Things are escalating again in one of Syria’s many wars. Last Sunday, 29th April, two massive strikes – presumed by Israel – reportedly hit the Syrian Arab Army’s 47th Brigade military base and arms depots near Hama, as well as Nairab Military Airport in Aleppo. The attack, thought to have been carried out using powerful ‘bunker-buster’ missiles, created a fireball which could be seen for miles, and triggered a shock measuring 2.6 on the Richter scale, felt as far as Turkey and Lebanon. It is thought the strikes targeted Iranian surface-to-surface missiles intended for deployment in Syria, and killed 26 – 38 people, including 11 Iranians.
The attack appears to have been coordinated with the USA, coming just hours after US Secretary of State Mike Pompeo left Jerusalem – where, according to Haaretz, he had “thrilled Netanyahu with hawkish talk on Iran”. That same day, noted the Times of Israel, “news also broke of a phone call between Netanyahu and US President Donald Trump”, whilst Israel’s Defense Minister Avigdor Liberman was meeting his US counterpart James Mattis in Washington. This feverish activity came less than a week after “Gen. Joseph Votel, the head of the US army’s Central Command, or CENTCOM, whose sphere of responsibility includes Syria and Iran, made a largely unpublicized visit to Israel.” The article concluded that “All this is beginning to look rather like a coordinated Israeli-American operation to limit Iran’s military activities in Syria — simultaneously conveying the message to Moscow that Russia’s green light for Iran to establish itself militarily in Syria is not acceptable in Jerusalem and Washington.” The war on Iran, in other words, has begun.
In hindsight, it has been underway for some time. Israel has reportedly conducted over 100 airstrikes in Syria since 2011, but a stepchange occurred last July. On July 9th 2017, Russia and the US agreed on a de-escalation zone in Southwest Syria, which, according to Foreign Policy journal analyst Jonathan Spyer, Israel believed “could seriously complicate the de facto Israeli safeguards in place against Iranian infiltration of the border”. In the four months which followed this agreement, Israeli jets made over 750 incursions into Syrian airspace, an average of six per day, and totalling 3200 hours in the country. Clearly, some serious reconnaissance activity was taking place. Then on October 16th, Israeli jets struck a Russian-supplied S-200 air defense battery in the Damascus area. The attack took place during a meeting in Tel Aviv between the Israeli and Russian Defence Ministers, and was perhaps calculated to send a message to Syria that they can not rely on Russian protection.
Then, in January 2018, with the battle against IS almost won, Rex Tillerson announced new goals for the 2000 US troops in Syria, vowing that they would remain until “Iranian influence in Syria is diminished, and Syria’s neighbors are secure from all threats emanating from Syria.” This was followed in February by calls by the French foreign minister for Iran to ‘leave Syria’, and a warning from the International Crisis Group that Israel had “updated its red lines – signalling it would take matters into its own hands if necessary to keep Iran from establishing a permanent military presence in Syria”.
Since then, Israel has moved from targeting Syrian army and Hezbollah convoys to the directly targeting of Iranian personnel and facilities.It’s shooting down of an Iranian drone on February 9th led to one of its own F-16s being downed by the Syrian army after it bombed the drone’s command centre, the first time an Israeli warplane had been shot down since the 1980s. Yet, in a very rare admission of responsibility, Israel still called the mission a success, claiming that between one third and one half of Syria’s air defences had been destroyed in the strikes.
Two months later, on April 9th, Israeli missiles again struck the same ‘T4’ military base they hit in February. The target this time, however, was specifically Iranian installations and equipment, and 14 Iranian soldiers were killed. According to one Israeli official, this was first time Israel had attacked ‘live Iranian targets’. It was also, apparently, the first time Israel had failed to inform Russia to provide advance warning of an upcoming strike, breaking the ‘de-confliction’ agreement made between Israel and Russia right at the start of Russian entry into the Syrian conflict in 2015.
Russia’s response was similarly unprecedented, with Russia immediately revealing Israel’s role in the attack, and Putin calling Netanyahu to warn him that Israel can no longer expect to be able to attack Syria with impunity. Then, following the US-UK-French airstrikes on Syria on 13th April, the chief of the Russian General Staff’s main operations directorate, Colonel General Sergey Rudskoy, floated the idea of providing Syria with the powerful Russian-made S300 air defence system. The S300, capable of tracking up to 100 targets simultaneously over a range of 200km, “would create a no-go situation for Israel if allowed to be made operational by the Syrian regime”, according to former US naval officer Jennifer Dyer, adding that “The kinds of low-level, preemptive strikes (in Syria) the IAF [Israeli Air Force] has executed in the last few years, against Hezbollah targets and the special weapons targets of Iran and the Assad regime, would become virtually impossible. Israel would lose the ability to preempt the ‘build-up’ to war ”. Russia had originally signed a contract with Syria to deliver the S300 system in 2010, but this was scrapped after pressure from Israel. But, on April 23rd, Russian newspaper Kommersant reported that the decision to reverse that suspension and supply the S300 had now been made, with only the technical details left to iron out. Two days later, the Syrian embassy in Moscow claimed that the S300 had in fact already arrived a month ago and was being deployed. The Russian authorities immediately denied this, and reiterated that no final decision on whether or not to supply the S300 had in fact been taken. A few days later, the Israelis struck again, this time with their earth-shaking bunker busters, directly targeting Iranian troops and equipment for the second time. No S300, you see.
Media reports, both mainstream and alternative (my own included!), are increasingly nervous about the scenario now unfolding, and rightly so. Yet, whilst the danger of escalation and miscalculation – and specifically, the drawing in of Russia into the Israeli-Iranian conflict developing in Syria – remains real, many analysts have overstated the friction between Russia and Israel – and, indeed, the convergence of interests between Russia and Iran.
Despite both being opposed to western-backed regime change in Syria, Russian and Iranian objectives in the region are in fact very different. According to intelligence analysts Stratfor, “Russia’s strategic vision is chiefly focused on eliminating sources of instability and preventing U.S.-led military interventions”, with a “broader goal of establishing itself as an indispensable guarantor of collective security in the Middle East”. In Syria, therefore, the Russians have the “limited objective of ensuring that Assad controls enough territory to negotiate with Syrian opposition factions from a position of strength” in order to create a mediated, negotiated settlement, overseen and guaranteed by Russia.
The Iranians, however, are more focused on “containing Saudi Arabia’s power projection capacity across the Arab world”, leading to an “unwillingness to suspend military operations in Syria until Assad has completely vanquished opposition forces….Iran’s belief in the feasibility of a military solution in Syria has made it less willing than Russia to diplomatically engage with Syrian opposition or Kurdish factions during diplomatic negotiations, limiting the scope of the Moscow-Tehran partnership.” Furthermore, “Iran’s use of Syrian territory to create a permanent transit point of weaponry to Hezbollah has alarmed Russian policymakers who seek to preserve strong relations with Israel.”
From this point of view, far from seeking to protect Iranian entrenchment in Syria, Russia has a direct interest in restricting it. Israel’s strikes may thus serve a function for Russia, putting pressure on Iran to ‘rein in’ the activities Russia views as disruptive to its own aims. Furthermore, Russia may believe that the Iranian presence in Iran – as an alternative source of support for President Assad – makes the Syrian government itself less willing to sign up to Russia’s diplomatic initiatives. Indeed, on a very basic level, a reduced Iranian presence leaves Assad more thoroughly dependent on Russia – a point, no doubt, made by Netanyahu on at least one of his seven meetings with Putin over the last year. And anyway, a cynic might argue, now the rebellion has been all but quashed, haven’t the Iranians served their purpose?
Many people claim that the alliance with Iran is too important for Russia to risk a gambit like this. And no doubt it is. But what if there is no risk? Whilst the Russian-Iranian alliance remains crucial for Moscow’s projection of power into the Middle East, Russia may well calculate that Iran has no interest in jeopardising this however poorly they are treated by their Russian ‘ally’ in Syria. After all, the provision of protection against a US attack on Iran is hardly a buyer’s market – Russia is a monopoly supplier. Safe in the knowledge that Iran really has no-one else to turn to, Russia can afford to let Israel loose on them.
Certainly, Israel’s belligerent Defence Minister Avigdor Lieberman does not appear to see Russia as an obstacle to Israeli plans for Syria. “What is important to understand is that the Russians, they are very pragmatic players,” he said in Washington recently, “At the end of the day, they are reasonable guys, it’s possible to close deals with them and we understand what is their interest,”. He certainly doesn’t sound like he is referring to a steadfast ally of Israel’s number one foe.
It may even be that Russia are still, against all hope, expecting to get something out of the Trump administration, in the form of sanctions relief, or at least some recognition of their security concerns in Ukraine and eastern Europe. Such hopes are surely forlorn.
I would like to think Russia is not so cynical as to stand back and allow Israeli aggression against Iran in order to gain leverage in its own relationship with both the Iranians and Syrians, nor so naive as to expect anything from the US. But the omens are not good. The failure to deliver the S300s, or to create any other meaningful deterrent, even after the opening shots in this new war on Iran were fired on April 9th, suggests either cowardice or collusion. And the Russians are not cowards.
Yet acquiescing to western aggression has not turned out well for the Russians in the past. Their failure to veto the UN-blessed crucifixion of Iraq in 1991, let’s not forget, was rewarded with nothing more than an economic straitjacket leading to the biggest collapse of living standards (outside of war) in recorded history. Twenty years later, when Russia agreed not to veto the west’s destruction of Libya, what followed was not gratitude, or acceptance, or respect, but western support for an anti-Russian fascist coup on Russia’s western flank, followed by the imposition of a vicious sanctions regime.
If Russia really are going to allow their erstwhile Iranian comrades to get wiped out, they really should understand that this is not simply a matter of Israel’s ‘legitimate security concerns’. This is about eliminating Iran’s chance of building up a deterrent in advance of an all-out war against Iran itself. And the destruction of states such as Iraq, Syria, Libya, and Iran is, in turn, about isolating Russia when its own turn comes. This year will see the 80th anniversary of the Munich agreement, another occasion when major powers sacrificed supposed allies in the hope of saving their own skins. That didn’t go so well. Never mind the S300s, Russia need to provide S400s to the Syrian Arab Army and put a stop to this new war before its too late.
(Write up of my original interview here)
I interviewed Noam Chomsky in October 2011, but it was not published for two months, because none of the newspapers, magazines and journals who usually print my work wanted to run it. This was despite the fact that several of them were initially very enthusiastic – at least, that is, until they saw it. In the end, having been rejected by all the major publications of the Western left, it was published by Al-Ahram Weekly, an Egyptian newspaper.
It was controversial because Chomsky is such a popular figure amongst the British and American left, and my article was critical of Chomsky’s position on Libya. One person even refused to believe that the interview was real, and accused me of having made the whole thing up! Some saw it as sectarian, dividing the anti-war movement by unnecessarily criticising one of its leading voices. But as a supporter of the war against Libya, at least in its initial phase, Chomsky could hardly be considered part of the anti-war movement at that moment. It seems pretty obvious to me that the real sectarians in the anti-imperialist and anti-war movements are those who support wars against anti-imperialist states, not those who criticize former anti-war activists for switching sides. Ironically, although many people expressed the sentiment that I was wrong to criticize Chomsky, he himself told me afterwards that he actually prefers ‘confrontational’ interviews like the one with me (although he said he was not used to having them from this side).
One criticism I took more seriously was that as a British citizen, my focus should be on exposing the devious role of British power in the world – not pointing fingers across the Atlantic as if British imperialism no longer exists, as so many in the British left are wont to do. I agree with that. But nevertheless, I do believe that, as a hero to so many in the British left, Chomsky’s positions helped also to facilitate elements of British public opinion behind a British war. Challenging his argument, I felt, was therefore an essential part of the process of challenging British imperialism as well.
Chomsky’s position on the war was that the initial ‘intervention’ was justified, but that it then morphed into something different ( which he termed a ‘second intervention’), which he did not support. This position still makes no sense to me. To offer an analogy: imagine a notorious, mass murdering robber coming to your house, armed to the teeth, asking if he can come in to read the gas meter. Chomsky’s argument seems to be that you should let him in, but if he deviates from his invented task and – as is rather more likely – instead starts to rob and murder, we should at that point build a mass movement to pressure him to stop it. My argument – and that of others who opposed NATO’s intervention – was that the door should be kept firmly shut to these proven criminals.
In fact, it was worse than this, because the initial intervention was not designed to check the gas meter but to destroy Libya’s air defence system (to create a ‘no-fly zone’). All those who supported this, therefore, helped to pave the way for what Chomsky calls the ‘second intervention’ that they opposed, by supporting the destruction of all possible defences against this ‘second intervention’. Further, by calling for the first intervention, they were also helping to build ideological support for the second.
As I put it in subsequent written correspondence with Chomsky:
“You have to admit that it is quite a complex position to argue simultaneously:
a) that the rebels are a progressive movement that should be supported,
b) that Gaddafi is a monster who should be overthrown,
c) that although the rebels are calling on NATO to overthrow that monster, we should focus on organising a huge movement to prevent NATO doing exactly that and
d) arguing all this at the exact moment we have just supported the resolution that was openly designed to facilitate what we are now opposing.”
This was not the first time that Chomsky had supported Western aggression against the third world. In the run up to the Iraq war in 1991, he was asked in an interview what he thought should be done against Iraq, given that he did not support bombing. His reply was: economic sanctions. In the event, both bombing and economic sanctions were imposed, with the latter being far more deadly, killing an estimated 1.5million people, including 500,000 children, and causing the resignation of 3 high ranking UN officials involved, who argued that the sanctions constituted a form of genocide. Once they were underway, Chomsky campaigned against these sanctions. But it is instructive to note that, just as with the case of Libya, at the crucial moment when public opinion was being prepared, he was calling for the very thing he later came to oppose.
This illustrates something interesting about Chomsky and other ‘radical liberals’ promoted in the mainstream media (albeit at the margins), that I had not fully comprehended before: they are tolerated precisely because their criticism is only vocal at moments when it is likely to be ineffective. The crucial moment in the war against Libya was during the run-up. This was the moment when everything was in the balance and criticism might have had some effect. Once it was underway, it would be much more difficult to stop it. Once it was underway, therefore, criticism was tolerated, because it was too late. This helps explain why people like Chomsky are able to hold impressive positions at prestigious American universities, and their views are even promoted, to an extent, through occasional interviews on mainstream TV channels. It is important for imperialism to allow, and even encourage, a certain level of criticism and dissent, because this allows it to pose as a respecter of pluralism and civil liberties. By tolerating those who criticize imperialist policies, but only at moments when that criticism is impotent, imperialism gets the best of both worlds.
Something else I later came to realize, reflecting on this interview, was that radical liberals like Chomsky are fundamentally not anti-imperialists. They object to some of the methods and policies of imperialism, but do not actually dispute the right of imperialist states to wage wars against third world peoples. They seem to believe that, in an imperfect world, only the imperialist states have the muscle to intervene, and that humanitarian interventions are sometimes necessary. Therefore we should call on those states to intervene, but hold them to account when they do so. This relates to another fundamental problem with Chomsky’s brand of ‘radical’ liberalism: the tendency to think the main problem facing the world is all these nasty third world dictators. The West itself is only seen as a problem inasmuch as it supports these nasty people. We are bad only because we support them. They are the real ‘bad guys’, and we (the West) are bad only because we sometimes tarnish our purity by association with them (or sometimes because we act like them). In reality, of course, this has the problem on its head – the ‘third world dictators’ that really cause problems do so precisely when they act as conduits for Western control and plunder: the real and fundamental problem facing the world. In other words, for Chomsky, imperialism itself is not the
main problem facing the world’s peoples, but a secondary problem. During the Cold War, when support for anti-communist strongmen was the West’s preferred method of maintaining global control (Suharto, Pinochet, Mobutu et al), this difference might almost have seemed academic. Radical liberals and anti-imperialists were largely on the same side, united in opposition to this ‘unholy alliance’. However, in the current climate – when it is not the propping up of strongmen, but the destruction of all independent third world states, which is the imperial order of the day – the difference is critical. For Chomsky, Western aggression against ‘dictators’ (a catch-all term covering any leader with significant authority in a strong, sovereign state) is to be supported – within certain legal limits of course, and always ‘held to account’.
This also explains Chomsky’s bizarre method of ‘opposing’ the war, when he eventually decided to do so. Rather than highlight those things about Gaddafi that the West objected to, such as his support for African unity and development, opposition to Western military involvement in Africa, ‘resource nationalism’ etc – and thus exposing the real reasons for the war – he tried to paint a picture of Gaddafi as being somehow ‘in bed with the West’. Presumably, in his mind, this would expose the warmongers, because it would show that they were as bad as Gaddafi. In reality, this approach merely served to confuse, demoralize, and ultimately weaken the anti-war movement, by obscuring the fundamental tension between the imperialist and anti-imperialist agendas that was the real driving force behind the conflict.
At the end of the day, of course, Chomsky is who he is: a radical liberal who believes imperialism can and should be reformed and ‘held to account’ rather than ended. We should not expect him to be anything else. Genuine anti-imperialists need to develop their own analysis of events, and ultimately their own political movement and leadership, and not rely on the ‘respectable’ opposition offered to us by the ruling class. This is the fundamental lesson I learnt from interviewing Noam Chomsky.
This article originally appeared in Counterpunch magazine
It is the contention of this article that we are entering into a new fascist epoch. Movements with outright fascist roots are winning elections and referendums in Britain and the USA, and mainstream electoral parties too are being ‘fascisised’ in the process. Even the left are being fascisised, with the movements against war and neolioberal globalisation increasingly falling under the hegemony of the new fascists. And yet, the term ‘fascism’ has for so long been used as a byword for any kind of brutality or state control to which one takes exception, that many seem not only to have forgotten what it means, but also to be failing to notice it how it is unfolding before their very eyes.
Part of the problem is that fascism has too often been conflated with particular elements of one or other of its historical manifestations, or even with perceived elements that have never, in reality, existed. Many, for example, conflate fascism with military dictatorship. Yet, dictatorships existed for centuries – if not millennia – before fascism, and, as Robert Paxton has noted, “most military dictatorships have acted simply as tyrants, without daring to unleash the popular excitement of fascism”: fascism, unlike most military dictatorships, is a genuine mass movement. Furthermore, fascist movements can still be properly be described as such before they have established any dictatorship. Hitler was a fascist for long before he became a dictator.
Others confuse fascism with ‘totalitarianism’; total state control of all aspects of social life. The very term is a deliberate piece of Cold War propaganda, brought into scholarly use by imperialist strategist Zbigniew Brzenzski in 1956 in order to besmirch communism by drawing a superficial – and, in my view, unsustainable – parallel with fascism. Yet not only is the term an anachronistic piece of propaganda, it, on closer inspection, cannot even be said to apply to fascism at all: fascist governments never gained ‘total control’, but rather, as Paxton has pointed out, “jostled with the state bureaucracy, industrial and agricultural proprietors, churches and other traditional elites for power”.
Even worse, some seem to think that to use the term fascist for anything less than industrial genocide is somehow an insult to the victims of the Nazi holocaust. This definition of fascism, therefore, excludes from its scope not only the entire pre-governing period of the Nazi party, but also the first nine years of Hitler’s premiership: fascism, by this definition, began not with the establishment of Mussolini’s party in 1919, nor with his coming to power in 1922, nor with Hitler’s ascendancy to the German chancellorship in January 1933, but on 20th January 1942, with the advent of the “final solution” at the Wannsee Conference in Berlin. This definition is the most dangerous, as it effectively serves to give a free ‘non-fascist’ pass to anything below the level of mass extermination.
Furthermore, whilst fascism is necessarily anti-liberal, it is not strictly ‘anti-democratic’. Dylan Riley has described fascism as ‘authoritarian democracy’, noting “the paradoxical incorporation of democratic themes into the fascist project”. Riley argues that democracy fundamentally boils down to “a claim that a certain type of political institution “represents” the people.” Fascists certainly made this claim, arguing that their institutions represented “the people” more perfectly than those they replaced. Indeed, the use of referendums and plebiscites by both the Italian and German fascist governments demonstrated that they took the claim seriously.
So what is fascism then? Let me offer a definition. Fascism is a mass movement, predominantly rooted in a middle class whose privileges are being undermined by capitalist crisis, and whose ‘national pride’ has been wounded by national decline and military defeat and humiliation. It is based on a promise to restore these privileges and national pride through, on a domestic level, purging ‘impure elements’ within the polity blamed for national weakness, and on an international level, restoring military prowess and ‘great power’ status. It is a ‘pseudo-revolutionary’ movement inasmuch as, whilst it adopts much in the way of imagery and policies from the radical left, it does not threaten fundamental property relations: rather, it redirects popular anger away from the capitalist class and towards vulnerable scapegoats in a way that actually serves the ‘elites’ it claims to oppose. It is sponsored and helped to power by powerful elements of the dominant political and economic classes. It opposes liberalism on the grounds that liberalism is unable or unwilling to deal effectively with those internal and external enemies deemed responsible for weakening the national polity.
Yet, first and foremost, as Mussolini’s magazine The Fascist, put it, fascism is “less a policy than a state of mind”. For communist theoretician Rajani Palme Dutt, “there is no theory of fascism, there is only its practice”. But what is the fascist state of mind, and what is it’s practice? Its’ state of mind is one of hatred towards those deemed responsible for ‘national decline’, however defined, and for the declining privileges of the (racially or nationally defined) ‘in-group’. And its practice is attacking these people. As Mussolini put it, “The democrats of [left-liberal newspaper] Il Mundo want to know our programme. Our programme is to break the bones of the democrats of Il Mundo”.
Italy’s fascist movement was founded in Milan on March 23rd 1919. It’s first ‘action’, three weeks later, was to attack the offices of the socialist newspaper Avanti, destroying its printing press, injuring 39 people and killing 4. Said Mussolini, the fascists had “declare[d] war against socialism…because it has opposed nationalism”. This war went into full throttle in 1921, when fascist squadristi went on a countrywide rampage against trade unions, farmers co-operatives and the socialist party, attacking their premises and beating – or killing – their members. These gangs, in an early demonstration of the complicity between fascism and the conservative establishment, were often hired by landowners and businessmen to destroy the wave of land and factory occupations that had gripped Italy in the aftermath of the first world war.
The German Nazis, too, considered the eradication of socialism – and specifically Marxism, “the fiercest enemy of all German and European culture” according to the Nazi professor H. Ludat – to be their principal aim. “I wished to be the destroyer of Marxism” Hitler told the jury in his trial following the failed Munich putsch, “and I will achieve this task”. Nine years later, on the eve of his accession to power, he reiterated this commitment at a meeting of leading German industrialists in Dusseldorf: “Yes,” he told them, “we have taken the unalterable decision to tear Marxism out by its roots”. The Nazis, like the Italian fascists, regularly indulged in the killing of communists, particularly in drive-by shootings, long before controlling the levers of power. Fascism, then, first and foremost, means the crushing of proletarian revolution by any means necessary.
On February 8th of this year, Guadalupe Garcia de Rayos, a 36-year old mother of two who had lived in the US for 22 years, was arrested during her standard bi-annual check-in with immigration officials. She was immediately deported, leaving her two children (both US citizens) stranded. “I don’t think it’s fair that she was taken away from us,” her 14 year old daughter Jacqueline said. “Her only crime was to work here so she could support us”. Of course, working in the US of itself is not a crime; it is only criminal for certain nationalities. Her real crime, committed when she herself was a 14 year old in Mexico, was to have refused to accept the diktat of modern-day feudalism: that those born into high-unemployment, low wage economies ravaged by imperialism must also be condemned to die there. In this sense, the 14 year old Guadalupe was committing a revolutionary act. And it is a revolution which Trump is determined to crush at any cost.
In Reece Jones’ excellent book “Violent borders: refugees and the right to move”, he argues that ‘illegal’ migration constitutes a refusal “to abide by the global border regime… in the same way that Harriet Tubman refused to abide by the system of slavery and fugitive slave laws, Mahatma Gandhi refused to abide by the laws of British colonialism, and Nelson Mandela refused to abide by the South African system of apartheid”. For what are borders, after all? For Jones, they are nothing more than “artificial lines drawn on maps to exclude other people from access to resources and the right to move”. “One day,” he writes, “denying equal protection based on birthplace may well seem just as anachronistic and wrong as denying civil rights based on skin colour, gender or sexual orientation.” Moreover, it is precisely the system of state borders that creates the wage differentials underpinning the extreme levels of global inequality in the world today, in which, for example, a taxi driver in London is paid around 50 times a taxi driver in Delhi, whilst the average wage in Norway is around 300 times that in the Congo: “Restricting the movement of workers creates artificially low wages. If workers could move, wages would stabilise between the high wage in the US and the low wage elsewhere. This would allow the economy to produce goods based on the real value of work, without a low wage subsidy artificially produced by borders” (Jones, 140). Put another way, the global border regime sustains the split in the global working class, with that section ‘contained’ in the third world forced to subsist on artificially low wages, whilst the section in the western world are able to preserve their monopoly access to high-paid work. This divide has become so pronounced, argues professor Zak Cope, that we can no longer legitimately speak of a ‘proletariat’ amongst the citizenry of the western world at all, but rather a “middle class working class” which is paid well above the value of its labour power (that is, the cost of reproduction of labour power) and “which benefits materially from imperialism and the attendant super-exploitation of oppressed nation workers”.
Yet the proletariat – that section of the working class paid subsistence wages: that is to say, the working class of the global South – are revolting. They are revolting by refusing to accept the global border regime which keeps them in subjection, and they are doing so on an unprecedented scale: the UN estimated that there were 244 million international migrants in 2015, a 41% increase as compared to 2000. Around 350,000 attempt to cross the Mexican border into the US each year, and around one million tried to reach the shores of Europe in 2015. This, then, is a mass proletarian revolutionary movement, driven – like all revolutionary movements – by a realisation that playing by the existing rules will not put food on the table or allow a dignified peaceful future for one’s children. Yet, just like it did the middle classes who flocked to fascism in Italy and Germany, proletarian revolution disgusts the “middle class working class” of the West, who see it as a threat to their privileged monopoly of high waged work. That is why they elected Trump to crush it.
Garcia de Rayos’ arrest came about following an executive order stepping up the deportation of undocumented immigrants in the USA signed by Donald Trump two weeks earlier. This was his third executive order targeting immigrants, the others banning immigration from seven Muslim countries and ordering the construction of a wall between the US and Mexico, along with a further 15,000 border staff to patrol it. “We are living in a new era now,” said Garcia de Rayos’ lawyer, Ray Maldonado, following her arrest: “an era of war on immigrants.”
To be fair, today’s neo-fascists did not start this war. Deportations reached new heights under Obama, who deported a record 2 million undocumented immigrants. The much-hyped ‘wall’ between the US and Mexico effectively already exists, at least in the sense of a hard border, enforced with violence. And it was Britain’s Theresa May, along with her chancellor Philip Hammond, who played the major role in pressuring Italy to terminate its successful search and rescue programme in the Mediterranean in 2014 to ensure that refugees were left to drown as a message to others. Around 10,000 men, women and children have so far been drowned as a result of the policy – which was, significantly, first advocated by the British National Party, Britain’s main overtly fascist party, some years earlier. In total, Reece Jones estimates that no less than 40,000 people have been killed – shot, drowned or starved in the desert – at the borders of Europe and North America over the past ten years. This already marks the beginnings of a descent into fascism, which can also be viewed as a collapsing of indirect structural violence (in this case the structural violence of poverty wages imposed by the global border regime) into direct,
physical violence (shooting, drowning and starving migrants at the border) under pressure of proletarian revolution. Yet what Obama and the ‘mainstream’ parties did shamefacedly, ‘on-the-quiet’ and to the embarrassment of their supporters, Trump does openly, brazenly and with gusto, to the untrammelled delight of the movement that brought him to power. Again, this is fully in line with classical fascism, which did not, after all, invent the purging of communists, jew-baiting, rule by decree and so on, but rather turned all of this into a mass movement, stepped it up and systematised it – marking a qualitative difference in what had gone before in so doing.
Once we understand that all citizens of the western world are effectively bourgeois – net beneficiaries of (global) exploitation living, at least in part, off the labour of others – the parallels with fascism become clear. If the working class of the west is, properly speaking, a section of the global middle class, as Cope argues, then for all the ‘workerism’ espoused by Trump and his European bedfellows, their electoral basis is, just like the classical fascists, primarily middle class. Fascism has always had a special appeal to the middle class in periods of capitalist crisis, as it promises redemption from both the threat from ‘below’ – proletarian revolt threatening their privileged class position – and the threat from ‘above’ – the big capitalist industries and finance capital. Hitler chose the Jew as a very specific symbol designed to represent both of these threats simultaneously – the poor ghetto jew representing the communist threat, and the wealthy jew symbolising the ‘greedy banker’. By the same token, the Jew also represented both the internal enemy, ‘weakening the enemy from within’, as well as the external enemy – the Soviet Union, standing in the way of German lebensraum, and the ‘Jewish-controlled’ capitalist victors of Versailles – responsible for Germany’s decline. For today’s neo-fascists, the Muslim plays the same role. Whilst the poor Muslim immigrant represents the unwanted intrusion of the global proletariat into the white westerner’s monopoly of privileged access to jobs and services, the wealthy Arab sheikh represents the (foreign) capitalist responsible for pushing up house prices and rents etc. Likewise, the internal threat posed by the ‘jihadi terrorist’ is mirrored by the external threat of the rising global South, freeing itself from western domination, and both symbolised by the Muslim other. The promise to root out this impure ‘other’ internally – whilst reasserting dominance over it abroad – is at the heart of fascism’s appeal.
But also fundamental to fascism is that all of this comes dressed in pseudo-‘left wing’, ‘anti-establishment’ drag. The Nazis were forever railing against what Gregor Strasser called “the degenerate economic system” which would supposedly smashed by the fascists, who would “restore honest payment for honest labour”. Their 25-point programme promised the abolition of unearned income, the “nationalisation of all trusts”, the “breaking of interest slavery”, the “death penalty for usurers” and on and on – but in power, of course, none of this came to fruition. Just like Trump, far from executing the ‘usurers’, be brought them into his government: whilst Hitler made the head of Deutsche bank his economics minister, Trump has now broken the record for the number of former Goldman Sachs officials in Cabinet. For the Nazis, it was only the promises to smash Marxism and round up Jews, in the end, to which they were seriously committed, just as Trump’s anti-immigrant programme is the only major plank of his manifesto that has survived actually taking office. As Slavoj Zizek succinctly put it; “Hitler staged a spectacle of revolution so that the capitalist order could survive”. It is supremely ironic that Zizek now provides ideological cover for the neo-fascists himself, parroting their ‘threat to Europe’ rhetoric on immigration.
For Willie Thompson, fascism is defined as “pseudo-revolutionary populist nationalism”; and a more precise definition of today’s European far-right, Trump and Brexit movements would be hard to find. But the neo-fascist electoral model which has been so successful for these groups – immigrant- baiting, pseudo-workerism, plus a faux ‘anti-establishment’ presentational style – has now been established as THE electoral formula across the entire ‘western’ world, with mainstream parties seeking to maintain their position playing the same game. The fascist epoch is truly underway; history shows us the direction in which it is headed.
“The situation in Yemen – today, right now, to the population of the country,” UN humanitarian chief Mark Lowcock told Al Jazeera last month, “looks like the apocalypse.”
150,000 people are thought to have starved to death in Yemen last year, with one child dying of starvation or preventable diseases every ten minutes, and another falling into extreme malnutrition every two minutes. The country is undergoing the world’s biggest cholera epidemic since records began with over one million now having contracted the disease, and new a diptheria epidemic “is going to spread like wildfire” according to Lowcock. “Unless the situation changes,” he concluded, “we’re going to have the world’s worst humanitarian disaster for 50 years”.
The cause is well known: the Saudi-led coalition’s bombardment and blockade of the country, with the full support of the US and UK, has destroyed over 50% of the country’s healthcare infrastructure, targeted water desalination plants, decimated transport routes and choked off essential imports, whilst the government all this is supposed to reinstall has blocked salaries of public sector workers across the majority of the country, leaving rubbish to go uncollected and sewage facilities to fall apart, and creating a public health crisis. A further eight million were cut off from clean water when the Saudi-led coalition blocked all fuel imports last November, forcing pumping stations to close. Oxfam’s country director in Yemen, Shane Stevenson, commented at the time that “The people of Yemen are already being starved to submission – unless the blockade is lifted quickly they will have their clean water taken away too. Taking clean water from millions of people in a country that is already suffering the world’s largest cholera outbreak and on the verge of famine would be an act of utmost barbarity.”
Since then, things have been getting worse. As of late January, fuel imports through the country’s main port Hodeidah were still being blocked, with cholera cases continuing to climb as a result. And on 23rd January, the UN reported that there are now 22.2 million Yemenis in need of humanitarian assistance – 3.4 million more than the previous year – with eight million on the brink of famine, an increase of one million since 2017.
This is unsurprising, as both the bombardment and the blockade have intensified in recent months. For almost a month at the end of last year, the coalition blocked all imports into Hodeidah port, through which 70% of the country’s imports would otherwise enter. And since the death of former President Ali Abdullah Saleh on 4th December, the air campaign has been stepped up, with massacres occurring on a near-daily basis. On 9th February, the UN announced that 85,000 had been displaced in ten weeks due to “surging violence”, particularly on the Red Sea Coast, where the coalition have mounted a new campaign to capture the country’s strategically important Hodeidah port.
With the Hodeidah campaign now entering a new phase, this war on the Yemeni population is set to escalate still further. Since it launched in early December, the coalition and their Yemeni assets have taken several towns and villages on Hodeidah province, and are now poised to take the battle to the city itself. On 20th February, Emirati newspaper The National reported that, in the coming days, “more forces will be committed to Hodeidah as a new front is to be opened in the next few days by Maj Gen Tariq Mohammed Abdullah,” nephew of the deceased former president Ali Abdullah Saleh. This attack would put the almost completely-import dependent country’s most essential port out of action for months, leaving millions unable to survive. “If this attack goes ahead”, Oxfam chief executive Mark Goldring told the press when a similar attack was proposed earlier last year, “this will be a deliberate act that will disrupt vital supplies – the Saudi-led coalition will not only breach International Humanitarian Law, they will be complicit in near certain famine.” His colleague Suze Vanmeegan added that “any attack on Hodeidah has the potential to blast an already alarming crisis into a complete horror show – and I’m not using hyperbole.”
There is no doubt the war’s British and American overseers have given their blessing to this escalation. In late 2016, the “Yemen Quartet” was formed by the US, the UK, Saudi Arabia and the UAE to co-ordinate strategy between the the war’s four main aggressors. Throughout 2017, they met sporadically, but since the end of the year their meetings have become more frequent and higher-level. At the end of November, just before the launch of operations in Hodeidah province, Boris Johnson hosted a meeting of the Quartet in London as Theresa May simultaneously met with King Salman in Riyadh, presumably to give the go-ahead to this new round of devastation for Yemen’s beleaguered population. They met again two weeks later, and then too on 23rd January, also at Johnson’s instigation, where the meeting was attended, for the first time, by Rex Tillerson. The “economic quartet” – also attended by officials from the IMF and World Bank – convened on 2nd February in Saudi Arabia, whilst Johnson and Tillerson once again met with their Saudi and Emirati counterparts to discuss Yemen in Bonn on 15th February. Of course, these meetings do not carry out the nitty-gritty of strategic war planning – civil servants in the military and intelligence services do that. The purpose of such high level forums is rather for each side to demonstrate to the others that any strategic developments carry the blessing of each respective government at the highest level. That the “quartet” met just days before an announcement that the long-planned attack on Hodeidah port was imminent, then, speaks volumes about US-UK complicity in this coming new premeditated war crime.
These military and humanitarian ‘developments’ (if such a word can be applied to the deliberate reversal of a country’s living standards) form the backdrop to the Saudi-led coalition’s unveiling on 22nd January of their new plan to deliver “unprecedented relief to the people of Yemen”. YCHO – “Yemen Comprehensive Humanitarian Operations” – is a new ‘aid’ programme with the ostensible aim of “addressing immediate aid shortfalls while simultaneously building capacity for long-term improvement of humanitarian aid and commercial goods imports to Yemen”, primarily through increasing the “capacities of Yemeni ports to receive humanitarian as well as commercial imports” – and all sealed with a whopping $1.5billion in aid contributions. What could possibly be wrong with that?
The problem here is not only that the the funding required to meet the needs created by the Saudi-led coalition is estimated by the UN to be twice that amount. The real problem is that the plan will not, in fact, increase the imports on which Yemen is utterly dependent, but reduce them still further. This is because the much-vaunted ‘improvements in port capacity’ will apply solely to “coalition-controlled ports”, excluding the ports outside their control – Hodeidah and Saleef – which, between them, handle about 80% of Yemen’s imports. For these, absolutely critical, ports, the plan explicitly states that it wants a reduction in the flow of cargo they handle: by around 200 metric tons per month, compared to mid-2017 levels. Yes, you heard correctly: cargo levels in mid-2017 – when 130 children were dying each day from malnutrition and other preventable diseases largely caused by the limits on imports already in place – are now deemed in need of further, major, reductions. This plan is nothing less than a systematisation of the starvation politics of which the Saudis were accused by the UN Panel of Experts on Yemen in relation to their closure of Hodeidah and Saleef in November. Back then, noted the panel’s Final Report, all Yemen’s ports had been closed following a Houthi missile attack on Riyadh airport. But whilst coalition-controlled ports were quickly reopened, Hodeidah and Saleef remained closed for weeks. “This had the effect,” said the panel, “of using the threat of starvation as an instrument of war.” Today, the ‘Comprehensive Operations’ plan envisages making permanent the juxtaposition of wilful starvation of Houthi-controlled territory (in which the vast majority of Yemenis live) and ‘generous’ aid deliveries into coalition-controlled territories. These are the same ‘methods of barbarism’ as were employed by the British in the Boer war – when Boer-controlled territories were subjected to scorched earth policies of torching farms and destroying livestock – and then revived for Britain’s colonial wars in Malaya, Kenya and, indeed, Yemen in the 1950s-60s. Small wonder Britain is so deeply involved today.
But such a strategy will surely be hard to sell in this day and age. Certainly, the Saudis seem to think so; which is presumably why they have employed a plethora of the world’s most notorious PR agencies to help them do so.
An exceptional investigation by the IRIN news agency reported that “the press release journalists received announcing the [YCHO] plan came neither from the coalition itself nor from Saudi aid officials. It came, along with an invitation to visit Yemen, straight from a British PR agency”. That agency was Pagefield Global Counsel, one of the successor companies to disgraced PR giant Bell Pottinger (employing over 20 former Pottinger staff).
The investigation also revealed that the powerpoint presentation used to introduce the YCHO to high level UN officials was authored by Nicholas Nahas, of Booz Allen Hamilton, a US management consultancy with long-established links to the US state – including involvement in the illegal SWIFT and PRISM mass surveillance programmes – and which currently has, says IRIN “35 job listings in Riyadh on its website, including “military planner”, a role that requires the applicant to: “Provide military and planning advice and expertise to support the coordination of Joint counter threat operations executed by coalition member nations and facilitate resourcing to enable operations.””
Another PR company involved in ‘selling’ the YCHO, long on the Saudi payroll, is Qorvis MSLGROUP, who, says IRIN, “booked US revenue of more than $6 million from the Saudi Arabian embassy [in the US] over a 12-month period up to September 2017”.
These masters of spin have certainly been busy: their work on the plan has been delivered to “the offices of major INGOs in the UK as well as to members of the UK parliament”, and YCHO accounts has been set up on facebook, twitter, instagram, youtube and gmail. The YCHO twitter account has around 10,000 followers; but, says the investigation, “almost half of YCHO’s followers have less than 10 followers themselves, while some 1,000 followers were accounts created on the same day in 2016 – signs that a significant number of bots or fakes are inflating YCHO’s popularity”.
“All of this,” concludes IRIN, “has fed suspicions that rather than a genuine attempt to help the people of Yemen, the plan is really intended more to gloss over the Hodeidah issue and improve Saudi Arabia’s battered image, or at least a bit of both.”
You would think a strategy aimed at starving the world’s most starving population still further would be a hard sell. But, then, money not only talks, it silences. And $1.5 billion is a lot of money.
The UN’s own ‘Humanitarian Response Plan’ for Yemen, issued just two days before the YCHO, on 20th January, had noted that “Al Hudaydah port, which accounts for 70-80 per cent of commercial imports in Yemen, remains a critical lifeline, despite operating at reduced capacity after being hit by an airstrike in August 2015”, adding that “the extended blockade imposed on Al Hudaydah and Salif ports on 6 November 2017 significantly threatened this lifeline of Yemenis” and that “only a sustained flow of imports of essential basic goods can avert further catastrophe”. Yet the cash-strapped UN, facing dramatic budget cuts from the Trump administration, and presumably nervous of saying anything that might jeopardise Saudi-Emirati money as well, officially welcomed the announcement, despite its clear commitment to essentially tightening the very blockade of Hodeidah and Saleef ports which the UN had denounced just days earlier.
Thankfully, the aid agencies do not seem to have been fooled. A joint statement on the YCHO by a number of international NGOs, including Oxfam and Save the Children, stated that “We remain concerned that the blockade on Red Sea ports has still not been fully lifted and about the insufficient volume of fuel reaching these, which has led to an increase in the price of basic goods across the country. As a result, we are seeing families pushed into preventable disease and starvation because they cannot afford to buy food and clean water. Hodeidah port handles the majority of the country’s imports and cannot be substituted. It is vital that the warring parties commit to keep Hodeidah port fully open and functioning, including unfettered access for both humanitarian and commercial supplies.” Save the Children’s Caroline Anning explained that the plan “is a misconception – in the publicity around this new plan they say the blockade around Hodeida port has been fully lifted but actually what we’re seeing is that fuel is still being blocked coming into that port which is having a really horrendous knock-on effect around the country.” She added that if “they want to try and push the delivery of key important commercial supplies through other ports like Aden, Jazan and Saudi Arabia and cut off the Hodeida port, again that could be really problematic and again it means one of the warring parties in the conflict is controlling access routes for goods coming in…Improved humanitarian access is really important and that’s been a massive challenge – but in reality that’s not going to solve the humanitarian conflict in Yemen. We’ve seen increased violence, air strikes across the country in the last few months, civilians being killed every day, vital infrastructure like health clinics being hit all the time. While that’s happening and while the economy is collapsing and public sector salaries aren’t being paid, the humanitarian crisis is going to continue.”
And the International Rescue Committee (IRC)’s scathing response – issued with the title “Yemen: Saudi ‘aid’ plan is war tactic” – is worth quoting at length:
“The Yemen Comprehensive Humanitarian Operations (YCHO), announced on January 22, 2018, is neither comprehensive, nor reflective of clear, shared humanitarian priorities…The YCHO politicizes aid by attempting to consolidate control over access and transit points. Rather than endorsing a parallel plan, which was created without broad input from humanitarian actors, the Saudi Led Coalition (SLC) and its supporters, notably the US and UK, should work to ensure the full implementation of the existing UN humanitarian response plan.
“The name in itself is misleading: it is neither comprehensive, nor particularly humanitarian,” said Amanda Catanzano, senior policy and advocacy director at the International Rescue Committee. “The Saudi-led coalition is offering to fund a response to address the impact of a crisis it helped to create. The acute crisis in Yemen needs more than what appears to be a logistical operations plan, with token gestures of humanitarian aid”. The IRC go on to list a number of ‘red flags’ about the plan, first and foremost, that it does not end the blockade: “If the Saudis were serious about addressing the humanitarian crisis,” they point out, “the most valuable step they could take would be to lift the blockade, permanently, which they and the international community should do without delay”. Furthermore, they add, the YCHO “severely threatens humanitarian access, endangering the lives of millions more civilians. The plan would move the main hub of the response from Hodeidah port to Aden port and would increase capacity of additional Southern ports of Mokha and Mukalla as additional alternatives. The development of additional Yemeni ports is welcome and laudable, but not at the expense of access to Red Sea ports like Hodeidah and Saleef. The southern ports are neither equipped for, nor well placed to service populations in need: they the lack basic infrastructure and capacity of the northern ports, through which 80% of all imports come into Yemen, and humanitarians would need to go through 70 checkpoints between Sanaa and Aden, complicating delivery and driving up costs”. They also note that it is precisely the Saudi-led coalition and its Yemeni stooges who have implemented a policy of cutting off payments to public sector workers, leading to the current public health disaster: “The acute deprivation in Yemen is as much a function of the blockade as it is the absence of basic public services. The SLC is overfunding the war effort at the expense of governance and service delivery. The vague “economic stabilization” clause in the YCHO does not address the restoration of basic public services. These funds should be used to reinstate basic government services and pay government workers.” It concludes:
“A meaningful response to the world’s largest humanitarian crisis requires more access – not less. At best, this plan would shrink access and introduce new inefficiencies that would slow the response and keep aid from the neediest Yemenis, including the over 8 million on the brink of starvation,” said Catanzano. “At worst, it would dangerously politicize humanitarian aid by placing far too much control over the response in the hands of an active party to the conflict.”
Essentially, this is a plan to tighten the blockade whilst monopolising access to aid in the hands of the aggressors, presented as a great humanitarian effort, and unveiled just as the coalition begins an attack on the country’s “vital lifeline” which will lead to “a complete horror show” and “near-certain famine”. In the twisted minds of men like Mohammed bin Salman, Rex Tillerson and Boris Johnson – for whom even the liquidation of an entire people is a apparently a noble cause in the pursuit of containing Iran – this is what passes for humanitarianism today.
20 years ago this month, a run on the Thai currency triggered a financial crisis that quickly devastated the economy of the entire region, sinking the currencies of Thailand, Indonesia and South Korea and ultimately spreading as far as Russia and Brazil. Far from ‘lessons being learned’, however, history looks worryingly set to repeat itself.
On 2nd July 1997, Thailand’s Prime Minister Chavalit Yongchaiyudh announced that the baht, would be freely floated. The Thai government lacked the foreign exchange reserves necessary to continue pegging the currency to the US dollar – and the result was a collapse of the baht to less than half its former value.
The contagion quickly spread to Thailand’s neighbours as panicked investors began selling off their stocks in other East Asian currencies. Within months, noted the Financial Times on the 2nd January 1998, the crisis had “laid waste to what was once the most dynamic part of the world economy”, leading to a collapse of the currencies of Indonesia, Malaysia, the Philippines, and South Korea. Later that year, the economies of Russia and Brazil were seriously hit by the impact of the crisis on commodity prices, triggering crises of their own.
Across the region, economic devastation reigned. Unable to refinance their debts, companies of all sizes had their loans called in. But the collapse of their currencies meant that the value of these debts – denominated in dollars – had increased exponentially. A wave of bankruptcies drove unemployment through the roof, whilst governments hit by declining tax revenues – and IMF-imposed austerity – were forced to cut back on social safety nets. At the same time, the collapse of currency values led to rapid inflation, forcing up prices of basic essentials such as food and fuel. Poverty rates ramped up – and in Indonesia, the resulting social unrest even led to the overthrow of the government.
What had caused this devastation? In the years preceding the crash, the economies of East Asia had, under IMF tutelage, removed capital controls. This, in turn, had led to an influx of ‘hot money’ into those economies, as low returns in the developed world prompted investors to seek capital outlets elsewhere. As the Financial Times noted in January 1998, “between 1992 and 1996 net private capital flows to Asian developing countries jumped from $21bn to $101bn. …What caused the inflow was largely the search for better returns by investors made insensitive to risk and hungry for profit by the western bull market.” Those investors had been especially encouraged by the 1993 World Bank report “The East Asian miracle” praising the growth those countries had achieved. To keep their exports competitive, they had pegged their currencies to – then undervalued – dollar. But things turned sour when the so-called ‘reverse Plaza accord’ of 1995 brought about a major appreciation of the dollar, decimating the exports of the East Asian economies. It took a while for this to ‘filter through’ to investors, but once it became clear that East Asian currencies and stocks were overvalued, the herd mentality took over. “As usual,” wrote the FT, “mania ended in panic”.
Thailand, Indonesia and South Korea were all forced to take billions of dollars in emergency loans from the IMF – coming, of course, with strict conditions, which exacerbated the crisis. As is standard with the IMF, recipient governments were forced to adopt strict austerity measures, which preventing them from doing anything to stimulate demand. But they were also forced to abolish all barriers on foreigners purchasing assets such as banks and property. As a result, Western capital was able to swoop in and buy up Asian infrastructure – some of the most modern plant and machinery in the world – for pennies on the dollar, as companies unable to meet their dollar debts were forced to sell their assets at rock-bottom prices. As Wade and Veneroso wrote, “the combination of massive devaluations, IMF-pushed financial liberalisation, and IMF-facilitated recovery may have precipitated the biggest peacetime transfer of assets from domestic to foreign owners in the past fifty years anywhere in the world”. For Professor Radhika Desai, this was “the most impressive exercise of US power the world had seen in some time”, providing, in the words of Peter Gowan, “a welcome boost for the US financial markets and through them for the US domestic economy” as “capital flows bypassed emerging-economy financial markets and went directly into the upward-moving US bond and stock markets” (Desai). Western policy had facilitated the crisis, exacerbated it, and profited immensely from it: for, as Peter Gowan has noted, “the US economy depends…upon constantly reproduced international monetary and financial turbulence” – whilst Wall St in particular “depends upon chaotic instabilities in ‘emerging market’ financial systems”.
With the western world poised to ramp up interest rates, could it be that we are again on the verge of just such an episode? The parallels are worrying.
First of all, just as during the years prior to 1997, the past decade has seen a massive influx of capital into the developing world, exacerbated by the British-US-German-Japanese ‘quantitative easing’ (QE) programmes. According to the world bank, “Over the four-year period between mid-2009 and the first quarter of 2013 [ie the first four years of the QE experiment], cumulative gross financial inflows into the developing world rose from $192 billion to $598 billion”, which, it noted, was “more than twice the pace compared to the far more modest increase of $185 billion between mid-2002 and the first quarter of 2006”. Former foreign secretary of India, Shyam Saran, warned of the potentially destabilising effects of this influx back in 2013: “According to one estimate, about 40 percent of the increase in the U.S. monetary base in the QE-1 phase leaked out in the form of increased gross capital outflows, while in the QE-2 phase, it may have been about one-third. This massive and continuing surge of capital outflows to emerging and other developing economies is having a major impact. Corporations, which have a sound credit rating, are taking on more debt, and increasing their foreign exchange exposure, attracted by low borrowing costs. Their vulnerability to future interest rate changes in the developed world and exchange rate volatility will increase.” The Daily Telegraph has also picked up on this vulnerability, noting that “Nobody knows what will happen when the spigot of cheap dollar liquidity is actually turned off. Dollar debts outside US jurisdiction have ballooned from $2 trillion to $9 trillion in fifteen years, leaving the world more dollarised and more vulnerable to Fed action than at any time since the fixed exchange system of the Gold Standard.” Even the World Bank have admitted that the reversal of QE “is a central concern for developing economies, which have struggled to cope with the surge in financial inflows that they have experienced over the past several years, and are fearful that the renormalization of high income monetary policies will be accompanied by a disorderly sudden stop in capital inflows.” Later in their study, they conclude that “These fears were not unfounded”. Just as during the pre-1997 period, emerging markets are dangerously leveraged, with the influx of ‘hot money’ into the developing world leaving it exceptionally vulnerable to any action that might reverse this flow. And such action is almost certainly on the cards.
On July 18th, the Times’ economics editor Philip Aldrick wrote that “In two months’ time, the US Federal Reserve is expected to begin the next phase in the greatest economic experiment of modern times. America’s central bank has signalled that it may start unwinding quantitative easing in September with the piecemeal sale of the $3.5trn of bonds bought since QE’s 2008 launch. No one quite knows what happens next, but the gloomiest predict another financial maelstrom. One thing is certain. Borrowing costs will rise”. Indeed, he writes, “it’s already happening. Government bond yields, used to price everything from fixed rate mortgages to corporate loans to pension schemes, have jumped. Since June, the yield on ten-year UK gilts has risen from below 1% to 1.275%. The same is happening in US and German bonds.
Against the backdrop of automatic global monetary tightening, a Fed decision to flood the market with more bonds would lift borrowing costs even higher.” In other words, we are entering an era of rising effective interest rates exactly like that which prefigured the 1997 crisis.
A second parallel is that the debts being accumulated in the global South are, again, largely denominated in dollars. In 1997, this was devastating as it meant that, as local currencies dropped in value, their dollar debts effectively escalated by the same amount; had the debts been denominated in local currency, the number of bankruptcies would not have been nearly so large. To guard against a repeat scenario, therefore, the countries hit in 1997 began to issue debt only in their own currency: those wishing to invest would have to first convert their money into the local currency, and only then could they do so. As the years passed, however, complacency seems to have set in: to such an extent that, today, according to the Bank of International Settlements, non-bank borrowers in emerging markets have now accumulated more than $3 trillion in dollar-denominated debt. According to a report published by the Bank last year, “The accumulation of debt since the global financial crisis has left EMEs [emerging market economies] particularly vulnerable to capital outflows. As private sector borrowing has led to overheating in several large EMEs, the unwinding of imbalances may generate destabilizing dynamics.” The report goes on to note that around $340 billion of developing country debt will be maturing this year, “creating a potential default risk if investors start pulling money out of emerging markets”.
All the warning signs are there. Writing for Bloomberg, Lisa Abramowicz wrote in November 2016 that “the debt of developing economies is positioned uniquely for pain.” Noting Adair Turner’s warning that “the large increase of emerging-market debt, much of it denominated in dollars,” is one of the biggest risks in the financial system right now, she added, “All that money is owed to somebody, and a failure to pay it back will cause big ripple effects. So as emerging markets come under stress, bond investors around the world should take note. As the dollar continues to strengthen, it’s not a stretch to see how this developing-market debt selloff can worsen, having far-reaching consequences on markets around the world.”
Others have specifically drawn attention to the parallels with 1997. Reporting on a speech by Bill Dudley, head of the New York Fed, the Telegraph noted that he had “hinted that the Fed may opt for the fast tightening cycle of the mid-1990s, an episode that caught markets badly off guard and led to the East Asia crisis and Russia’s default.” And the above quoted former foreign secretary of India, Shyam Saran, warned that “The Asian financial crisis of 1997/98 was, in part, triggered by an earlier version of QE pursued by Japan in the aftermath of the bursting of its property and asset bubble in the early 1990s. Then, too, the large inflow of low-cost yen loans led to the asset price bubbles, inflationary pressures and currency instability in the Asian economies.”
Of course, triggering a new crisis by ramping up interest rates and selling off bonds – precisely at a time when a large portion of developing world debts are maturing – would hurt the West as well. Yet this seems to be precisely what is being planned. Because if a new crisis is inevitable – and I believe the inherent capitalist tendency towards overproduction means it is – it makes perfect sense to time it at a moment when the global South will be forced to bear the brunt. And, even if the US it hit, so long as everyone else is hit harder, that is a net gain for US power. As the Telegraph noted, “The US is perhaps strong enough to withstand the rigours of monetary tightening. It is less clear whether others are so resilient.” And, says Abramowicz, “While bonds globally are posting some of the biggest losses on record, debt of U.S., Germany, Japan and other large economies will eventually have natural buyers that can swoop in and support values.”
Fans of Breaking Bad will remember the memorable scene in which drug lord Gus Fring arrives at the mansion of his arch rival Don Eladio with a bottle of poisoned tequila disguised as a peace offering. Eladio is suspicious, so to prove its purity, Gus drinks the first shot. Whilst the rest of the cartel are poisoning themselves, he heads to the bathroom to make himself sick. After nearly dying, he eventually recovers – whilst his rivals’ corpses lay strewn around the swimming pool. Is the US hoping to pull the same stunt – choking themselves, but fatally throttling everyone else in the process, so they can swoop in and pick up the pieces? It wouldn’t be the first time.
This article originally appeared on RT.com