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This story was also featured on today’s episode of Democracy Now! Check it out for an interview with Brendan Dunn, member of Olympia Students for a Democratic Society (SDS).
Spy for the US Military Exposed: Spent Last Two Years Spying on Activists
Brendan Maslauskas Dunn
July 27, 2009
“John Jacob” was an activist well liked by many in Tacoma and Olympia, WA.
He was active in the anti-war and anarchist communities in both towns. He
did extensive work with the group Port Militarization Resistance (PMR)
which blocks military shipments to and from Iraq and Afghanistan through
Northwest ports. He went to numerous Students for a Democratic Society
(SDS) events and actions, was interested in starting a chapter or Movement
for a Democratic Society, worked closely with Iraq Veterans Against the
War, but spent most of his time with anarchists. Aside from attending
meetings, events and actions organized by activists, he spent much
personal and leisure time with other anarchists in the area.
But some recent records requests done through the City of Olympia, asking
the City for any information on anarchists/anarchism/anarchy, SDS and the
radical union Industrial Workers of the World, surfaced an email from a
John J Towery II from Fort Lewis Force Protection with a daily force
protection update for Fort Lewis. Interested in this email and the name
attached to it, several activists did some research that eventually
confirmed the identity of “John Jacob” as John J Towery II.
Two anarchists met with John Towery after this information was confirmed.
By his own admission, John Towery spent the past two years spying on
anarchists, Iraq and Afghanistan War veterans, SDSers and anti-war
activists in Tacoma, Olympia and the Pacific Northwest. He admitted that
he reported to an intelligence network that included county sheriffs from
Pierce, Thurston and other WA counties, municipal police agencies from
Tacoma, Olympia, Seattle and elsewhere, WA State Police, the US Army, FBI,
Homeland Security, Joint Terrorism Task Force, and Immigration and Customs Enforcement (ICE) Agency among other agencies. Read the rest of this entry »
“The Shock Doctrine: The Rise of Disaster Capitalism”
by Naomi Klein
2007 Metropolitan Books
I feel confident saying that The Shock Doctrine is one of the most important political non-fiction works of the last decade. This should be a high school textbook, or at least required reading in college. Naomi Klein applies her extensive vision and intellect to present us with a way of seeing our world that is extremely relevant and powerful: in the pursuit of enormous profits, those running the global economy intentionally exploit terrible catastrophes, or even create them, to take things for themselves that only shocked and traumatized populations would give up. This ambulance-chasing strategy of those in power is defined as the “shock doctrine,” and “disaster capitalism”, alternatively known as “neoliberalism” is the dominant social paradigm it has created.
Although there are flaws here, which I will mention, this book is both timely and well-written; Klein carries the reader through a story about grandiose topics like neoliberalism, torture, psychology, and international politics that is fundamentally readable.
The most important contribution made by this book in my view is the dismantling of the myth that capitalism’s global dominance is a function of democracy or destiny. This is the notion that with the defeat of the Soviet Union, all alternatives to “the free market” have naturally faded into history, presumably because capitalism is so irresistible. To the contrary, Naomi Klein provides numerous case studies to show us the exact opposite is true – the temporary triumph of global capitalism has been fertilized by the victims of natural disasters, terrorist attacks, wars, campaigns of torture, and economic calamity. In short, alternatives to capitalism have been shocked into submission wherever they’ve appeared.
This is no accident, it is part of a conscious crusade by market fundamentalists, those devoted to the pseudo-religious belief that “the market solves all.” Klein explains that the shock doctrine was developed (at least in part) by the patron saint of neoliberalism, free-market economist Milton Friedman. In his words, “only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” And he intended to provide those ideas. It was Friedman’s opus “Capitalism and Freedom” that proclaimed neoliberalism’s core edicts: deregulation, privatization and cutbacks to social services.
Since the 1970s, these teachings have been vigorously applied across the globe by the “holy trinity” of the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO). Read the rest of this entry »
“American Fascists: The Christian Right and the War on America”
Chris Hedges
2006 Free Press
Are right-wing Christians in America developing a potentially fascist movement that would discard democracy for the sake of security and conservative values? This is answered affirmatively by Chris Hedges, author of War is a Force That Gives Us Meaning, in his newest book.
We all know the worst of the evangelical movement, which Hedges calls the “dominionists”: they’re militantly anti-abortion and promote abstinence-only education, they hate queer and trans people, they don’t believe in evolution or environmentalism, they’re racist against immigrants and support US warfare and imperialism, and they can be violent, potentially terroristic. This book explores all of these themes, but it also exposes the frightening strength these people have in our society.
For example, “There are at least 70 million evangelicals in the United States attending more than 240,000 evangelical churches… Polls indicate that about 40 percent of respondents believe the Bible is ‘to be taken literally, word for word.’ .. Almost a third of all respondents say they believe in the Rapture.” Clearly this movement has developed a mass base by hiding behind Christianity.
But are these folks organized? Hedges says yes, quite so. He points to their dominance over the Republican Party, as well as billions of dollars received in the form of “faith-based” grants. This governmental power is matched by media influence, as the Christian Right also owns several national television and radio networks, as well as many local media outlets. Further, right-wing organizations such as Focus on the Family and the Christian Coalition are controlled by wealthy white male elites who claim to be “close to God” and are followed with feverish obedience by millions of supporters.
The best parts of the book are the interview sections which delve into the lives of the people drawn to, and spit out by, this movement. By humanizing the participants, we come to understand that their immersion into this Christian reality is often a flight from an overwhelming sense of meaninglessness and despair, genuine emotions which develop from real-world sufferings like unemployment and abuse.
However, much of the book does not live up to this potential and consists of Chris Hedges sending forth litanies of blanket indictments against the ideology of the Christian Right, and attaching a somewhat monolithic character to what in reality is probably a more scattered and heterogeneous right-wing Christian population. In other words, by attacking them as potentially all-powerful, do we not in fact imbue them with powers they do not actually possess?
Worse, although the author rightly argues we must not tolerate a movement which does not tolerate us, he leaves us with little useful ammunition for that struggle. Condemnations of fundamentalist thinking and similarities to Nazism will only get us so far, we need to locate the weak points in the armor of these Crusaders, and this book unfortunately serves little in developing such a strategy.
In a present and future marked by severe crises of an economic, ecological and social nature, the seductiveness of movements urging apocalyptic violence unfortunately may become quite great, and only an alternative movement that appeals to the best in humanity can prevent the emergence of a dictatorship of fear. That great Christian principle of love must be the guiding force as we address the mounting grievances of those left behind by this society and point towards a better future.
“Cows, Pigs, Wars, and Witches: The Riddles of Culture”
by Marvin Harris
1974 Random House
Why do Jews and Muslims refuse to eat pork? Why were thousands of witches burned at the stake during late medieval Europe? These and other riddles are explored by famous anthropologist Marvin Harris, and his conclusions are simple: people act within social and ecological contexts that make their actions meaningful. Put another way: cultural ideas and practices that seem strange to us may actually be vital and necessary to the people of those cultures.
Harris is especially good at explaining how societies create elaborate rituals to avoid harming the natural ecosystems they depend on, which clarifies the Middle Eastern ban on pig products. It turns out the chubby animals compete with humans for the same foods. Raising them in large numbers would place great strain on a land made fragile by thousands of years of deforestation and desertification. Better to ban them entirely and not risk further ecological damage.
This logic is then extended to elucidate why the institution of warfare probably first arose as a way to limit population pressure on the environment. In Harris’ words, “In most primitive societies, warfare is an effective means of population control because intense, recurring intergroup combat places a premium upon rearing male rather than female infants.” Since the rate of population growth depends on the number of healthy women, privileging males by making their larger bodies necessary for combat is a way of reducing the need to “eat the forest.” Not that male supremacy and violence is the BEST way to curb population growth, but it’s one ritual that societies have adopted to meet that goal.
This discussion of patriarchy leads to an exploration of class. The emergence of “big men”, chiefs, and finally the State is explained as a cascading distortion of the original principles of reciprocity into the rule of redistribution. “Big men” work harder than anyone in their tribe to provide a large feast for their community – with the only goal being prestige. Chiefs similarly pursue prestige, and plan great feasts to show off their managerial skills, but they themselves harvest little food. Finally “we end up with state-level societies ruled over by hereditary kings who perform no basic industrial or agricultural labor and who keep the most and best of everything for themselves.” At the root of this construction of inequality is the impetus to make people work harder to create larger surpluses so that greater social rewards can be given out to show off the leader’s generosity. But only at the State or Imperial level is this hierarchy enforced not by prestige but by force of arms, to stop the poor and working classes from revolting and sharing the fruits of their labor.
The most provocative sections of the book deal with revolutionary movements that fought for this liberation, within the context of the religious wars of Biblical Judea and Late Medieval Europe.
First, Harris tackles the Messiah complex Read the rest of this entry »
More and more people are using the language of peak oil and becoming aware that the future we once took for granted is now being foreclosed (not incidentally, by the same folks who are foreclosing a lot of our homes). It is increasingly clear that we stand at a cross-roads, and that neither road leads anywhere similar to the global capitalist era we just passed through.
Here are some excerpts from a good article that acknowledges the reasons why the future will be nothing like the past, and lays out the 2 paths we can now head down. I wrote some thoughts at the end to inspire us to think realistically and demand the impossible. [alex]
Time to Deliver: No Turning Back, Part I.
by Sara Robinson
April 7, 2009
Originally published by Campaign for America’s Future
..[T]he two dominant scenarios about the American future that progressives seem to be wrestling with right now [might be described as]:
1) Permanent Decline — Due to Americans’ native hyperindividualism, political apathy, and overweening willingness to accept personal blame for their country’s failures, the corporatists finally succeed in turning the US into Indonesia. This time, we will not find the will to fight back (or, if we do, it will be too late). As a result, in a few years there will be no more middle class, no upward mobility, few remaining public institutions devoted to the common good, no health care, no education, and no hope of ever restoring American ideals or getting back to some semblance of the America we knew.
2) Reinvented Greatness — Americans get over their deeply individualistic nature, come together, challenge and restrain the global corporatist order, and finally establish the social democracy that the Powers That Be — corporate, military, media, conservative — have denied to us since the 1950s. This happens in synergy with a move to energy and food self-sufficiency, the growth of a sustainable economy, a revival of participatory democracy, and a general renewal of American values that pulses new life into our institutions and assures us a much more stable future.
Conservatives and the mainstream media, of course, are also offering a third scenario:
3) Happy Face — Prop up the banks, keep people in their houses, and by and by everything will get back to “normal” (defined as “how it all was a few years ago.”)
[Sara recognizes that this third "road" is an illusion, for the following underlying realities which cannot be ignored any longer. -alex]
1. Energy regime change
The first reason there’s no going back to the way it was is that there’s simply not enough oil left in the ground — or carbon sinks left in the world — to sustain America as we’ve known it. We may well be able to sustain some semblance of that way of life (or perhaps, find our way to one even more satisfying); but we won’t be running it on oil or coal.
And when the oil goes, so goes the empire. Read the rest of this entry »
“The war on population always has been, and will continue to be, a war on women’s bodies.”
After reading this article by Betsy Hartmann rebutting recent psuedo-environmental hysteria surrounding overpopulation, I wanted to investigate further how fears of overpopulation facilitate sexist, racist and imperialistic policies by Western countries and NGOs against poor women of color in the Global South.
As Hartmann states with clarity:
“The population controllers have blinders on their eyes when they attribute the cutting down of forests, the polluting of water supplies, and the extinction of species to too many poor people, rather than the unchecked power of large corporations to monopolize resources and ravage the land. Missing from the picture is the question of technological choice: for example, reducing the population of automobiles and investing in public transport worldwide would do much more to curtail climate change than imposing limits on family size.”
This seems to me fundamentally correct. It’s clear that human civilization has overshot the capacity of the Earth to provide for it, that’s not in question. The question is about what forces are responsible for this, and what can we do about it?
For Hartmann and myself, the number of people alive is not nearly as important as the structure of the economic system in which we live. The planet could support 6, or maybe even 9, billion people living a low-impact lifestyle, based on community subsistence and a diet full of fruits and vegetables. But the planet cannot possibly support 6 billion people living like Americans, with their cars, and their computers, and their wars.
As with all things, the debate on “overpopulation” is a political debate, because its a question about who has power and who doesn’t. Placing the blame on poor women is just a way of ignoring the real power-holders: Large multinational corporations and Western capitalist governments.
Below are excerpts from an article that I found helpful in explaining this more clearly. [alex]
10 Reasons to Rethink “Overpopulation”
By the Population and Development Program at Hampshire College
Fears of overpopulation are pervasive in American society. From an early age we are taught that the world is overpopulated and that population pressure is responsible for poverty, hunger, environmental degradation and even political insecurity. If we don’t get population growth under control now, the argument goes, our future is in danger.
Conventional wisdom, however, is not always wise. Placing the blame on population obscures the powerful economic and political forces that threaten the well-being of both people and the planet. It leads to top-down, target-driven population control programs that undermine voluntary family planning and women’s reproductive rights. It reinforces racism, promoting harmful stereotypes of poor people of color. And it prevents the kind of global understanding we need in order to reach across borders to work together for a more just, peaceful and environmentally sustainable world.
Here are ten reasons why we should rethink ‘overpopulation.’
…
2. The focus on population masks the complex causes of poverty and inequality.
A narrow focus on human numbers obscures the way different economic and political systems operate to perpetuate poverty and inequality. It places the blame on the people with the least amount of resources and power rather than on corrupt governments and economic and political elites. It ignores the legacy of colonialism and the continuing unequal relationship between rich and poor countries, including unfavorable terms of trade and the debt burden. It says nothing about the concentration of much wealth in a few hands. In the late 1990s, the 225 people who comprise the ‘ultra-rich’ had a combined wealth of over US $1 trillion, equivalent to the annual income of the poorest 47% of the world’s people.
3. Hunger is not the result of ‘too many mouths’ to feed.
…There is enough food for every man, woman and child to have more than the recommended daily calorie intake. People go hungry because they do not have the land on which to grow food or the money with which to buy it. Read the rest of this entry »
I Want a Twenty-Four-Hour Truce During Which There Is No Rape
Speech by Andrea Dworkin.
This was a speech given at the Midwest Regional Conference of the National Organization for Changing Men in the fall of 1983 in St Paul, Minnesota. One of the organizers kindly sent me a tape and a transcript of my speech. The magazine of the men’s movement, M., published it. I was teaching in Minneapolis. This was before Catharine MacKinnon and I had proposed or developed the civil rights approach to pornography as a legislative strategy. Lots of people were in the audience who later became key players in the fight for the civil rights bill. I didn’t know them then. It was an audience of about 500 men, with scattered women. I spoke from notes and was actually on my way to Idaho–an eight-hour trip each way (because of bad air connections) to give a one-hour speech on Art–fly out Saturday, come back Sunday, can’t talk more than one hour or you’ll miss the only plane leaving that day, you have to run from the podium to the car for the two-hour drive to the plane. Why would a militant feminist under this kind of pressure stop off on her way to the airport to say hi to 500 men? In a sense, this was a feminist dream-come-true. What would you say to 500 men if you could? This is what I said, how I used my chance. The men reacted with considerable love and support and also with considerable anger. Both. I hurried out to get my plane, the first hurdle for getting to Idaho. Only one man in the 500 threatened me physically. He was stopped by a woman bodyguard (and friend) who had accompanied me.
I have thought a great deal about how a feminist, like myself, addresses an audience primarily of political men who say that they are antisexist. And I thought a lot about whether there should be a qualitative difference in the kind of speech I address to you. And then I found myself incapable of pretending that I really believe that that qualitative difference exists. I have watched the men’s movement for many years. I am close with some of the people who participate in it. I can’t come here as a friend even though I might very much want to. What I would like to do is to scream: and in that scream I would have the screams of the raped, and the sobs of the battered; and even worse, in the center of that scream I would have the deafening sound of women’s silence, that silence into which we are born because we are women and in which most of us die.
And if there would be a plea or a question or a human address in that scream, it would be this: why are you so slow? Why are you so slow to understand the simplest things; not the complicated ideological things. You understand those. The simple things. The cliches. Simply that women are human to precisely the degree and quality that you are.
And also: that we do not have time. We women. We don’t have forever. Some of us don’t have another week or another day to take time for you to discuss whatever it is that will enable you to go out into those streets and do something. We are very close to death. All women are. And we are very close to rape and we are very close to beating. And we are inside a system of humiliation from which there is no escape for us. We use statistics not to try to quantify the injuries, but to convince the world that those injuries even exist. Those statistics are not abstractions. It is easy to say, “Ah, the statistics, somebody writes them up one way and somebody writes them up another way.” That’s true. But I hear about the rapes one by one by one by one by one, which is also how they happen. Those statistics are not abstract to me. Every three minutes a woman is being raped. Every eighteen seconds a woman is being beaten. There is nothing abstract about it. It is happening right now as I am speaking.
And it is happening for a simple reason. There is nothing complex and difficult about the reason. Men are doing it, because of the kind of power that men have over women. That power is real, concrete, exercised from one body to another body, exercised by someone who feels he has a right to exercise it, exercised in public and exercised in private. It is the sum and substance of women’s oppression. Read the rest of this entry »
“The Tyranny of Oil: The World’s Most Powerful Industry and What We Must Do to Stop it”
by Antonia Juhasz
2008 HarperCollins
Ever wondered why the US government spends trillions of dollars to launch massive wars against Middle Eastern nations that have never attacked us, but refuses to do absolutely anything about the ongoing climate crisis? This book is for you.
The Tyranny of Oil is an exposee of “Big Oil”, meaning Exxon-Mobil, Chevron, BP, ConocoPhillips, and Royal Dutch Shell, the largest oil corporations in the world (and some of THE largest corporations in the world). The book exposes how these enormous oil octopi have gained virtually total control over the US government, and use their money and political power to make big profits at the expense of the public and the planet. (For example, Exxon Mobil in 2003 posted the largest profits of any corporation in history, then proceeded to beat that record each of the next 5 years).
It all starts with the origin of Big Oil, the mother, Standard Oil. Juhasz stresses the importance of monopolies and corporate mergers, in a sense missing the deeper analysis of capitalism, but nevertheless we come to understand how enormous companies wielding enormous profits can and do undermine democracy.
The book progresses to tell a story about Big Oil’s development and control over the government agencies that are supposed to be regulating it, and finally Big Oil’s plans for the future (War and Trashing the Planet, basically), before an inspirational chapter on What We Can Do. (There’s also a shoutout to SDS here and to our No War No Warming action in DC last year! Cool!)
This is essential reading for all US citizens, because if you aren’t familiar with the concepts she lays out, you frankly have no understanding of the country you live in. Environmental racism, corporate lobbyists and corrupt government agencies, the criminal behavior of Cheney’s Energy Task Force, deregulation and Enron-style fraud, tar sands, and the list goes on.
My only major complaint of the book was the virtual silence on the looming and imminent reality of Peak Oil and how this will transform everything. Juhasz does recognize the scarcity of oil and the likelihood of oil peaking, but chooses to essentially overlook its importance, instead blaming oil companies and speculators for driving up the cost of oil.
This is not just a minor quibble, because the BIG TRUTH is that we’re not just in a struggle against Big Oil, we’re in a struggle against capitalism, and it’s a fight that is reaching perhaps its final act. Peak Oil will challenge the dominant for-profit institutions of power, and can create an opening for social justice activists and organizers to push for much more radical change than appears possible within the current system. Nevertheless, this is probably a subject for another book (mine!), and Juhasz treads on steady ground by appealing to a more mainstream audience and demonizing the oil companies exclusively. This is a very effective book, highly recommended!
Finally, my favorite quote (pg. 325):
“As Paul Wolfowitz said in 1991, ‘The combination of the enormous resources of the Persian Gulf, the power that those resources represent – it’s power. It’s not just that we need gas for our cars, it’s that anyone who controls those resources has enormous capability to build up military forces.’”
Two days before he published this article, David Graeber spoke at the People’s Forum in DC, which was organized by DC SDSers as part of Global Justice Action. The People’s Forum ran simultaneously while the G20 met in DC to save capitalism, because capitalism isn’t in crisis – capitalism is the crisis. The activities included a brainstorming session to explore “What Comes After Capitalism?” and a celebratory “Funeral for Capitalism” where the below pictures were taken. [alex]

At the "Funeral for Capitalism" - photo by Jake Cunningham
Hope in Common
David Graeber
Originally published by InterActivist Info Exchange, November 17, 2008.
We seem to have reached an impasse. Capitalism as we know it appears to be coming apart. But as financial institutions stagger and crumble, there is no obvious alternative. Organized resistance appears scattered and incoherent; the global justice movement a shadow of its former self. There is good reason to believe that, in a generation or so, capitalism will no longer exist: for the simple reason that it’s impossible to maintain an engine of perpetual growth forever on a finite planet. Faced with the prospect, the knee-jerk reaction—even of “progressives”—is, often, fear, to cling to capitalism because they simply can’t imagine an alternative that wouldn’t be even worse.
The first question we should be asking is: How did this happen? Is it normal for human beings to be unable to imagine what a better world would even be like?

photo by Christa H
Hopelessness isn’t natural. It needs to be produced. If we really want to understand this situation, we have to begin by understanding that the last thirty years have seen the construction of a vast bureaucratic apparatus for the creation and maintenance of hopelessness, a kind of giant machine that is designed, first and foremost, to destroy any sense of possible alternative futures. At root is a veritable obsession on the part of the rulers of the world with ensuring that social movements cannot be seen to grow, to flourish, to propose alternatives; that those who challenge existing power arrangements can never, under any circumstances, be perceived to win. To do so requires creating a vast apparatus of armies, prisons, police, various forms of private security firms and police and military intelligence apparatus, propaganda engines of every conceivable variety, most of which do not attack alternatives directly so much as they create a pervasive climate of fear, jingoistic conformity, and simple despair that renders any thought of changing the world seem an idle fantasy. Maintaining this apparatus seems even more important, to exponents of the “free market,” even than maintaining any sort of viable market economy. How else can one explain, for instance, what happened in the former Soviet Union, where one would have imagined the end of the Cold War would have led to the dismantling of the army and KGB and rebuilding the factories, but in fact what happened was precisely the other way around? This is just one extreme example of what has been happening everywhere. Economically, this apparatus is pure dead weight; all the guns, surveillance cameras, and propaganda engines are extraordinarily expensive and really produce nothing, and as a result, it’s dragging the entire capitalist system down with it, and possibly, the earth itself.

photo by Christa H
The spirals of financialization and endless string of economic bubbles we’ve been experience are a direct result of this apparatus. It’s no coincidence that the United States has become both the world’s major military (”security”) power and the major promoter of bogus securities. This apparatus exists to shred and pulverize the human imagination, to destroy any possibility of envisioning alternative futures. As a result, the only thing left to imagine is more and more money, and debt spirals entirely out of control. What is debt, after all, but imaginary money whose value can only be realized in the future: future profits, the proceeds of the exploitation of workers not yet born. Read the rest of this entry »
Now I hope people don’t see this article as ‘support for the Soviet Union’ or something ridiculous like that, but I think this is a very insightful and amusing article, based on a powerpoint presentation. The question is, was the USSR more prepared for the economic collapse it suffered than the US is for the collapse it will soon suffer? Orlov lived through the former and seems to think that it was.
Also note that I strongly disagree with his recommendation to abandon politics – he’s right that politicians are swine but i think he’s wrong in overlooking people’s ability to build a resistance movement that can make real changes to our society, despite politicians best efforts to derail it. So with that, enjoy the article! [alex]
Closing the ‘Collapse Gap’: the USSR was better prepared for collapse than the US

Good evening, ladies and gentlemen. I am not an expert or a scholar or an activist. I am more of an eye-witness. I watched the Soviet Union collapse, and I have tried to put my observations into a concise message. I will leave it up to you to decide just how urgent a message it is.
My talk tonight is about the lack of collapse-preparedness here in the United States. I will compare it with the situation in the Soviet Union, prior to its collapse. The rhetorical device I am going to use is the “Collapse Gap” – to go along with the Nuclear Gap, and the Space Gap, and various other superpower gaps that were fashionable during the Cold War.

Slide [2] The subject of economic collapse is generally a sad one. But I am an optimistic, cheerful sort of person, and I believe that, with a bit of preparation, such events can be taken in stride. As you can probably surmise, I am actually rather keen on observing economic collapses. Perhaps when I am really old, all collapses will start looking the same to me, but I am not at that point yet.
And this next one certainly has me intrigued. From what I’ve seen and read, it seems that there is a fair chance that the U.S. economy will collapse sometime within the foreseeable future. It also would seem that we won’t be particularly well-prepared for it. As things stand, the U.S. economy is poised to perform something like a disappearing act. And so I am eager to put my observations of the Soviet collapse to good use.

Slide [3] I anticipate that some people will react rather badly to having their country compared to the USSR. I would like to assure you that the Soviet people would have reacted similarly, had the United States collapsed first. Feelings aside, here are two 20th century superpowers, who wanted more or less the same things – things like technological progress, economic growth, full employment, and world domination – but they disagreed about the methods. And they obtained similar results – each had a good run, intimidated the whole planet, and kept the other scared. Each eventually went bankrupt. Read the rest of this entry »
[There are many articles (including one I wrote in college), and even whole books written about Petrodollars - the way that US dollars dominate the world economy by their crucial involvement in all global oil trades. This just happens to be a very clearly written and accessible essay, so I'm reprinting it despite slightly out-of-date numbers. The extent to which the fragility of petrodollar hegemony affects US foreign policy is probably the biggest question mark, but it seems plausible that the much-threatened aggression against Iran has a lot to do with that country's moves to abandon the dollar for their oil trades. - alex]
Oil prices and the dollar
C. P. Chandrasekhar
Jayati Ghosh
Originally published by Business Line, February 26, 2008.
| The depreciation of the US dollar has been closely bound up with the movement of oil prices, as world oil trade is typically denominated in dollars. Yet this relationship may now be under threat as the dollar continues to depreciate and the US economy tips into recession. In this edition of Macroscan, C. P. Chandrasekhar and Jayati Ghosh examine how oil prices have changed with different numeraires, and consider the implications for the future of the oil-dol lar nexus. |
The relationship between oil and the US dollar has been at the heart of the way international economic relations have been organised for more than half a century.
International capitalism has relied on the US dollar as the basic reserve currency, and has therefore granted it an essential degree of stability for several decades despite the large external deficits run by the US and the periodic swings in its valuation in currency markets.
More than half of aggregate world exports are denominated in dollars; more than 80 per cent of all international currency transactions similarly involve dollars.
Loans made by the IMF and other multilateral institutions are denominated in dollars. More than 60 per cent of the foreign exchange reserves held by central banks of all countries are in dollar assets.
This has obviously meant huge advantages for the US. It has allowed the US economy to benefit from access to imports that can effectively be paid for simply by printing dollars, and has therefore allowed the US to run enormous current account deficits for prolonged periods. It has encouraged the rest of the world to finance these deficits by providing its savings to be held in US or dollar-denominated financial assets, to the point that all the developing regions of the world are also building dollar reserves that directly or indirectly find their way to the US economy.
Dollarisation of oil markets
A key feature of this entire process has been the dollarisation of world oil markets. Oil is the central commodity of industrial capitalism, absolutely essential for the production of essential and widely used goods. All industrial economies, and most developing ones, would grind to a halt with even a moderate disruption of oil supplies.
Most of the world oil trade has operated and continues to operate in dollars, even when the US is not the trade partner. Oil prices are defined in dollars for most oil exporters. As a result, oil importing countries also pay in dollars. The oil-exporting countries accumulate dollar reserves, which have been preferentially invested back in the US because of the zero currency risk involved in this.
Indeed, this recycling of petrodollars has been very significant as a source of finance for US trade deficits in several periods, including in recent times. Other countries also hold dollars for future oil purchase.

The dramatic increase in the price of oil in the past few years could be argued to have accentuated this tendency. As Chart 1 indicates, oil prices have increased dramatically in dollar terms especially from 2003, going up by nearly 2.5 times between 2003 and 2007.
This has obviously contributed very significantly to the wealth of oil exporters, and allowed them to generate balance of payments surpluses and build foreign exchange reserves, which have then been invested dominantly in dollar assets in US markets.
However, this is also the period that the US dollar has been depreciating, especially with respect to some of the other major currencies such as the euro and the Japanese yen. As a result, the change in oil prices has been less striking in terms of these currencies than in terms of the dollar.
The currency factor
Read the rest of this entry »

“You can never awaken using the same system that put you to sleep in the first place.”


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