drunken cynic

“Some people ask why we chose socialism. We answer that we had to, because capitalism would get China nowhere. If we had taken the capitalist road, we could not have put an end to the chaos in the country or done away with poverty and backwardness. That is why we have repeatedly declared that we shall adhere to Marxism and keep to the socialist road. But by Marxism we mean Marxism that is integrated with Chinese conditions, and by socialism we mean a socialism that is tailored to Chinese conditions and has a specifically Chinese character.” – Deng Xiaoping, “Build Socialism With Chinese Characteristics” (1984)

In the three years following the death of Mao Zedong in 1976, the Chinese Communist Party oversaw an abrupt and dramatic transformation of the ideology and practice of economic policy in the People’s Republic. This transformation represented a break with dogmatic Marxist economic theories of autarky, self-sufficiency, and total state control of production and investment, gradually opening the Chinese economy to foreign investment and market forces. This began the long, sustained economic boom which has turned China from an impoverished, backwards, agrarian society to an emerging economic superpower. The Communist Party’s explanation of this ostensible abandonment of the policies of Mao and Marxist dogma was that socialism had not been abandoned, but adopted to the special circumstances of Chinese culture and society – that they were pursuing a policy of “Socialism with Chinese Characteristics.”

It is not my intention at this time to analyze or criticize this specific ideology and policy or its meaning in theory or practice. But to give some meaning to the phrase, I would like to briefly discuss the quasi-socialist reign of the Chinese emperor Wang Mang, founder and sole member of the Xin Dynasty (A.D. 9-23). Wang Mang’s policies represent a remarkable prototype of twentieth century socialism, and his rise and fall is also quite evocative of modern-day Marxist leaders.

Wang Mang came to power during a time of turmoil in the Han dynasty. Originally an official in the Han court, Wang Mang came to power through skillful, crafty political maneuvering that courted royal favor, combined with a Bismarckian personality cult which succeeded in landing him mythical titles such as Duke of Chou and “Ruling Governor”, both of which strongly evoked classical Chinese history, tradition and mythology. Winning the favor of the royal family, and taking advantage of the succession of an infant emperor to the Han thrown, he originally presented himself as a defender and re-legitimator of the Han dynasty, achieving the office of “Acting Emperor” and serving as guardian of the Han heir-apparent. He subsequently turned abruptly to found his own dynasty in a bloodless coup that was perhaps the only instance of peaceful inter-dynastic transition in Chinese history.

Wang Mang undertook numerous ambitious reforms of Chinese society, both as a member of the Han court and as emperor. As regent-emperor he sought to create a system of universal education down to the village level, with some emphasis on the teaching of classics. He also undertook “Confucianization” of Chinese society, including the establishment of special offices in the state bureaucracy to promote and protect Confucian culture.

Upon ascending the throne, Wang Mang instituted following economic policies:

§ Criticizing the concentration of land ownership in the hands of the few, nationalized land and forbid its purchase or sale;

§ Limits were placed on the size of land holdings, and large holders were forced to distribute land to their friends and neighbors;

§ Slavery was abolished;

§ Established state monopolies on salt, iron, liquor, and other minerals;

§ Assumed state responsibility for stabilizing prices and controlling credit;

§ Instituted bizarre currency reforms which eventually eroded all confidence in state currency.

Now the point is not to emphasize how much these reforms and policies approximate “socialism” as we know it in a modern sense; to some degree, most of the despotic regimes that have appeared throughout history can be called “socialist” if we use the crude meaning of state direction of the economy. But the importance of this analogy is between the motivation of Wang Mang and the effects of his policies on the Chinese economy and the Chinese people. Wang Mang was a humanitarian and a philosopher who wished to improve the lives of the Chinese peasants. He wished to reduce poverty and reduce inequality. But his policies had a disastrous effect. They created chaos and economic stagnation, and eventually rioting and rebellion by the very peasants whose lives he was trying to improve.

As would later be discovered in Mao’s Great Leap Forward or the Cuban “10 Million Ton Harvest” of the 1960s, transforming the economy or eradicating poverty cannot be achieved by sheer act of will. And when sheer acts of will are not voluntarily undertaken, but are imposed upon the people by an authoritarian government – however well intentioned – the result is generally disastrous in both economic and human terms.

I plan on finally finishing part two of my piece on asymmetric warfare this week.

Signing off for now.

drunken cynic

I do not necessarily like to label myself as an agnostic, but the truth of the matter is that I have very little to say about religion, theology, the existence of God, or mysticism in general. A Catholic by birth and socialization, I have read the Bible nearly cover to cover and used to attend church regularly. But it has been years since I would describe my worldview as Catholic or even Christian. It is not that I have become disillusioned or experienced some dramatic “turning away” from religious faith – it is just that as a worldview, as a system of giving order to the world, religion simply does not appeal to me.

That being said I personally believe that religion serves a purpose, in both the grand scheme of things (it is unsurpassed as a tool of social control) and in individuals’ own experiences. Religion, as well as philosophy and mysticism, gives the individual a means of making sense of a complex world, of creating order from chaos, of providing comfort in a cold and lonely universe. My personal worldview is a hodgepodge and, ultimately, self-serving combination of classical, modern and postmodern philosophy combined with a cynical pragmatism (not to be confused with realism). This works for me, and if others find some other system of belief personally appealing, convenient, or – most importantly – effective at getting what they want out of life, I think that is a great thing. And as to whether we should encourage supposedly “irrational” or mistaken beliefs, or whether some religio-philosophical perspectives are more reasonable than others – I say let them be judged by their actual outcomes, their impact on actually helping individuals to lead good lives and be successful, rather than on our opinion of their logical coherence.

At any rate, this is what little I have to say on religion. Contemporary philosopher Simon Blackburn offers an interesting critique of religious belief in his paper “Religion and Respect”. Interesting opposing viewpoints from Christian theology and apologetics (the systematic intellectual defense of religion) can be found here, here, and here.

Signing off for now.

drunken cynic

Everyone who is anyone has heard about the melting Arctic icecap producing a mad dash to claim newly-unfrozen territory which is thought to contain potentially vast oil and gas reserves. This summer various states - particularly Russia, Canada, and Denmark - attempted to lay claim to various sections of the Arctic ocean, culminating in Russia laying claim to the North Pole and sending a minisub to plant a titanium Russian flag on the polar seabed.

But meanwhile there has been rising controversy over Antarctica, which is also divided up into controversial and disputed territorial claims and subject to increasing interest by scientists and oil prospectors alike.

While territorial claims have been frozen by the Antarctic Treaty of 1958, several countries maintain claims to sovereignty over large swaths of the continent (map). And while vast oil and gas reserves are believed to lie beneath the once-green Antarctic soil, the Madrid Pact effectively bans energy exploration until 2048. The government of Australia, the largest claimant to territory in Anarctica, remarks on an official website that oil prospecting and extraction has been banned “effectively for ever” in Antarctica - a bit of an exaggeration to say the least. The Australian newspaper Courier Mail disagrees completely and argues that natural resources are central to interest in the continent.
But outcry has also been risen against the environmental degradation caused by scientific research on the Antarctic landmass. Anxiety about oil spills was sufficient to give Argentine scientists reason to spend their time and trouble developing (or discovering) a petroleum-biodegrading microorganism that thrives in subzero temperatures.

What is particularly exciting to myself is the discovery of sub-glacial lakes buried beneath miles of ice and warmed by geothermal fissures in the continental shelf that may contain as-yet-undiscovered forms of life. Russian scientists are within arms-length of reaching the largest of these lakes, Lake Vostok, with a drill bit, but have paused to consider environmental concerns and take suggestions on how best to extract samples of the lake without unduly contaminating such a pristine environment. The Russians are intent to be the first to do so, however, as indicated by comments made by Russian scientist Valery Lukin. In one (hopefully) final twist of absurdity, Lukin remarks in the above-linked article that “The U.S. made the first flight to the moon. They won. For our country it is very important to be first into a subglacial lake.”

Just a heads up on what is sure to become a primary scene of 21st century geopolitical stagecraft.

Signing off for now.

drunken cynic

“If he (the enemy) is superior in strength, evade him. If his forces are united, separate them. Attack him where he is unprepared; appear where you are not expected.” – Sun Tzu, The Art of War

“It is important to emphasize that guerrilla warfare is a war of the masses, a war of the people. The guerrilla band is an armed nucleus, the fighting vanguard of the people. It draws its great force from the mass of the people themselves… Guerrilla warfare is used by the side which is supported by a majority but which possesses a much smaller number of arms for use in defense against oppression.” – Che Guevara, Guerrilla Warfare

The era of unprecedented imbalance of power represented by the current unipolar system of American hegemony represents a unique historical moment by many standards – and thus represents something of a “laboratory” for testing theories of international relations and for observing how the laws of state behavior are bent and morphed by such atypical scenarios as an era of unchallenged military and economic dominance by a lone superpower. There have been other similar periods in history which are roughly analogous to the present – British hegemony from 1815-1890; the Roman Empire; Egypt prior to the ascendance of the Assyrians and Hittites – but the ability of the United States to stand astride the globe and dictate events on every corner of the planet in real time is certainly unparalleled.

So this presents us with an opportunity to see how potential rivals deal with such a situation, where military parity is an unattainable goal and deterrence, even of the nuclear variety, is at best an imperfect guarantor of security from attack. Within such a system, the standard status quo versus revisionist dichotomy breaks down to a large extent. Instead, states which are not within the network of friends and allies of the hegemon have essentially two options: submission and rebellion. Submission implies that the potential rival accepts the rules of the game as dictated by the hegemon and behaves accordingly. The pursuit of power is not in itself contradictory to a policy of submission. A “peaceful rise” such as that presently being advocated and pursued by China is consistent with a policy of submission so long as the means used are those the hegemon deems legitimate – i.e. courting foreign investment, implementing pro-market economic policies and pursuing free trade.

Rebellion, on the other hand, occurs when the potential rival essentially renounces the rules dictated by the hegemon and flouts the established norms and structures of the international system, over which the hegemon presides. Thus it is not a choice of whether states seek to preserve their current status or place in the power hierarchy or attempt to revise the distribution of power and advance their position in the system. It is a choice between accepting the rules dictated by the hegemon and (de facto) acquiescing to their ability to dictate such rules and norms, or rejecting the authority and legitimacy of the hegemon and placing oneself more or less outside that system one way or another.

In essence, the foreign policy of the United States is based on containing rebellion and establishing networks of economic interdepencies and military alliances to support submission by potential rivals, and to make this option more attractive. Submission is “made more attractive” via a combination of carrots and sticks, primarily of an economic nature but also appealing directly to the self-interest of political elites of potential rivals. Again, China’s current peaceful rise is the paradigmatic example of the economic incentives of submission, while the slow strangulation of Cuba, North Korea, and Libya represent the inverse of this particular carrot. In terms of appealing to the self-interest of political elites, the protection racket run by the United States government for the House of Saud is a perfect example; the current support of Pakistan’s Pervez Musharraf and the support previously extended to the Shah of Iran are others.

Inevitably, though, a number of states do find rebellion to be a more attractive option than submission. And once they are subjected to economic sanctions, political isolation, and pariahization that comes with rebellion, it becomes a question of whether that state will be permitted to stay outside the system, or whether it will be invaded, its regime replaced with a pro-Western government, and it will be brought back into the system by force. Iraq has been subjected to the latter treatment, North Korea thus far the former. It appears that the most important factor determining whether a rebellious state is invaded and overthrown or let be is – quite logically – its deterrence capability.

Deterrence in this context should not evoke the images of Mutually Assured Destruction or the Cold War arms races. Deterrence in a struggle between great power rivals of roughly equal power and capability demands rough parity in terms of arms and resources on each side. In the context of keeping rebellious states within the fold of a hegemonic system requires a different understanding of deterrence because it represents a different type of conflict. A conflict between a global hegemon and a second-, third-, or fourth-tier power is fundamentally an example of Asymmetric Warfare, more akin to the Vietnam War or current War in Iraq than to a classic, state-state conflict.

Kenneth F. McKenzie defines asymmetric warfare as “leveraging inferior tactical or operational strength against the vulnerabilities of a superior opponent to achieve disproportionate effect with the aim of undermining the opponent’s will in order to achieve the asymmetric actor’s strategic objectives.” The importance of this definition is the idea of the targeting of the will of the opponent. The inferior party in an asymmetric conflict can not hope decisively defeat their opponent in battle, or even to force them to exhaust their resources in a protracted war of attrition. They can not hope that their opponent will run out of men or materiel. But they can expect that their opponent will exhaust their will to fight at some point, particularly if they can make the fight frustrating, humiliating, or costly enough for the superior power.

Deterrence in this context means that the inferior power need not demonstrate that an attack by the hegemon would be successfully repulsed or met with overwhelming retaliation, but only that it would be so profoundly difficult, costly, or unpopular for the hegemon that it is simply not worth it. Hegemons face a loss of face at best and a moral crisis at worst when a rival rebels against their authority, so the deterrence capability a potential rival contemplating rebellion must possess needs to be sufficient to overcome these powerful incentives for the hegemon to take aggressive action.

So potential rivals of the United States – large and small – are investing in and developing the type of weapons systems that would make aggression very costly, weapons which exploit the vulnerabilities of the expensive, state-of-the-art hardware of the American military. Since military parity is impossible, the idea is not that the inferior power should equip itself to win a war against the United States, but that it should be able to either survive such a war or at least to inflict so much damage while losing that victory itself is deemed “not worth it” in advance. So China is not attempting to build a navy which could take on the United States in an all-out war; instead the Chinese are investing in missiles like the Yingji-82 that could potentially wreak havoc on American carrier groups approaching Chinese waters. In the essay by McKenzie cited above, Chinese Senior Colonel Qiao Liang is quoted as making the following statement:

“If we were to try to use high technology to counter U.S. high technology, that would in fact land us in the U.S. trap. We could never catch up to them on that track. So for a poor and weak country to try to use high technology to counter the United States would in fact be like throwing eggs against a rock.”

There are three factors that would be important to determining whether an asymmetric war between a hegemon like the United States and a lesser power like Iran, North Korea, or even China that would be deemed to be too costly or difficult to undertake. The first and perhaps most important is the military capability of the lesser power, in terms of its ability to inflict material damage and loss of life on the hegemon. The more costly the conflict is, the longer it takes for the inferior power to be defeated and subdued, the less attractive the conflict becomes to the political elite and general public of the superpower.

The second factor is non-military capability of the inferior power to frustrate the objectives of the hegemon. This can consist of the political ideology that inspires resistance against the invading and occupying forces of the hegemon, or of the ability of the propaganda of the inferior power to evoke sympathy and turn global public opinion against the hegemon. The success of Al-Qaeda in turning Iraq into a chaotic hellhole by targeting Iraqi civilians is one example. The resurgence of the Taliban, motivated by the same Jihadi ideology that brought the mullahs to power in Afghanistan in the first place, is another. Iran has been flexing its muscles in this regard by constantly reminding the American foreign policy elite of its ability to activate proxies throughout the Middle East and sow trouble and violence across the region if needs be.

The third factor is the domestic political cost of such a conflict for the hegemon. The protests and resistance against the Vietnam War were the most important and iconic example of this. Increasingly, however, antiwar protests are coming to be part and parcel of any conflict involving the United States or any other liberal democratic state. The antiwar movement, now very active in opposition to the War in Iraq, is organized around several important organizations of professional protester-organizers such as CODEPINK, UPJ, and A.N.S.W.E.R., which are essentially pacifist organizations who will mobilize protests against any war in which the United States becomes embroiled. Their ability to recruit protesters and to mobilize ordinary citizens against a particular war will depend on the popularity and perceived legitimacy or justness of the conflict. The point is that while these organizations, which will form the core of any antiwar movement, will always exist and be ready to mobilize antiwar sentiment, their effectiveness at doing so will depend on the ability of the United States (or “the hegemon” to be consistent with the generally applicable theoretical context of this argument) to convince the public at home and abroad that the wars it becomes involved in are legitimate, necessary, and just. It also necessitates the use of extreme care to avoid civilian casualties, which is the most powerful and decisive factor in turning the public against any conflict.

In the second part of this essay I will discuss what this sketch and the assumptions it contains about conflict in a unipolar world order means for the future of international conflict more explicitly. I will explain the strategies potentially rebellious states are employing to deter American aggression, the role and importance of the antiwar movement, and the implications of asymmetric conflict on the international system more generally.

Signing off for now.

drunken cynic

I am becoming increasingly disturbed by the developing relationship between the Russian Federation and the Islamic Republic of Iran. I have mentioned previously that I believe an Iran-Russia-China axis is a distant but real possibility in the near future, and that this would be catastrophic for US interests in Eurasia. This is still an extremely implausible scenario, but the direction of cooperation between Iran and Russia on defense, energy, and the energy politics of the Caspian Sea Basin portend another, equally grim scenario: the return of the “Bad Old Days” of Realpolitik, that cynical, geopolitical chess game of balance of power politics which characterized European politics from 1815 to 1918.

Iran has slowly but steadily became the centerpiece and primary obsession of the American foreign policy since the toppling of Saddam Hussein in 2003. Indeed, the barrage of accusations lobbed against the Iranian regime by politicians and the foreign policy elite in Washington - ranging from its alleged nuclear weapons program, to its support for international terrorism, to its financial and tactical support for anti-US insurgents in Iraq - have led to a general sense of deja vu among the leftist intelligentsia and anti-war movement that we are in the middle of an Iraq War redux. The primary action that has been taken by Washington against Iran to date, however, has been the establishment of an international consensus that Iran can not be allowed to develop nuclear weapons. This has been built around the fulcrum of the so-called “EU Three” (France, the UK, and Germany) who have led the way in negotiations with Iran to open up its nuclear facilities to international inspectors and erase any doubt that it is pursuing nuclear technologies for any but peaceful purposes. While the EU Three negotiations have been unable to solve the Iranian nuclear crises, they did succeed in creating a general consensus that the West did try to deal rationally and peacefully with Iran and that Iran’s defiance was cause for punitive action of some sort. To date this punitive action has come in the form of financial and economic sanctions, although conservatives among the American foreign policy elite have made it clear that military action of some sort is a real and increasingly likely possibility.

A thorn in the side of the Western “consensus” that something serious must be done about Iran has been the Russians and Chinese. Both assert publicly that a nuclear-armed Iran would be a terrible thing, but neither has been convinced to get fully on board with the sanctions regimes or general effort to isolate the Iranian regime, and both have called for more moderate, multilateral measures. But Russia has in recent months transformed its position from one of seeking moderation on the Iran issue, to seemingly leaving the Western camp altogether to pursue a unilateral posture towards Iran - and one which seeks to build cooperation, trust, friendship and the pursuit of mutual interests, rather than antipathy. Russian president Vladimir Putin’s attitude towards Russo-Iranian relations is revealed in an important interview he gave on 16 October 2007 with Iran’s state-run IRNA news agency. Putin emphasizes the shared interests of Iran and Russia in economic issues, energy, regional stability and combating American unilateralism - even going so far as to express deep admiration for Persian culture and poetry. Putin remarks that “we support a multipolar world and I personally am deeply convinced that even if someone wanted to see a world based on unilateral power, this model has already proven that it does not work and that it cannot actually be implemented in practice.” The most alarming part of this budding relationship is, of course, Russian arms sales to Iran which would make a military strike by the United States much more difficult and costly. According to the Council on Foreign Relations, Russia agreed last year to sell Iran a $700 million surface-to-air missile defense system and plans to help upgrade Iran’s air force and its squadrons of T-72 Battle tanks, all of which are of Russian design and manufacture. Iran has also expressed interest in acquiring other anti-aircraft and anti-ship missile systems that could make airstrikes and extremely unattractive option for the US military.

What is the real nature of the new Russian foreign policy stance towards Iran? Russia and Iran do indeed have shared interests in the Central Asian region, particularly in terms of exploiting the energy resources of the Caspian Sea. The purpose of Putin’s visit to Iran in mid-October was to attend a summit of littoral nations of the Caspian Sea, to negotiate cooperation and international boundaries on the body, which has been a source of regional friction since the fall of the USSR. Two of the most interesting agreements to come out of the summit were that no ships not flying the flag of a littoral state were to be allowed on Caspian Waters, and that no littoral state can allow the use of their territory for attacks on another littoral state under any circumstances (source). But at the end of the day shared interests in terms of energy and countering US hegemony are not enough to explain the evolution of the Russo-Iranian relationship. Iran and Russia are historical rivals, and the Russians have little to gain from befriending a second-tier power that is a regional pariah and a supporter and financier of Radical Islamism and international terrorism, particularly since Russia has its own problems with Islamist terrorism. I believe, to the contrary, that Russia’s growing endearment of the Iranians is a calculated move to piss off the American leadership and convince Washington to come to a broader agreement with Russia on its spheres of influence in Central Asia and Eastern Europe.

Why would Russia go to such lengths simply to acquire a bargaining chip for negotiations with the Americans? This is the essence of realpolitik - you choose your friends based not on ideology or shared values, or even alignments of interests, but on what their friendship can do for you. This was the nature of balance of power politics in Europe in the nineteenth century, when shifting patterns of alliances were the order of the day, and the prevention of any one power or alliance of powers from attaining hegemony over the continent was the overriding principle of diplomacy. Russia was a major party in this struggle, which the United States for its part viewed as corrupt, dangerous and backwards. The Russians have apparently learned that you are more likely to get the concessions you want from the US by unspoken threats than by overtures of peace and friendship. The Russians tried the latter during the nineties; the United States responded by encircling the Russians, establishing relationships with former Soviet Republics and Warsaw Pact states. The encroachment of the United States political and military power on traditional Russian spheres of influence is illustrated most strikingly by the expansion of NATO since the fall of Communism, shown in the following maps:

The expansion of the Western military alliance of NATO has been viewed with alarm by Moscow, but equally alarming has been Western support for the so-called “color revolutions” that replaced Russian-supported, less-than-democratic governments with pro-Western, liberal democratic regimes. The most alarming of these was the 2004 Orange Revolution in the Ukraine, which raised fears in Russia that the country may soon decide to join NATO or the European Union - a catastrophe for Russian national interests and security. The Ukraine has been an agricultural and industrial heartland of the Russian empire(s) for centuries, and still hosts its Black Sea fleet at the port of Sevastopol. Equally troubling has been the proposed missile defense systems to be hosted by Poland and the Czech Republic, which Russia sees as a threat to its nuclear deterrent capability. In sum, Russia’s geopolitical situation looks grim, and it desperately needs leverage to turn the tables and regain its strategic position around its periphery. It has done fairly well at re-establishing itself in Central Asia, so its primary concerns are in the Trans-Caucasus and eastern Europe - specifically Georgia and Ukraine.

Seen through this lens, the Russo-Iranian relationship appears designed specifically to create unease - if not panic - in Washington. In fact, the more panic it creates, the more valuable Iran is as a bargaining chip to Russia. There is no doubt that, provided the right incentives, Russia would sell the Iranians out and support (in words if not in deeds) an American strike on Iran. More realistically, for the right price the Russians would turncoat and support strict economic and political sanctions that could bring the Iranian regime to its knees. Russia knows well the cards it is holding, and will be looking for big concessions. And it must be mentioned that the cynical realism of the Russian political class guarantees that appeals to justice or ethical arguments - even appeals to global political and economic stability - for supporting sanctions or attacks on Iran will have no impact on their posture. Peter Zeihan of Statfor.com makes this case quite forcefully and eloquently in an article entitled “The Russia Problem”. Zeihan argues that the growing conflict between Iran and the United States in the Middle East is ideal for Russian interests in the region, allowing Moscow to play each side off the other while giving it a free hand to pursue its own goals. Zeihan also sees Russia’s policies towards Iran as cynical and pragmatic, writing that

”The Kremlin wants Washington to be fully aware of every detail of how Russian sales are making the U.S. Army’s job harder, so that the Americans have all the information they need to make appropriate decisions as regards Russia’s role. Moscow is not doing this because it is vindictive; this is simply how the Russians do business, and they are open to a new deal.”

The quagmire in Iraq has left the US extremely vulnerable to an international crisis, and so should Russia decide to create such a crisis, Washington would be in a very weak position. Iran is emerging as a central bargaining chip in US-Russian relations, and for now the Russians have the upper hand. The best option for the US at this point would be to make a deal with the Russians and beat them at their own game. Trade them Ukraine, Georgia, and Central Asia (which is all but lost anyway) for a reversal of the Russian stance towards Iran and support for sanctions and military strikes against that country. Promise the Russians a free hand in their dealing with Ukraine and Georgia, and end the possibility of NATO or EU membership for Ukraine. Remain silent about the status of democracy and individual liberties in the former Soviet Republics, and end support for color revolutions in Russia’s sphere of influence. Make a deal regarding the missile defense installations in Eastern Europe. In exchange, Russia will help resolve the standoff with Iran. This will end the potential of the US overextending itself in a two-front war, and most likely help speed up the process of stabilizing Iraq. The US will then no longer be bogged down in the Middle East and will be free to focus on its interests more generally, and even to resume its encirclement and containment of Russia. This gives the Russians what they want, this gives Washington what it wants, and may have the added effect of bringing down the Iranian regime. But in the long run this type of geo-Realpolitik will not contribute to a more peaceful or stable international system, so a more general reorientation of America’s foreign policy interests, goals, and approach is needed. That, however is a topic for another day.

Signing off for now.

drunken cynic

“No social order ever perishes before all the productive forces for which there is room in it have developed; and new, higher relations of production never appear before the material conditions of their existence have matured in the womb of the old society itself. Therefore mankind always sets itself only such tasks as it can solve; since, looking at the matter more closely, it will always be found that the tasks itself arises only when the material conditions of its solution already exist or are at least in the process of formation.” - Karl Marx, Preface of A Contribution to the Critique of Political Economy

Having ended my hiatus and reluctantly returned to the blogosphere to once again proclaim truths and shatter the comfortable illusions of anyone with the intellectual courage to peruse these paragraphs, I returned last night to the postmodern salon of a local pub to engage in a friendly debate with some fellow philosophes over a few glasses of pale ale.

The subject of the conversation at some point turned to the source of social change - that is, whether progressive changes in society originate in the people, at the bottom of the socio-political power structure, or whether they are guided or dictated from above by enlightened or self-interested elites. After briefly (and somewhat absurdly) endorsing the latter position - for the sake of argument more than anything - I declared that I believe this to be a false choice. For genuine, progressive social change does not come from the masses or their masters, but has its origins in the evolution of the material conditions of society. This is a statement of historical materialism, expressed eloquently in the above quote by Karl Marx. Allow me to briefly express this as a theory of social change, as I understand it.

Historical materialism is the theory that the evolution of human society is based on the mutually reinforcing interaction between material conditions and ideas. That is not to say that material conditions or forces determine ideas - vulgar Marxism or what Antonio Gramsci dubbed economism - but it is to say that ideas never gain traction or become influential in transforming society until the material conditions which make them appropriate or necessary come into being. In other words, ideas and what is known as social consciousness are no doubt the product of individual ingenuity, insight, effort and reason, but their ability to genuinely influence the social world - to become the drivers of historical socio-political transformation - they require the material conditions appropriate for their germination.

The central premise of historical materialism is that ideas are inseparable from the historical conditions in which they exist. That’s not to say that material conditions “cause” ideas, but that those ideas which are important in any epoch are those which address important practical issues of the day and solve the problems which are confronting society. Hence the old adage by Victor Hugo, that “there is nothing more powerful than an idea whose time has come.” Marx believed (famously) that human beings make their own history, just not in circumstances of their own choosing. Each individual, in forging his or her own destiny, must grapple with the existing material organization of society, and all of the power structures, social forces and class relations which have evolved to support it. We are not autonomous actors, we act within a pre-existing structure, which has its own internal logic, its own evolutionary trajectory, and most importantly its own inertia. Attempting to overthrow a social system by sheer force of (individual or collective) will is akin to attempting to force a sailing ship to sail against the winds and currents - an impossibility, no matter how noble our intentions. The more practical and ultimately more fruitful course is to use the winds and currents - i.e. the logic, trajectory, and inertia of the existing social structure - to get where one wants to go, however less romantic it may appear.

This is not meant to be a statement of fatalism or indifference to social change, but in fact the opposite. It is a recognition that in large part the evolution of society is beyond our control, but that at critical epochs we can as individuals and especially as groups have an enormous impact on what is the outcome of this evolution, what direction it takes, and what changes it creates in the everyday lives of the individuals who make up the so-called masses. This can only be achieved when our intentions and ideas are in line with the practical realities of the social system, that is, with the state and evolutionary trajectory of the material conditions of society. This is the fundamental distinction between materialism and idealism: the former emphasizes the importance of material forces in driving social change, while the latter emphasizes the importance of ideas and social consciousness. It is my argument, as a historical materialist, that ideas are critical but only in their relation to the material conditions of human existence. And that means that not only are ideas shaped by material conditions - that for example what we do for a living determines how we think about the world - but also that ideas shape these very material conditions, since material conditions refers not to just the natural world but to the infrastructure, technology, tools, capital, and institutions (in the physical rather than social sense) that society is built upon, and which are themselves the product of ideas. This is just one of the ways, and certainly not the only, that the ideas of one epoch themselves play a role in influencing the material conditions of the next. The interaction between material conditions and ideas is thus a co-evolutionary process.

So to return to the point: from whence does important social change originate, from the elites or from the people? The answer is simultaneously neither and both. True social change, I believe, originates in the marriage of important ideas to capacity for meaningful action (power). This can originate from below, with the building of mass movements, organizations, coalitions, political parties, or even guerrilla armies, based on a vision of social change whose “time has come” and which can in both practical and ideological terms be successfully brought to fruition through political, social, or armed struggle. This is the model of the Abolitionists, the so-called Bourgeois revolution of pre-industrial Europe, or the Civil Rights movement in the USA. Social change can also originate from above, led by elites who can read the writing on the wall and understand and anticipate forces of social change and are in a position to re-order society accordingly. This is in a sense the Bonapartist, Bismarckian, or even Maoist model.

Which of these approaches is superior? I would reserve judgment on this issue. I do not believe either is inherently better than the other as a general category, whether in a practical or moral-ethical sense. Rather I would argue we should judge social transformations on the basis of their actual consequences for people’s lives rather than on how they were achieved or whether they were pure or righteous in some romantic sense. This may be my own bias, as I am myself much more interested with outcomes than with intentions - going so far as to argue that trying and failing to achieve change is no better, in the final analysis, than not trying at all. I’m not sure whether we need “heroes” but I am quite convinced that we DO NOT need martyrs.

To summarize my own philosophy of how to best anticipate and shape social change, I believe we must: (a) understand the nature of the current material and social organization of society; (b) understand how this material and social structure has evolved to become what it is; (c) understand which forces are driving further evolution of the system, what direction this appears to be heading, and what new possibilities (in terms of future social/material structures) this is creating for the future; (d) develop our own ideas and visions for the future of human society, based not upon fantastic utopias but on our careful of understanding of what is and what can be; and (e) position ourselves to be able to take advantage of the opportunity to seize the moment when the moment comes, to put our ideas into action (what Marx dubbed praxis) and to see them through to their ultimate realization.

Signing off for now.

drunken cynic

Well, I was hoping for a one-year hiatus but decided to cut it short when recent comments from former-Fed Chairman Alan Greenspan were brought to my attention. Alas, I have decided to return from my self-imposed intellectual exile a bit early in order to tear asunder a few popular myths and misconceptions about the global political economy.

The long and short of Greenspan’s comments are that (a) the value of the dollar has been sliding to historic lows relative to currencies like the euro, the British pound, and even the Canadian dollar (which has risen from approximately 0.85:1 to nearly 1:1 in the last year or so, putting upward pressure on the price of timber and Labatt Blue); (b) European political and economic integration, particularly the rise of the European Central Bank, have created in the euro a viable alternative to the US dollar as a reserve currency; and (c) the euro in the near future could conceivably replace the dollar as the dominant reserve currency in the global economy. In order to put these contentions into context we need to understand a few things about the international monetary system and the US dollar’s current and historical role in it.

The Role of the US Dollar in the Global Economy

The international monetary system evolved out of the system which was conceived, constructed and established by British and American diplomats, politicians, and economists who met in Bretton Woods, New Hampshire in 1944. They had assembled to determine the institutional character of the post-war international economy, and they did just that - creating two of the most famous (and notorious) contemporary international economic institutions, the International Monetary Fund and the World Bank, and compromising on an international monetary regime that would, it was hoped, combine stability with liquidity. Stability and liquidity are fundamental to any monetary system, and are both equally essential to economic growth - stability ensures that inflation is kept within reasonable bounds and that fluctuations in prices and interest rates remain within reasonable limits, liquidity ensures that there is enough currency available that money can be borrowed cheaply enough to finance economic expansion.

The IMF and World Bank were meant to finance trade deficits and economic development, respectively, keeping markets expanding and keeping the pressure on trade restrictions and beggar-thy-neighbor economic policies low. The international monetary regime, the so-called gold-dollar standard, would provide the stability of a gold standard with the flexibility of fiat currency. In practice, the dollar was deemed to be backed by a fixed amount of gold - a la the gold standard - redeemable at $35/ounce. Other currencies would be pegged to the dollar, i.e. exchangeable for a fixed amount of dollars, a sort of “loose” gold standard which would allow other nations to periodically revalue their currencies while the price of the dollar remained fixed.

The advantages of the Gold-dollar standard were that (a) it provided a stable basis for the international financial system, creating confidence that the US dollar, being backed by gold, would not lose value or collapse; (b) it had much less of a liquidity constraint than a universal gold standard, as only one currency needed to be backed by gold while others could pursue expansionary/contractionary monetary policies in line with the needs of their economies; and (c) it provided a “universal currency” in the US dollar, which reduced transaction costs and increased the efficiency of the international economy, due to the network externalities* of foreign exchange.

The disadvantages of the gold-dollar standard was that (a) it constrained the monetary policies of the US by fixing the price of the dollar and (b) it rested on a tacit commitment by other nations (particularly in Western Europe) not to redeem their dollars in gold when the real value of the dollar fell below the established price of $35/ounce. This was particularly critical in periods of high inflation in the United States, such as during the Vietnam War. And in fact it was the inflationary policies of the US government during this period which ultimately brought the gold-dollar standard down, leading to its abandonment in 1971 when President Nixon announced that the US dollar would no longer be redeemable in gold bouillon.

The lasting effects of the gold-dollar standard, however, were that (a) the dollar was established as the universal reserve currency, making up as much as 95% of many governments’ total foreign currency reserves; and (b) most commodities priced and traded on international exchanges (especially oil) were priced and traded in US dollars. This was a result of the dollar’s position as anchor currency, and a cause of its continued dominance, as it creates a need on the part of foreign governments to accumulate US currency in order to purchase raw materials and energy inputs**. For a fantastic historical account of the back-room dealing undertaken by Nixon and Kissinger to keep oil and other commodities priced and traded in dollars, check out The Hidden Hand of American Hegemony by David E. Spiro.

Beginning in 1973, the international monetary system became a system of pure floating exchange rates. This system lacks the stability of the gold (or gold-dollar) standard but allows each individual nation to pursue its own expansionary or contractionary monetary policy, and allows the exchange rates of individual currencies to be set (ostensibly at least) by the workings of the market. In a floating-exchange/fiat currency system, the value of a currency is set by the interaction of supply and demand for that currency, which ultimately means that the value is determined by the value of/demand for the sum of all goods and services sold in the economy in which that currency is legal tender.

Despite the abandonment of the gold-dollar standard, the dollar has remained the anchor currency of the global economy and the predominant reserve currency of most governments. This owes to three key factors. The first is the dominant position achieved by the US dollar during the era of the gold-dollar standard. As noted above, network externalities create a bias in the international monetary system towards the establishment of a single anchor currency for international exchanges. Once established, an anchor currency has an incumbent advantage and is difficult to dislodge. The second factor is the use of the dollar for pricing and trading on international commodity exchanges. This encourages governments (and private companies) to accumulate reserves of US dollars for the purchase of such commodities, especially energy resources. The third factor is the size and dominance of the American economy. The US has the largest GDP and the deepest and most diverse financial markets in the world, and is a stable and profitable market in which to invest. Therefore although the dollar may be losing value in relation to other currencies, so long as there are plenty of products to by and plenty of sound investments to be made with American currency, the consequences of this lost value are rather muted when all is said and done.

The below charts demonstrate the continued dominance of the US dollar in global markets. The first shows the composition of official foreign reserves in terms of dollars and euros. Although the euro has gained significant ground in the last decade or so, most of this is the result of diversification (in order to hedge against losses due to fluctuations in the dollar’s value) rather than a concerted move to replace the dollar as key reserve currency. The second chart shows the balance of trade between the US and its top ten trading partners. All are substantially negative. This raises alarm (and often hysteria) as a seemingly unsustainable state of affairs, but in fact is evidence that the dollar itself continues to be in high demand, as these foreign markets are willing to absorb net surpluses of US dollars in order to (a) invest them in US financial markets, (b) hold them in the form of official currency reserves, or (c) use them to purchase commodities on international markets from non-US producers.

Thus it is my opinion that the threat to the US dollar is overstated, and that its replacement as reserve currency by the euro, the yen, the yuan or any other currency is conceivable but not bloody likely barring a real global monetary crisis which dislodges the dollar from its position of dominance. Mr. Greenspan is echoing fears and speculation which have periodically reared their heads since the crises of the 1970s. His comments have made news simply because excitement is generated whenever there is talk by respected economists of the decline of the American economy or the weakening of the dollar. This is related to deeper themes currently running rampant on the internet and in the public discourse, particularly among the international left and among some conservative economic nationalists in the West. That theme is the decline of the dollar, the American economy, and the neoliberal economic model which it supports and represents, and its replacement by the more reasonable, humane, socially just, equitable, and peaceful model of social democracy practiced in the European Union and embodied in the euro. It is to this delusion that I will now turn.

The European Union as Alternative to American “Empire”

Greenspan’s comments are not particularly interesting in their own right. There are always “possibilities” in economics; in fact there are very few impossibilities, strictly speaking, so it would be much more controversial for a prominent economist to assert that something will “never” happen than for one to assert that something “may possibly” happen. The reason that Greenspan’s comments are interesting to some is that they inspire hope among some in the decline of the American Empire of free-market “cowboy capitalism” and military-backed economic uniformity. The implicit assumption is that the decline of American “Empire” - I use quotes because America is not an empire in any traditional or accepted definition of the term, it is a hegemon which uses its military and economic might to pursue its interests in an often aggressive manner, but exerts no formal political control over other nations, which is the cornerstone of imperialism - will mean the ascendancy of a more humane and socially just model such as European social democracy.

I find this to be utterly foolish. A careful and honest analysis of global political economy reveals that the European model of capitalism - as well as the Japanese model - are complements of the American system rather than competitors to it, and their fate and health are inextricably linked to the fate of the American system. They, in fact, depend on American hegemony for their very existence. Politically and militarily, both Japan and Europe have depended on American might since the end of the Second World War to preserve their independence and have been free to deploy their energy and their technological infrastructure in pursuit of economic and social goals rather than investing in militarization. Economically, both Europe and Japan depend on the US as a trading partner, to the extent that any collapse in the American economy would be devastating to their own. Therefore, if it would take an economic catastrophe to dislodge the US from its place of dominance, this same catastrophe would likely drag the EU down with it, creating economic depression as well as political and social upheaval in the latter. At any rate it is highly unlikely the the euro would, in those circumstances be an attractive candidate for a reserve currency.

My argument is that all of the experiments with the so-called “capitalism with a human face” model that have succeeded have taken place within American spheres of influence. They are therefore not alternatives to the US model of capitalism, but complements to it which depend on American neoliberalism even as they decry it. Their existence is in fact fundamentally contrarian, their popularity deriving primarily from contrast with the excesses and inequities of the American economic model. Outside of America’s spheres of influence, we see the real alternatives to the American model, which, I believe, will be the true competitors with the US for global economic predominance in the 21st century.

The primary alternative to the American neoliberal model lies in the formerly Communist economies of Russia and China. In both economies we see similar characteristics: heavy state involvement in trade and investment, and especially in resource extraction and procurement; the absence of democratic representation of workers and consumers in the regulatory apparatuses; and strategic cooperation between the state and the economic oligarchy (domestic oligarchs and siloviki in Russia, MNCs and party apparatchiki in China), to ensure that the interests of both are being met. The result is an economy in which the free market is relied on for the production and distribution of consumer goods and services and to encourage entrepreneurship and innovation, but where the “commanding heights” of the economy - heavy industry, energy and infrastructure, defense, space, and other crucial sectors - are controlled or “guided” by the interests of the state.

The result is a combination of Japanese neo-mercantilism with the militarism and heavy-industry bias of the Communist bloc. This model seems to be uniquely capable of resisting the apparently detrimental tendencies of globalization - namely the exodus of manufacturing industries from developed economies, the outsourcing of critical defense industries, and the reliance on international markets for energy needs - while being adaptive, efficient and innovative enough to compete with the neoliberal capitalism which buried the state socialist model once and for all in the 1980s.

And, unlike the European Union and Japan, the Russian and Chinese economic models are being forged outside of the direct sphere of American economic influence, and would likely be able to resist American collapse. Although it is true, no doubt, that China’s export-led development is extremely dependent on American consumer markets for its present success, all signs suggest that this is an intermediate phase which will not persist as the Chinese economy becomes more mature and developed. In any event, the degree of control exercised by the Chinese state over the course and character of the economy means that, like the Russians, they will be able to respond quickly and effectively to global political economic shake-ups in order to avoid being sucked into the whirlpool of economic collapse, and to take advantage of the opportunities such crises create.

The moral of the story is that the leftists and so-called progressives who can’t wait for the collapse of American hegemony and for the end of American economic dominance know not for what they wish. American decline will not signal the rise of social democracy but its collapse, and likely the rise of a statist, economic nationalist model along the lines of what is currently being developed in Russia and China today. This will likely coincide with greatly increased international conflict (both “hot” and “cold”), a resurgence of state power in the world (and the increased surveillance and police powers that implies), a replacement of the international economic oligarchy of financiers and MNCs by statesmen and military officers, and a disaster for workers’ and consumers’ rights and civil liberties worldwide. Or maybe I’m just a pessimist.

*This simply refers to the direct and indirect savings resulting from being able to price all currencies in terms of one base currency. If all currencies in an 100-currency market must be priced individually in terms of one another, there would need to be 100*99 currency prices/exchanges. If all currencies are traded/priced in terms of one anchor currency, there only needs to be 100-1 prices/exchanges. I.e. you don’t exchange Mexican pesos for British pounds, you exchange pesos for dollars and then dollars for pounds. This creates enormous efficiency gains and creates a bias in the system towards the establishment of an anchor currency.