19th century before being replaced in the first half of the 20th century by the economically ascendant United States, which in turn experienced its signal crisis during the stagflation of the 1970s. After this, the de-industrialization of the U.S. set in, leading to the economic dominance of the U.S. financial sector. The indebtedness of the descending hegemon to the imperial ascender, which Arrighi also addressed, can be seen both in the case of Britain vis-à-vis the United States and in the United States’ rising trade deficit with China.

The U.S. dollar thus gained its world position in the context of the postwar Fordist boom, when the Marshall Plan also established U.S. hegemony in the western part of devastated Europe. And it was precisely this prolonged period of Fordist expansion that formed the economic foundation of U.S. hegemony. With the end of the postwar boom in the stagflation phase, financialization and the imposition of neoliberalism, the economic basis of the Western hegemonic system changed. In the worsening systemic crisis of overproduction, the increasingly indebted U.S. became, in a sense, the “black hole” of the world system, absorbing the surplus production of export-oriented states like China and FRG through its trade deficits – at the price of advancing de-industrialization and indebtedness. The Chinese regime thus had every reason (just like the German government) to tolerate U.S. hegemony and the dollar as the world’s reserve currency, because without the U.S. sales market, China’s rise to become the new “workshop of the world” would not have been possible.

And yet, because of the unfolding world socio-ecological crisis of capital, the 21st century is unlikely to bring an epoch of Chinese hegemony, the yuan will not be able to inherit the US dollar. The ascendant phase of the People’s Republic, marked by the dominance of industrial commodity production, occurred within the framework of the aforementioned global deficit cycles, in which debt in the West generated demand for Chinese exports. This phase ended with the crisis surge of 2008. With the bursting of the real estate bubbles in the U.S. and Europe, China’s extreme export surpluses declined (with the exception of trade with the U.S.), while the gigantic stimulus packages launched by the government in Beijing at that time to prop up the economy changed the nature of the Chinese economy: exports lost importance, and the credit-financed domestic construction industry and the real estate sector henceforth formed the central drivers of economic growth.

Thus, China has obviously already passed its signal crisis marking the transition to a financial market-driven growth model in 2008. China’s growth is thus also running on credit, and the People’s Republic is similarly highly indebted to the descending Western centers of the world system. The Chinese deficit economy is generating even greater speculative excesses than was the case in the U.S. or Western Europe, as the crises in the inflated Chinese real estate market in 2021 made evident. Economically, the hegemonic decline of the People’s Republic due to the global systemic crisis has thus already begun, even though it has not yet been able to achieve its hegemonic position geopolitically.

This is particularly evident in China’s foreign policy ambitions, where an ambitious global development project was initiated with the “New Silk Road,” modeled on the Marshall Plan-and which brought the People’s Republic its first international debt crisis. According to the Financial Times, of the roughly $838 billion China invested to build a country-centered economic and alliance system in developing and emerging economies through 2021, some $118 billion is at risk of default in the wake of the current crisis surge (due to pandemic and Ukraine war).

Currently, there is no global economic recovery in sight, only over-indebtedness and inflation. Thus, China’s teetering mountains of debt, both domestically and abroad, make it look as if it were in decline even before it achieved hegemony. In addition, there is the external, ecological barrier of capital, since the People’s Republic, in the course of its state capitalist modernization, would become the largest emitter of greenhouse gases, which, because of the threat of climate catastrophe, makes a similar development path for other countries of the Global South ecologically extremely doubtful (even if it is downright obscene to preach renunciation from the centers to the Global South without being able to point out a development alternative). The historical hegemonic cycle of the capitalist world system is thus superimposed on the socio-ecological crisis process of capital itself, interacting with it and allowing China’s hegemonic rise and fall to merge.

And yet, against the backdrop of the socio-ecological crisis, the struggle between Russo-Chinese Eurasia and the United States’ Oceania, in which Ukraine and Taiwan form the current and a future battleground, respectively, can certainly also be understood as a struggle between the future and the past. It is a struggle between the ending era of neoliberal crisis management and the looming age of openly authoritarian rule, in which reactionary mobilization and social disintegration interact, as is paradigmatically visible in the Russian state oligarchy and mafia rule.

Posted in 2011 | Leave a comment

Is it possible to negotiate with Putin?


For Putin, the intention to admit Ukraine to NATO was a breach of “the agreement made with NATO after the fall of the Berlin Wall not to expand it” (2:34:20). Just as the Americans claimed hegemony over the Western Hemisphere according to their “centuries-old Monroe Doctrine,” Putin considers Ukraine his “backyard.”

Is it possible to negotiate with Putin?
Ukraine war
By Ulrike Simon
[This article posted on 3/15/2023 is translated from the German on the Internet, Kann man mit Putin verhandeln? – MAKROSKOP.]

Jürgen Habermas advocates negotiations to end the Ukraine war. But would Putin go along with it? An interview with Naftali Bennett provides deep insight into peace negotiations after the first weeks of war.

Only counter-violence can help against the invasion of a sovereign state in violation of international law. For this reason, the Western alliance is not only justified, but even politically obligated to assist Ukraine with all the means at its disposal. Negotiations with the aggressor cannot be justified. Russia must not be allowed to win.

This view determines the current political discussion in Western countries. Moreover, talks about a cease-fire or even a peace settlement are not possible because there is no willingness to do so on either side.

Such considerations did not prevent the then Israeli Prime Minister Naftali Bennett from intervening as a mediator. Immediately after the Russian invasion of Ukraine, he held talks with both warring parties at the request of Ukrainian President Selensky, as he reported in an interview with journalist Hanoch Daum.

The nearly five-hour interview with the Israeli politician, dated February 4, 2023, deserves more attention than it has received in the media so far. It can be considered a historical document because Bennett, over the course of 45 minutes (2:19 – 3:04), for the first time provides very vivid insights into his personal encounters with Russian President Putin, and especially into the negotiations in the very first weeks of the war. On only the second Saturday after the Russian invasion of Ukraine, he secretly (2:49:32) visited Moscow as Israeli prime minister to mediate in the ceasefire negotiations that had begun in Belarus and later continued in Istanbul.

This was not done without self-interest, for in the face of war, the State of Israel was in a quandary: On the one hand, it was under considerable pressure to side unequivocally with the West and even to supply weapons to Ukraine. On the other hand, there are many reasons for Israel to maintain a good relationship with Russia, and not to exacerbate tensions in the Syrian conflict, where the states are on opposing sides. “When I am pressured by two sides, I pursue a third strategy, which is to contact both sides and try to mediate,” Bennett explained.(2:31:22)[1]

So, he said, he called Putin, and first told him Israel’s position on the Ukraine war: no arms deliveries, but humanitarian aid in the form of a field hospital in Lvov. Putin had agreed to this. Then he – Bennett – offered himself as a mediator, and this role was accepted by both Putin and the West.

“I knew that the trust I had built with Putin was a rare commodity. America didn’t know how to communicate then, and doesn’t know how to communicate now.”

Bennett had visited Putin two months before the war began. Based on his experience, he could not take Putin’s willingness to negotiate for granted. Putin had been very “courteous and hospitable” and had even invited him to his private home in Sochi, although by his own admission the Russian president actually “never invites anyone there.” During their long conversation, Putin had been the “friendliest person.” But when Bennett told him about Selensky’s desire to broker a conversation with him after five and a half hours, his “gaze suddenly turned cold,” he said. “They are Nazis, they are warmongers, I will not meet with him,” he had replied. This violent reaction surprised him, the Israeli politician reports, but admits that Ukraine was “definitely an accomplice in World War II.”(2:26:10)[2]

Despite these reservations, Putin had already expressed over the phone in Moscow in the run-up to the agreed meeting, “We can reach a ceasefire.” (2:38:30) And in personal talks, he had already made “two major concessions” (2:40:42) on the tenth day of the war. First, he had explicitly assured “I will not kill Selensky,” thus renouncing the goal of denazification. This was a great relief for the Ukrainian president, who had been in a secret bunker fearing for his life after the Russian invasion. He and all the world would have interpreted the Russian wartime goal of “denazification” as replacing the Ukrainian government coupled with the killing of Selensky. Putin’s second concession at that point had been not to demand the complete demilitarization of Ukraine.

At the same time, Selensky renounced Ukraine’s entry into NATO. As Bennett comments, this was a “huge concession. The war broke out over the demand to join NATO and Selensky said ‘I renounce'”(2:42:48). That Ukraine’s planned NATO accession had been the main reason for the war is also emphasized elsewhere by Bennett in the interview:

“I went home very optimistic because he [Selensky] renounced joining NATO, which was the reason for the invasion. Putin said, ‘Tell me you will not join NATO. I will not invade.’ He renounced his demands [denazification and demilitarization].” (2:53:57)

Bennett indicates that one must be “very careful” and “someone can always fake something.” At the same time, he stresses that he got the impression during the talks that Putin is not “bent on fighting at all costs.” Putin “has goals he wants to achieve.” Bennett’s perception was that both sides were very interested in a cease-fire. (2:53:06)

“Every politician has interests. You don’t agree with them, you understand them.”

Bennett reports that he prepared intensively for his role as mediator through reading and consultations. “The political leaders need to understand that you understand them,” he stresses. Every politician has interests, he adds. “You don’t agree with them, you understand them.”

Regarding the Ukraine war, he said, there are two very different narratives that he doesn’t want to judge, but merely notes: the West and Selensky see Putin “as an imperialist who wants to conquer more and more territory” and “will move on to the Baltics and Poland if he’s not stopped in time.” For Putin, however, the intention to admit Ukraine to NATO was a breach of “the agreement made with NATO after the fall of the Berlin Wall not to expand it and not to touch the countries that formed a belt around Russia.” (2:34:20). The problem, however, would lie “much deeper:” Just as the Americans claimed hegemony over the Western Hemisphere according to their “centuries-old Monroe Doctrine,” Putin considers Ukraine his “backyard.” (2:35:24)

Asked if Putin had acted “messianically,” the former Israeli prime minister replied:

“He was very pragmatic, just like Selensky.” “(…) he completely understood Selensky’s political constraints.” (2:46:53)

Thus, the stage was set for further negotiations, which took place first in Belarus and later in Istanbul. In the process, they had found themselves on a good path.

There were still two main issues to be dealt with: The most difficult complex of negotiations concerned the future of the territories of Donbass and Crimea and the corridor that began to emerge after the fall of Mariupol. (2:43:09).

The second topic had been security guarantees for Ukraine. Selensky had expected extensive security guarantees from America, France, and other countries. Bennett felt that any kind of pact with the West would be perceived by Russia as a security threat. Moreover, he said, after the Afghanistan disaster, the United States could not be relied upon. And Russia, he said, did not want Ukraine at all. That was the “cognitive breakthrough” that “both sides accepted,” and there were now concrete negotiations about necessary and acceptable weapons systems in a neutral Ukraine, he said. (2:43:32)

The Israeli politician reported that he had also seen solutions to the territorial issues, but did not want to elaborate on them in the interview. “They relate primarily to postponing the dispute for 99 years.” (2:45:46)

“Everything I did was coordinated down to the last detail with the U.S., Germany, and France.”

During the negotiations, Bennett emphasized transparency, saying he was in constant communication with Western allies throughout the process. Chancellor Scholz had been very concerned about Germany’s energy supply, he said. Overall, he said, the spectrum of Western leaders could be divided according to their degree of toughness in the “fight against Putin,” from “We must not reward the bad guys” to “Forget the war, everyone loses,” as journalist Hanoch Daum put it. (2:56:51) “Boris Johnson took the aggressive line. Macron and Scholz were more pragmatic, and Biden was both.”

“I submit that there was a good chance of reaching a truce had they not prevented it.”

However, the promising path of negotiations was abruptly aborted on the part of Ukraine. According to the former Israeli prime minister, this disappointed him in view of the expected serious consequences of the war for Ukraine and the world. The reason for the break-off he refers to the West, to which he is politically subordinate:

“When it comes to Israel, I remain steadfast. (…) Here I have no say. I am only the mediator, but I turn to America in this regard, I don’t do what I want. Everything I do is coordinated in detail with the U.S., Germany and France.” – “You blocked the negotiations?” – “Basically, yes. They blocked them, and I thought they were wrong about that.” (3:00:32)

At a later point, he reiterates:

“I maintain that if they [the West] had not prevented it, there was a good chance to reach a ceasefire. But I’m not sure.” (3:02:04)

On the assessment of the West’s stance, Bennett suggests that while the war would have terrible consequences for Ukraine, Europe, and the world, statecraft is a very “complex matter” and there may be good reasons for the West and even Israel to make this decision.

“Maybe it would have meant rewarding the criminal too quickly. Maybe it would have sent the wrong message to other countries. (…) I don’t want to seem cynical (…) but President Biden formed an alliance against an aggressor after many years, that’s the general perception, and that affects other arenas, such as China and Taiwan, and that has consequences.” (3:01:50)

Thus, according to Bennett, the fact that the war has a significance for the West that goes far beyond the local conflict between Ukraine and Russia was one reason for the rejection of a ceasefire.

It is “moral reasons that urge an end to the war” (Habermas).

In contrast, voices were raised, not only in Germany, calling for immediate negotiations – not only because of the consequences for Ukraine, but also for the West itself. However, it would be too short-sighted to reduce the discussions about this to the opposition between morality and self-interest. Rather, it is precisely “moral reasons that urge an end to the war,” writes Jürgen Habermas, for example.[3] Even the West, which “allows Ukraine to continue the fight against the criminal aggressor,” should “not forget the number of victims, nor the extent of the actual and potential destruction, which is accepted with a heavy heart for the legitimate goal.” Therefore, “the required alternative is the search for tolerable compromises,” if the outbreak of armed conflicts could already not be prevented by sanctions that are painful even for “the defenders of international law itself.”

It is precisely because of the global geopolitical and economic implications of the war – which in March 2022, however, from the perspective of the United States and Great Britain, according to Bennett, favored a continuation of the war – that Habermas sees opportunities for cease-fire talks today. To those who currently identify unreservedly with the Ukrainian government’s demands for “swelling military support to defeat Russia,” he counters that the point is not to defeat Russia but to ensure that “Ukraine does not lose.”

The United Nations Charter permits the use of armed force only in the “common interest” of the international community, he said, and the measures against acts of aggression mentioned in Article VII of the UN Charter are ultimately “directed against war as such.” In today’s situation, he said, the task now is to prevent an even longer war and its further escalation through timely negotiations.

Is a cease-fire promising? The interview with Bennett shows that the threat of Ukraine joining NATO must be taken seriously as a reason for war. If Russian security interests, rather than imperialist goals, are the decisive factor, a settlement seems more attainable. Bennet’s account suggests that Russian leaders sought negotiations at the outset of the war and were willing to make concessions in return.


[1]All quotes from the interview conducted in Hebrew were translated by the authors from the English subtitles.

[2]President Putin’s reaction is unquestionably linked to the experience of World War II. Bennett explains, “The Great Patriotic War […] is at the heart of the Russian ethos, especially for Putin.” The German war of extermination killed 27 million Soviet citizens, including Putin’s brother, grandmother, and two uncles.

Immediately after the end of the Soviet Union, a cult of personality arose in Ukraine around members of the Organization of Ukrainian Nationalists (OUN), especially Stepan Bandera, but also Roman Shukhevych, who was involved in “purges” in western Ukraine. Both had collaborated with the German Wehrmacht and were complicit in the murder of Jews and Poles. Monuments were erected and streets named after them. A Kyiv main street, previously named in honor of the Red Army’s liberator of Kyiv, now bears the name of Shukhevych, an OUN member. Bandera and Shukhevych were honored by President Yushchenko with the highest award of the state “Hero of Ukraine.”

[3]Jürgen Habermas: A Plea for Negotiations, Süddeutsche Zeitung, Feb. 15, 2023.

Ulrike Simon is a retired teacher and chairwoman of the board of a village local heating cooperative.

Posted in 2011 | Leave a comment

Ukraine war: Why is the Pentagon actually running out of ammunition?


The larger problem is financialization. Step by step, this conquered all areas of society. And finally it also reached the holy grail of the military-industrial complex. With financialization came the neoliberal market doctrines of capacity reduction, downsizing, “lean inventories,” and cutting costs wherever possible. They are the real drivers of the supply bottlenecks that are rampant everywhere.

Ukraine war: why is the Pentagon actually running out of ammunition?
by David Goeßmann
[This article posted on 4/21/2023 is translated from the German on the Internet, Ukraine-Krieg: Warum geht dem Pentagon eigentlich die Munition aus?.]

Ammunition is loaded onto pallets at Dover Air Force Base, Delaware, in the U.S., to be flown to Ukraine.

Ukrainian soldiers have hardly anything left to shoot. How can this be, when the USA and NATO countries grant Ukraine almost every wish? About supply bottlenecks in the military-industrial complex and what’s behind it.

The situation seems bizarre. Western journalists have been reporting for months that Ukraine does not have enough ammunition. Military officials there repeatedly complain about the lack of bullets.

As early as ten months ago, the vice-chief of Ukrainian military intelligence, Vadym Skibitsky, warned that they were losing the artillery war because they had nothing to shoot with. According to Skibitsky, Ukraine consumes 5,000 to 6,000 artillery shells per day.

We have used up almost all of our [artillery] ammunition and now use NATO standard 155-caliber shells.

Little has changed in that regard to this day. The Washington Post reported from the front lines just over a month ago that soldiers in Ukraine were running low on ammunition. They lacked artillery shells.

Ukrainian Lt. Col. Kupol described the situation to the Post as serious. There was a shortage of simple mortar bombs and shells for U.S.-made MK-19 grenade launchers.

How can this be? After all, Ukraine has been supplied with tens of billions of dollars worth of weapons by the U.S. military superpower and highly armed NATO countries for over a year. How then can there be a shortage of ammunition?

The astonishing answer is that the U.S. in particular, but other NATO countries as well, are apparently incapable of providing the ammunition they need. This is according to Mike Lofgren, who worked for a long time as a deputy assistant for the Republicans in the U.S. Congress and who has been sharply criticizing the political course of both parties in books for some time.

For example, he says, stockpiles in the U.S. are emptying fast. This is because they are not well stocked and there is no replenishment.

Since the beginning of the war, the U.S. has delivered 1.5 million artillery shells (155-mm) to Ukraine. This is actually a very simple projectile – a shell that has been around since the First World War.

Nevertheless, the U.S. military has been worried for months that ammunition supplies are running low. That’s because annual U.S. production of 155-mm ammunition is less than one-tenth the amount supplied to Ukraine.

Even if production were increased, it would take five years to replenish supplies, he said, because the lead time for building new production capacity in a country with a devastated industrial base – the projectiles are made in a century-old factory – is too long.

The same is true for other types of ammunition. For the Javelin anti-tank missile, it takes 5.5 to eight years to replenish stocks; for the Himars guided missile, 2.5 to three years; and with regard to the Stinger anti-aircraft missile, it takes as long as 6.5 to an incredible 18 years. Lofgren’s conclusion:

Despite all the money given to the Pentagon, the Department of Defense is unable to supply a third party with weapons for a conventional land war of moderate size and intensity for more than a year without depleting its munitions stockpile.

Consider this: the U.S. has an annual, ever-growing military budget of currently about $850 billion. But while Russia fires an average of 20,000 rounds per day against Ukraine, the Ukrainian army can respond with only a third of that amount. According to Lofgren, this is because the U.S. has to ration supplies because it is unable to produce more ammunition.

Supply shortages everywhere, with system

Overall, the Pentagon in the United States appears to be operating more and more ineffectively. For example, despite growing Pentagon budgets, the number of major military equipment is steadily declining. Thus, for fewer and fewer warships and fighter jets, U.S. citizens have to pay more and more.

The inefficiency has not fallen from the sky, but is part of a larger problem that has been consuming the U.S. economy in particular for decades. It goes by the name of financialization. Step by step, this conquered all areas of society. And finally it also reached the holy grail of the military-industrial complex.

With financialization then came the neoliberal market doctrines of capacity reduction, downsizing, “lean inventories,” and cutting costs wherever possible. They are the real drivers of the supply bottlenecks that are rampant everywhere today. Mike Lofgren puts it this way:

It is a commonly held view that Wall Street and the Pentagon have a kind of symbiotic relationship – if not a conspiratorial bond – from which both benefit. By mimicking the fashions of classical economics – zero inventories, just-in-time deliveries, wiping out small producers to reduce alleged overcapacity, treating labor as a liability rather than a value – the military bureaucracy engages in a kind of unilateral disarmament while the stocks of defense contractors soar.

To be sure, disarmament itself is desirable and necessary, mainly in the United States. After all, military interventions and wars should no longer be the answer to conflicts in the 21st century. Even the Ukraine war will be resolved diplomatically in the end. Better sooner than later.

But disarmament in the spirit of market radicalism does not lead to a reduction of the military-industrial complex, but rather turns it into an economic subsystem of neoliberal society, in which military assets also function as financial investment vehicles.

Thus, the Pentagon has mutated into a sprawling, highly inefficient tax-money-wasting machine – apart from the intrinsically nonsensical and astronomical sums for the U.S. military, which undermine the American welfare state and public infrastructure because there is then no money left for them.

Beyond the Pentagon, a rather late victim, neoliberal logic has long since left its traces of disaster all over the United States. They show up in broken and dysfunctional infrastructure like public transportation, electricity, hospitals and schools.

From the constant train derailments with sometimes devastating consequences that I have reported elsewhere, to the lack of hospital beds that led to health disasters in the Covid pandemic, the artificially created supply shortages are everywhere.

They were exacerbated by the pandemic measures and the Russia sanctions that created a fossil fuel crisis, but the roots of sputtering supply shortages in affluent societies like the United States run deeper. They extend into neoliberal policies that have transformed the material satisfaction of basic needs into a secondary appendage.

The Pentagon’s ammunition supply problems are thus not an isolated or accidental occurrence, but have a system and point to a system. Thus, undersupply and partial supply collapse becomes the new social normal. Lofgren sees the ideology of a capitalist realism at work in this. It has …

pounced on such diverse forms of human activity as running the railroads, stocking cooking oil on the shelves of Safeway [the largest retailer in the U.S.], supplying the Ukrainian front, or saving lives in an emergency room. Is it any wonder that issues like climate change are treated so poorly?

Posted in 2011 | Leave a comment