Home » Empire (Page 2)
Category Archives: Empire
Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe
By: Andrew Gavin Marshall
7 July 2015
“They just wanted to take a bat to them,” said former U.S. Treasury Secretary Timothy Geithner, referring to the attitude of European leaders towards debt-laden Greece in February of 2010, three months before the country’s first bailout. Mr. Geithner, Treasury Secretary from 2009 until 2013, was attending a meeting of the finance ministers and central bankers of the Group of Seven (G7) nations: the United States, Japan, Germany, France, Britain, Italy and Canada.
It was the first occasion he had to meet Germany’s new Finance Minister, Wolfgang Schauble, presenting an opportunity to pressure the Europeans to end the crisis. The Europeans, specifically Germany and the European Central Bank (ECB), always had the ability to end the crisis. Putting up enough money in a regional bailout fund or allowing the ECB to fund governments (acting as a ‘lender of last resort’) would provide enough reassurance to the markets that no country would go bankrupt and therefore the crisis would end. It was referred to as the ‘big bazooka’ option, but Mr. Geithner had no such luck in convincing the Europeans to act quickly, largely due to German resistance.
The Europeans arrived at the G7 meeting in the remote Arctic Canadian city of Iqaluit wanting “to teach the Greeks a lesson” and “crush them,” explained Mr. Geithner. The Treasury Secretary warned them, “You can put your foot on the neck of those guys if that’s what you want to do,” but they still had to take action to reassure markets that the crisis would not spread to other countries, or threaten the euro itself. “I thought it was just inconceivable to me they would let it get as bad as they ultimately did,” said Mr. Geithner.
As the United States and the rest of the world would learn, the European strategy for the debt crisis that began in Greece and spread across the eurozone would be dictated by Germany, “the undisputed dominant power in Europe.” More than five years later, the Americans are still pressuring the Europeans to resolve their debt crisis problems, but to little effect. The stakes are now even higher as the U.S. fears the possibility of losing Greece to Russia, a conflict in which Germany is increasingly involved.
The Americans would attempt to influence Europe’s crisis through extensive contact between Mr. Geithner and Mr. Schauble at the German Finance Ministry, Mario Draghi at the ECB, and Christine Lagarde at the International Monetary Fund (IMF). The Americans knew that for anything to get done in Europe, you needed the Germans and the central bankers on board. The U.S. spy agency, the NSA, was even wiretapping the phone calls of German Chancellor Angela Merkel, top officials of the Finance Ministry and the ECB, with a particular interest in economic issues and Greece.
Germany’s political strategy was to allow the debt crisis to spread, creating the pressure required to force eurozone nations to accept German demands of restructuring their economies in return for financial aid from the EU. The German magazine Der Spiegel described Frau Merkel’s overall European strategy: “the aim was to solve the debt crisis in a step-by-step fashion.”
“If the euro fails, then Europe fails,” said the Chancellor in May of 2010, shortly after the first Greek bailout program was agreed. “The euro is in danger. If we do not avert this danger, then the consequences for Europe are incalculable and then the consequences beyond Europe are incalculable.” Merkel worked closely with Mr. Schauble at the Finance Ministry and her Minister of Economics, Rainer Brüderle, to write a draft proposal outlining the changes Germany wanted in the European Union.
The German publication Der Spiegel was leaked a copy of the draft, and concluded: “Berlin is serious about taking the lead as the euro zone struggles with a suddenly weak currency.” Germany wanted a Europe where the European Commission had the power to suspend the voting rights of nations for violating the eurozone’s debt and spending laws, including plans for managing the bankruptcy of a member nation. “Europe,” said Angela Merkel, “needs a new culture of stability.” But that culture would be enforced through the destabilizing power of financial market crises.
The German bet was that the EU could outrun financial markets, using the crisis as an opportunity to advance fiscal and political integration and impose their demands upon the rest of Europe, while simultaneously preventing markets from creating a crisis so severe that it threatened the euro or the economies of the more powerful nations. Without the pressure of financial markets, the EU could not force its member nations to restructure their economies and societies. Chancellor Merkel would frequently describe the European debt crisis to her colleagues as a “poker game” between financial markets and politicians. The first to flinch would lose.
In 2011, Bloomberg noted that Merkel was “turning Europe’s sovereign-debt crisis into an opportunity to reshape the euro region in Germany’s image,” concluding that she had “pulled ahead for now in her battle to restore policy makers’ mastery over the market.” A biographer of Merkel explained, “It’s policy by trial and error.”
Merkel’s powerful Finance Minister, Mr. Schauble, was one of the chief architects of the German strategy for Europe’s crisis. In March of 2010, he wrote in the Financial Times that, “from Germany’s perspective, European integration, monetary union and the euro are the only choice.” But aid comes with strings attached and harsh penalties for violations. “It must, on principle, still be possible for a state to go bankrupt,” wrote Mr. Schauble. “Facing an unpleasant reality could be the better option in certain conditions.”
The German minister believed “the financial crisis in the eurozone is not just a threat, but an opportunity,” as markets would “force the most debt-laden members of the 17-nation currency union to curb their budget deficits and increase their competitiveness.” This would pressure governments to accept further integration into a “fiscal union” defined and shaped by Germany. “We need to take big steps to get that done,” Mr. Schauble said in 2011. “That is why crises are also opportunities. We can get things done that we could not do without the crisis.”
Financial markets were happy to oblige the German-EU strategy, as the crisis would force the reforms long demanded by banks as a solution to the irresponsible spending of governments: austerity and structural reform. From 2002 to 2012, Josef Ackermann led Germany’s largest bank, Deutsche Bank. In 2011, the New York Times described Ackermann as “the most powerful banker in Europe” and “possibly the most dangerous one, too,” standing “at the center of more concentric circles of power than any other banker on the Continent.”
When the financial crisis struck in 2008, Angela Merkel and Josef Ackermann established a close working relationship, though not without its ups and downs. “We have a cordial and professional relationship,” said Mr. Ackermann in 2011. The banker would advise Frau Merkel on her strategy through the financial and debt crises, also working closely with Jean-Claude Trichet, then-president of the ECB. From his “seat at the nexus of money and politics,” Ackermann was “helping to shape Europe’s economic and financial future.”
After he left Deutsche Bank in 2012, Ackermann delivered a speech to the U.S.-based think tank, the Atlantic Council, where he outlined Germany’s overall strategy for Europe’s crisis. When asked why Germany simply didn’t say that it would do whatever it took to protect the euro and eurozone nations from bankruptcy (thus ending the financial crisis), Ackermann explained that it was largely due to a “political tactical consideration.” While such an option would surely end the market panic and save the euro, it would be unacceptable to the German public, let alone the German parliament.
But another major problem, noted Mr. Ackermann, was that if Germany made such an announcement, other eurozone nations “would then say, well, why then go on with our austerity programs? Why go on with our reforms? We have what we need.” Thus, he said, “I think to keep the pressure up until the last minute is probably a – not a bad political solution.” However, “if it comes to the worst,” with the potential of a eurozone collapse, the banker had “no doubt” that Germany would come to the rescue.
If the eurozone collapsed, not only would an economic and financial contagion spread with drastic consequences for all its members and the world economy as a whole, but there was also a strong political element. “A fragmented Europe has no way for self-determination,” said Mr. Ackermann. “We will have to accept what the United States, China, India, Brazil and other countries will finally define for us.” But Germany was to define the future of Europe.
“My vision is political union,” said Chancellor Merkel in January of 2012. “Europe has to follow its own path. We need to get closer step by step, in all policy areas.” In the Chancellor’s Europe, Brussels (home of the European Commission) was to be given immense new powers over member nations. “In the course a long process,” she said, “we will transfer more powers to the Commission, which will then work as a European government.” Outlining the EU’s path to a federation of nations functioning like individual states within the U.S., Merkel said, “This could be the future shape of the European political union.” Further integration among eurozone nations was a major objective, she explained, “we need to give institutions more control rights and give them more teeth.”
As Chancellor Merkel and other German leaders would frequently remind the rest of Europe and the world, with 7% of the world population, 25% of global GDP and 50% of world social spending, Europe’s economic system was unsustainable and uncompetitive in a globalized economy. Germany’s vision for Europe was aimed at introducing “rules to force Europe’s economies to become more competitive.” But competitiveness was defined by Germany, and thus, “the rest of Europe needs to become more like Germany.”
Germany wanted Greece and the rest of Europe to impose ‘budgetary discipline’ through austerity measures: cutting public spending in order to reduce the debt. But these are painful and highly destructive policies that depress the economy, impoverish the population, destabilize the political system, undermine democracy and devastate the wider society. If you live in a country where the government funds healthcare, education, social services, welfare, pensions and anything that benefits the general population, under austerity measures, now you don’t! Not surprisingly, austerity is always unpopular with the people who are forced to live through it.
Only in times of crisis can austerity be pushed through. When financial markets threaten to cut a country off from its sources of funding, it must to turn to larger nations and international organizations for financial aid. “The current strategy of the EU,” wrote Wolfgang Münchau in a November 2009 article for the Financial Times, “is to raise the political pressure – perhaps even provoke a political crisis – with the strategic objective that the Greek government might eventually relent.” And the government would have to relent to the diktats of Germany and “the Troika”: the European Commission, European Central Bank (ECB), and the International Monetary Fund (IMF), who collectively managed Europe’s bailout programs.
In early 2010, European banks held more than 141 billion euros of Greek debt, with the largest share being held by French and German banks. The first bailout largely went to bailout these very banks. Karl Otto Pohl, the former President of the German Bundesbank noted back in 2010 that the Greek bailout was about “rescuing the banks and the rich Greeks,” especially German and French banks. As the Troika bailed out the banks, these institutions took on the Greek debt.
The second bailout organized by the Troika largely went to paying interest on Greek debt owed to the Troika. Thomas Mayer, a senior adviser to Deutsche Bank, said, “the troika is paying themselves.” Between May 2010 and May 2012, Greece had received roughly $177 billion in bailouts from the Troika. A total of two-thirds of that amount went to payoff bondholders (banks and rich Greeks), while the remaining third was left to finance government operations.
In 2015, a study by the Jubilee Debt Campaign noted that of the total 252 billion euros in bailouts for Greece over the previous five years, over 90% ultimately went “to bail out European financial institutions,” leaving less than 10% for anything else. At the time of the first bailout in 2010, Greece had a debt-to-GDP ratio of roughly 130%. As a result of the bailouts and austerity, the debt ratio has risen to 177% of GDP at the beginning of 2015. Thus, after more than five years of supposed efforts to reduce its debt, that debt has grown substantially.
But the banks are no longer the largest holders of Greek debt. Today, the Troika owns 78% of the 317 billion euro Greek debt. Greece now owes the IMF, ECB, and eurozone governments a total of 242.8 billion euros, with the largest single holder being Germany with more than 57 billion euros in Greek debt. And now the Troika wants to be paid back. “In short,” wrote Simon Wren-Lewis in the New Statesman, “it needs money from the Troika to repay the Troika.”
The effects on Greece of more than five years of living under the domination of Germany and the Troika have been palpable. Greece is a ruined economic colony of the European Union. Austerity in Greece led to the creation of “a new class of urban poor” with more than 20,000 people being made homeless over the course of 2011, and dozens of soup kitchens and charities opening up to attempt to address the growing social and human crisis.
As austerity continued to collapse the economy, unemployment and poverty soared. By 2013, more than 27% of Greeks were unemployed and 10% of school-age children were going hungry. Between 2008 and 2013, the Greek government cut 40% of its budget, healthcare costs soared, tens of thousands of doctors, nurses and other healthcare workers were fired, drug costs rose, as did drug use with HIV infections doubling and a malaria outbreak was reported for the first time since the 1970s, while suicide rates increased by 60%.
By early 2014, more than a million Greeks were left without access to healthcare, accompanied by rising infant mortality rates. A charity director in Athens noted that, “Alcoholism, drug abuse and psychiatric problems are on the rise and more and more children are being abandoned on the streets.” By 2015, roughly 40% of children in Greece lived under the poverty line while the richest Greeks, responsible for roughly 80% of the tax debt owed to the government, were hiding tens of billions of euros in offshore accounts.
Unemployment has grown to 26% (and over 50% for youth), wages dropped by 33%, pensions were cut by 45%, and 40% of retired Greeks now live below the poverty line. Just prior to the Greek elections that brought his party to power in January of 2015, Alexis Tsipras wrote in the Financial Times that, “This is a humanitarian crisis.” Joseph Stiglitz, the Nobel Prize-winning former chief economist of the World Bank, wrote in late June of 2015 that, “I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences.”
Thus, the German-Troika strategy of prolonging the debt crisis to reshape Europe has resulted in a human, social and political crisis that threatens the future of democracy in Europe itself. Germany has, in effect, established an economic empire over Europe, largely operating through the Troika institutions, all of which are unaccountable technocratic tyrannies.
The first pillar of the Troika is the International Monetary Fund (IMF), based in Washington, D.C., just a few short blocks down the road from the White House and U.S. Treasury Department. The United States is the largest single shareholder in the IMF, and the only one of its 188 member nations with veto power over major Fund decisions. The Financial Times referred to the IMF as “a tool of US global financial power.”
In 1977, U.S. Treasury Secretary Michael Blumenthal described the IMF as “a kind of whipping boy” in a memo to President Carter. In return for a loan to a country in crisis, the Fund would demand harsh austerity measures and other ‘structural reforms’ designed to restructure the economy along the lines desired by Washington. “If we didn’t have the IMF,” wrote Blumenthal, “we would have to invent another institution to perform this function.”
In the early 1990s, the IMF was managing ‘programs’ in over 50 countries around the world, and was “long been demonized as an all-powerful, behind-the-scenes puppeteer for the third world,” noted the New York Times. In 1992, the Financial Times noted that the fall of the Soviet Union “left the IMF and G7 to rule the world and create a new imperial age.” Operating through the Troika, IMF Managing Director Christine Lagarde took a “tough love” approach to Greece, with the Fund being referred to as “the toughest” of the three institutions.
The European Central Bank (ECB) is another pillar of the Troika, run by unelected central bankers responsible for managing the monetary union, with its headquarters in Frankfurt, Germany, home to the German central bank (the Bundesbank) and Germany’s large financial sector. Throughout the crisis, Brussels has pushed to give the ECB more powers, specifically to oversee the formation and management of a single ‘banking union’ for the EU. The ECB has, in turn, advocated for more power to be given to Brussels.
The ECB played a central role in the debt crisis, pushing Greece into a deep crisis in late 2009, making “an example” of the country for the rest of Europe, blackmailing Ireland into accepting a Troika bailout program, then blackmailing Portugal into doing the same, and putting political pressure on Italy and Spain to implement austerity measures.
In late 2014, ECB President Mario Draghi rebooted efforts to advance integration of the economic and monetary union. When the anti-austerity Syriza government came to power in Greece in early 2015, the ECB was placed to be “the ultimate power broker” in negotiations between the country and its creditors. A member of the central bank’s executive board welcomed the democratic victory in Greece by warning, “Greece has to pay, those are the rules of the European game.”
The ECB took a hardline approach to dealing with Greece, increasing the pressure on Athens to reach a deal with its creditors, with The Economist referring to the central bank as “the enforcer.” This unelected and democratically unaccountable institution holds immense, undeniable power in Europe.
The European Commission is the third pillar of the Troika based in Brussels, functioning as the executive branch of the European Union overseeing a vast bureaucracy of unelected officials with responsibility for managing the union. Throughout the crisis, the Commission has been given sweeping new powers over economic and spending policies and priorities of member nations.
Brussels was to be given the centralized power to approve and reject national budgets of eurozone nations, establishing a technocrat-run ‘fiscal union’ to match the ECB’s role in managing the monetary union. EU institutions would have “more powers to serve like a finance ministry” for all the nations of the eurozone, potentially with its own finance minister, “who would have a veto against national budgets and would have to approve levels of new borrowing,” said Mr. Schauble, the German Finance Minister.
In 2007, European Commission President José Manuel Barroso mused aloud during a press conference. “Sometimes I like to compare the E.U. as a creation to the organisation of empires,” he said. “We have the dimension of Empire but there is a great difference. Empires were usually made with force with a centre imposing diktat, a will on the others. Now what we have is the first non-Imperial empire.” Eight years later, it is clear that the EU is officially an imperial empire, using bailouts not bombs, choosing the Troika over tanks, Brussels over bullets, austerity instead of armies, advocating for consolidation instead of colonization.
Philippe Legrain, a British political economist, author, and adviser to President Barroso from 2011 to 2013 wrote that the debt crisis “divided the euro zone into creditor nations and debtor ones,” and the EU’s institutions “have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern ‘periphery’ to the northern ‘core’ in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.”
“In general,” wrote Gideon Rachman in the Financial Times in 2007, “the [European] Union has progressed fastest when far-reaching deals have been agreed by technocrats and politicians – and then pushed through without direct reference to the voters. International governance tends to be effective,” he concluded, “only when it is anti-democratic.”
Perhaps the greatest lesson of the past five years of crisis is that in a Europe under the rule of Germany and the Troika, the people and democracy suffer most. For democracy to survive in Europe, the technocratic tyranny of the Troika and debt-based domination of Germany must be challenged. Democracy is too important to be sacrificed at the altar of austerity. It is any wonder why Greeks voted ‘no’ to the status quo?
Andrew Gavin Marshall is a freelance researcher and writer based in Montreal, Canada.
Please consider making a donation to help support my research and writing.
Kissinger’s Plan: “Use Economics to Build a World Political Structure”
Power Politics and the Empire of Economics, Part 1
By: Andrew Gavin Marshall
1 June 2015
The following is an excerpt of the introductory chapter to my book. Read the full chapter here.
The President sat and listened to his closest adviser as they plotted a strategy to maintain Western domination of the world economy. The challenge was immense: divisions between industrial countries were growing as the poor nations of the world were becoming increasingly united in opposition to the Western world order. From Africa, across the Middle East, to Asia and Latin America, the poor (or ‘developing’) countries were calling for the establishment of a ‘New International Economic Order,’ one which would not simply serve the interests of the United States, Western Europe, and the other rich, industrial nations, but the world as a whole. It was on the 24th of May 1975 when President Gerald Ford was meeting with his Secretary of State and National Security Adviser, Henry Kissinger, easily the two most powerful political officials in the world at the time. Kissinger told the President: “The trick in the world now is to use economics to build a world political structure.”
Ford and Kissinger agreed that the United States could not accept a new ‘economic order’ that would undermine American and Western power throughout the world. Uprisings, revolutions and liberation movements across Africa, Asia and beyond had largely thrown off the shackles of European colonial domination, establishing themselves as independent political nation-states with their own interests and objectives. Chief among those goals was for economic independence to follow political independence, to take control of their own resources and economies from the Europeans and Americans, to determine their own economic policies and help to redistribute global wealth along equal and just lines.
The problem for the Western and industrial nations, with the United States at the center, was that formal colonial domination was no longer considered acceptable. In previous decades and centuries, the rich and powerful nations would directly colonize and control foreign societies, establishing puppet governments and protectorates, extracting resources, exploiting labour and expanding their own national power and international prestige. Following the end of World War II, such practices were no longer politically or publicly acceptable. The era of decolonization had taken hold, and the people of the world were failing to remain passive and obedient in the face of great injustices and inequality. War had become a bad word, colonialism was no longer en vogue, and belligerent political bullying by the rich countries increasingly risked a major backlash, threatening to unite the entire world against the West.
A new strategy for global domination had to be constructed. The West could not afford a direct political or ideological confrontation with the developing world, with many top American officials, including Henry Kissinger, acknowledging that if they were to pursue such a strategy they would be isolated and lost, with even the Europeans and Japanese abandoning them. Foreign ministers and heads of state could not appear to be attacking or seeking to dominate the developing world.
It was decided that the war would have to be waged largely in the world of economics and finance, where the conversation would change from that of colonialism and imperialism to the technical details of economic policy. The imperial interests and objectives of the powerful nations that had existed for centuries could no longer be articulated in a direct way. But those same interests and objectives would not vanish. Instead, they would be hidden behind bland, vague and technical rhetoric. The language of economics provides the appearance of impartiality, backed up by pseudo-scientific-sounding studies and ideologies, accessible only to those with the proper training, education and experience, otherwise inaccessible and incomprehensible to the general public. Empire was a thing of the past. In its place rose a new global economy, built by banks not bombs, expanding the reach of corporations not colonies, managing debt not dominions.
The “world political structure” which Kissinger described would not, however, make militaries and foreign ministers and diplomats irrelevant. They would still have a role to play in maintaining and expanding empire, though never calling it by its proper name, instead using words like ‘democracy’, ‘freedom’ and ‘markets’. But the role of such officials would often become secondary to that of the financial and economic diplomats, who would increasingly become the first line of offense in constructing the “world political structure,” the Empire of Economics.
Two days after Kissinger articulated this strategy to President Ford, another meeting was held at the White House with several more high-level cabinet officials. The discussion was a follow-up on the U.S. strategy to construct such a system. Stressing that political diplomats and foreign ministers could not take on the developing world directly, Kissinger told the assembled officials, “it is better to have the Finance Ministers be bastards, that’s where I want it.”
This book is the story of how financial diplomats, politicians, bankers, billionaires, family dynasties and powerful nations have used economics to build a “world political structure,” engaging in a constant game of power politics with and against each other and the rest of the world to construct and maintain their Empire of Economics for the benefit of a small ruling class, the global Mafiocracy: a super-rich, often criminal cartel of global oligarchs and family dynasties.
It is a brutal, vicious world of secret meetings, behind-the-scenes intrigue, financial warfare and coup d’états, economic colonization and debt domination. It is the unforgiving world of empire, an immense concentration of global wealth and power, a parasitic system of world domination built on the impoverishment and exploitation of billions. And it is a world obscured and hidden behind the dry, dull and seemingly empty rhetoric of economics. It is a language in need of translation, a reality in need of elucidation, and an empire in need of opposition.
Power Politics and Empire
It was the largest and most powerful empire the world had ever known. It spanned the globe, across oceans and seas, countries and continents, enveloping much of the known world – and the people throughout it – within the domineering shadows of its political, economic, social, cultural and financial institutions and ideologies. Those who ruled were the wealthy and war-like family dynasties, individual oligarchs, kings of coin, titans of industry, and a religious priesthood of proselytizing propagandists. These rulers would engage in a constant game of ‘power politics’ with and against each other in the quest to gain title, money and influence.
They lie, cheat, steal, kill and conquer; they plant their flags and preach their gospels, serve their interests and those of their unknown (or sometimes) masters. It requires a constant cunning, managing an endless lack of trust for all those around you, fearful that on your way up, others might seek to cut you down. To play the game of power politics in the age of empires is to be pragmatic, strategic and ruthless; it requires no less, but frequently more. It is a practice passed down through families, institutions and ideologies. No, this is not ‘Game of Thrones’, but rather, the Game of Globalization in the Empire of Economics: power politics of the 21st century.
But the game itself has been with humanity as long as empire, and was always seen at the center of the system of power within every empire. Human systems – that is, what we call ‘civilization’ and ‘society’ – are, ultimately, human creations with humans in control. Thus, power – at its center – is always dependent upon the interactions, relationships and emotions of the few individuals and families who rule. When such people get angry or throw a tantrum – because the neighbor boy stole his toy (or Russia annexed Crimea, for example) – wars are waged, and the poor are sent to go murder or be murdered, cities burn to the ground, nations crumble into dust.
The game is not known to many, save for those who play it. The masses are left with simple images, rumours and speculation, if anything at all. A public persona of the more visible rulers must be carefully constructed so as to legitimize their authority. The people must be satisfied to the bare minimum, so that they do not rise up in resentment and fury against the few who live in the most obscene opulence and imperial impunity. If the consent of the population is not maintained, a ruler must seek to control them in other ways, which generally means seeking to crush them, to punish them into submission and subservience. Kill and conquer at home and you can kill and conquer abroad.
Control is based upon a mixture of consent and coercion. The people must be either willing to let the rulers rule, to accept their position in society without question, or they must be made to fear the reach and wrath of the rulers, to be punished and persecuted, segregated and isolated, beaten, raped and murdered. The rulers must be vicious, but appear virtuous. If, however, a choice must be made between acting ruthless and appearing righteous, it is better for the rulers to be wretched and murderous, for the game of power politics is never won by virtue alone, but being vicious can get you far enough without assistance.
Niccolo Machiavelli wrote his book The Prince more than 500 years ago as an examination of power politics and methods through which one can achieve and maintain power within the old warring Italian city-states. Having long served as an adviser and strategist to various rulers, including princes, popes and dynasties, Machiavelli asserted that “it is desirable to be both loved and feared; but it is difficult to be both and, if one of them has to be lacking, it is much safer to be feared than loved.” He explained that this was so because “love is sustained by a bond of gratitude which, because men are excessively self-interested, is broken whenever they see a chance to benefit themselves.” On the other hand, “fear is sustained by a dread of punishment that is always effective.” Machiavelli has long been accused of being a cynic or pessimist in his interpretations of human nature, but this misses the point.
Machiavelli’s work was examining the attitudes, nature and actions of those who wielded significant power, which was always a small minority of the population. Indeed, far from a cynical interpretation, The Prince is rather a pragmatic and accurate interpretation of a deeply cynical world where every institution and individual wielding significant influence engages in a constant game of power politics designed to benefit themselves, maintaining or expanding their own power, often at the expense of others. It is a world where every relationship, title, position and even marriage holds strategic significance. For those individuals and families who rule, every decision must be made as a calculated attempt to preserve and expand their power. If this is not done, they will not remain rulers long, for this is how the game is played and won, and if one does not play by the rules, others will. Thus, the more cunning and ruthless a strategist, the more likely they are to elevate through the hierarchy because they will do what others will not, acting without hesitation to manipulate or crush others in order to rise higher.
It is a game – like that of all empires past – in which the few compete and cooperate with one another in the advancement of their own individual, familial, national or global interests, expanding their empires. It is a game in which the vast majority of humanity are – as they have long been – left to suffer the consequences, fight the wars, drown in debt, poverty, hunger and misery. On occasion, and increasingly often, groups of people – segments of the population – rise up in resistance, riot, revolt or even revolution. This is when the people are able to engage more directly in the game of power politics, because they change the game. Suddenly, all the key players at the top notice the building fury of the masses and so the game itself is put at risk. The key players will almost always – even in spite of their frequent competition and opposition to each other – work together if it means protecting the game itself.
A useful comparison is that of a Mafia crime network, in which the various heads of families may sit at the same table though they often feud with one another, working together to mutual benefit when possible, though occasionally whacking one another off when the competition grows fierce. It is a delicate balancing act of competition and cooperation, but when the criminal network is itself threatened, perhaps through the efforts of an ambitious district attorney or crackdown on organized crime, the various families will seek to unite in their efforts to protect the racket which benefits them all. If they remain divided in the face of growing opposition and potential external threats, they increase the risk that they will be conquered. When the game is threatened, the players must stand together or fall apart.
For successful rulers, the balance of competition and cooperation – vicious and virtuous – is present both in their relationships with other rulers, and with the larger populations. And so the rulers themselves – the oligarchs and dynasties – span both private and public realms: they are presidents and prime ministers, kings, queens and sultans, corporate chiefs, billionaires and bankers, consultants and advisers, academics and intellectuals, technocratic tyrants and plutocratic princelings. Their world is not our world. But it rules, wrecks and ravages our world and the people and life within it. It is a game that steers humanity toward certain extinction resulting from excessive environmental devastation, guided by that ever-present drive within those who have the most for more, more, more.
The game is little more, at its core, than basic gangsterism, its players little more than petty tyrants. Such personalities, egos and interests populate all sectors of society, all institutions, frequently appearing in inter-personal relationships. The more power they have, the greater the repercussions of the game. At the top of the global power structure are the personalities and families of immense wealth, political influence and prestige. With the same basic principles of a Mafia structure, the individuals and institutions that play the game of power politics in the age of globalization – in the Empire of Economics – are perhaps best understood as a global Mafiocracy. It makes no difference whether a nation is ruled by a monarchy, a dictatorship or democracy: the Mafiocracy is ever-present, and ever-expanding in its wretched reach.
The State of Empire
The world is defined and dominated largely by institutions, individuals and ideologies. The institution of the nation-state is perhaps the most obvious example, best represented by the world’s most powerful country, the United States of America. The government of the United States is composed of three separate branches (or institutions): the executive (President and Cabinet), legislative (Congress/Senate) and judiciary (the Supreme Court). The executive leads the government, while the role of the legislative and judiciary is (theoretically) designed to keep a check on executive power, preventing it from accumulating too much authority in one branch, threatening the potential for tyranny.
Since World War II, the executive branch has accumulated increased powers within the U.S. government, with a wide mandate to manage foreign and economic policies specifically, with little oversight and few checks from the legislative and judiciary branches. The executive is composed of a wide array of institutions itself, each with their own specific mandates, interests, and varying degrees of influence. These include the many cabinet departments, such as the Treasury Department, Defense Department (Pentagon), State Department, CIA, National Security Council (NSC), Department of Homeland Security, and many more. In addition, since 1913, the Federal Reserve has functioned as the central bank of the United States, operating with a large degree of independence from the other branches of government, including political independence from the executive branch (apart from the President’s ability to appoint the Chairman and Board of Governors), and no oversight from Congress (though the Fed chairman will occasionally testify to Congress).
Individually and collectively, these government departments and institutions manage hundreds of billions and even trillions of dollars in assets and funds, making them individually larger than most multinational corporations and banks in the world. These departments within the U.S. government are largely responsible for the maintenance and expansion of the American imperial system. Since the time of ancient Nubia and Egypt thousands of years ago, much of the world has been dominated by empires, rising, expanding and collapsing over centuries and millennia, running through ancient Greece, Rome, China, Aztec and Inca, Persian, Ottoman, and in the past five hundred years with the rise and demise of the European empires whose reach expanded the globe. For the most part, imperial systems have been dominated by families, often called royalty, sultanates, emperors or emirs. The essential interest and priority of all empires has been to protect and expand their empire, largely for the benefit of its ruling class or groups, with the imperial family at the center of power.
It is only a phenomenon of the post-World War II period that denial of the existence of empire is commonplace. Through the two World Wars of the 20th century, empires collapsed and faded into history. World War I led to the collapse of the German, Russian, Austro-Hungarian and Ottoman empires. World War II led to the collapse of the Japanese and Nazi empires, and its aftermath resulted in the erosion of European colonial domination, as the British, French, and other European colonial powers had to adjust to a new global order under American hegemony. It was in the post-World War II period that the United States had achieved unprecedented economic and political power. With just over 5 percent of the world’s population, the U.S. controlled roughly half the world’s wealth. Citing this very statistic, the U.S. State Department (responsible for managing diplomacy and foreign policy) published a policy paper in which top officials acknowledged that the global inequality that existed between the U.S. and the rest of the world would lead to “envy and resentment.” The “real task” of the United States was “to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security,” doing away with “the luxury of altruism and world-benefaction.”
Europe was devastated by the war, and the United States occupied the West with the Soviet Union occupying the East of the continent. The European empires were crumbling, and the process of decolonization had begun to take the world by storm, with the U.S. attempting to manage the process on behalf of its Western European allies. In its strategy for world domination, the United States sought to rebuild its former war-time enemies – Germany and Japan – into economic powerhouses, with West Germany acting as the locomotive for European integration (into what is now the European Union) and Japan acting as a counterweight to the spread of Communism in East Asia. Western Europe, Japan and other allies depended upon the United States military to protect their ‘security’ interests around the world, arming favorable dictators, supporting coups, fuelling civil wars, undertaking large occupations and counter-insurgency operations targeting independence, anti-colonial and revolutionary movements around the world.
Despite the imperial realities of this system, there was an overwhelming tendency within the United States and its industrial allies to deny the existence of imperialism altogether. Instead, these nations were merely economically and technologically advanced democracies who sought to protect ‘freedom’ and ‘democracy’ around the world in a largely ideological confrontation with the Soviet Union, which presented itself as the image of socialism and communism in a struggle against the capitalist imperial powers of the West. The Soviet Union’s influence was dominant in Eastern Europe, with a few close allies scattered across the Middle East, Africa and Latin America. The United States and its Western allies, however, were the dominant powers across much of the rest of the Middle East, Asia, Africa and Latin America. The only real sense in which the Soviet Union presented a challenge for the United States was in its military and nuclear capabilities. This was the period known as the ‘Cold War’, though despite its confrontational rhetoric dividing East and West, communist states from capitalist democracies, it was largely a struggle waged against the rest of the world, the ‘Third World’, otherwise known as the developing world or ‘Global South’. It was in the poor, colonized nations and regions of the world where the majority of the world’s resources were located, and thus, where the Western imperial powers needed to maintain control.
While the United States rebuilt Germany and Japan into economic locomotives, becoming the second and third richest countries in the world, American economic power experienced a relative decline. This created strong allies for the United States, and while they remained militarily dependent upon their imperial patron, their growing economic power gave them increased leverage. With their increased economic power came increased potential to act independently of the U.S. and other rich nations. Competition between the great powers increased during the same period that newly independent nations of the developing world were increasingly uniting in opposition to a Western-dominated world order.
On May 1, 1974, the vast majority of the world’s nations voted in favour of the U.N. Declaration on the Establishment of a New International Economic Order (NIEO), proclaiming that “the greatest and most significant achievement during the last decades has been the independence from colonial and alien domination of a large number of peoples and nations which has enabled them to become members of the community of free people.” Among the ‘principles’ adopted in forming the NIEO were “equality of States, self-determination of all peoples,” and the outlawing of war, seeking “the broadest co-operation” of all nations of the world in banishing the “prevailing disparities” and securing “prosperity for all.”
Each nation of the world would have the right “to adopt the economic and social system that it deems the most appropriate for its own development,” and establish control over their own natural resources. The people who continued to live under colonial domination, racial oppression and foreign occupation had a right “to achieve their liberation and the regain effective control over their natural resources and economic activities.” In 1974, this would include Israeli-occupied Palestine, South African apartheid, and U.S.-occupied Vietnam. The last line in the document stated that the Declaration should “be one of the most important bases of economic relations between all peoples and all nations.”
But Henry Kissinger had other plans. As Secretary of State and National Security Adviser, Kissinger was the chief imperial strategist in the United States, and remains one of the most influential foreign policy strategists in the nearly four decades since he left office. Kissinger’s “trick” to use economics in building a “world political structure” would largely be pursued through the finance ministries, central banks and international organizations (such as the IMF and World Bank) which are controlled by the rich and powerful nations. In the face of a growing threat, the rich nations banded together in various forums, conferences and diplomatic gatherings, the most notable of which came to be known as the Group of Seven, bringing together the U.S., Germany, Japan, the United Kingdom, France, Italy and Canada. Through these various institutions and initiatives, a “world political structure” would be incrementally constructed as the Empire of Economics.
Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada.
 Memorandum of Conversation, 24 May 1975: Foreign Relations of the United States, 1973-1976, Vol. XXXI, Foreign Economic Policy, Document 292:
 Memorandum of Conversation, 26 May 1975: Foreign Relations of the United States, 1973-1976, Vol. XXXI, Foreign Economic Policy, Document 294:
 Niccolo Machiavelli, The Prince (Cambridge University Press, 1988), page 59.
 Memo by George Kennan, Head of the US State Department Policy Planning Staff. Written February 28, 1948, Declassified June 17, 1974. George Kennan, “Review of Current Trends, U.S. Foreign Policy, Policy Planning Staff, PPS No. 23. Top Secret. Included in the U.S. Department of State, Foreign Relations of the United States, 1948, volume 1, part 2 (Washington DC Government Printing Office, 1976), 509-529:
 General Assembly, “Declaration on the Establishment of a New International Economic Order,” Resolution adopted by the General Assembly, United Nations, Resolution 3201 (S-VI), 1 May 1974:
 General Assembly, “Declaration on the Establishment of a New International Economic Order,” Resolution adopted by the General Assembly, United Nations, Resolution 3201 (S-VI), 1 May 1974:
The Global Mafiocracy and the Empire of Economics
By: Andrew Gavin Marshall
26 March 2015
I am aiming to raise $500 in order to complete and publish for all to view and read a sample introduction chapter to my book about the Global Mafiocracy and the Empire of Economics. The chapter would provide a sampling of the subject matter, style and approach to discussing these complex issues in a way that is understandable and approachable to as wide an audience as possible. The sample chapter would be completed relatively soon (in the next week or two), so long as the funding objective is reached so that I can afford to put in the time to complete the draft.
So what is the subject matter and focus of the book?
– Translating the world of Economics and Finance into basic English, dismantling the ‘technical’ language of ‘experts’ into a more direct and honest dialectic
– An introduction to the Global Mafiocracy: the banks, corporations, asset management firms, sovereign wealth funds, insurance companies and holding companies that collectively own each other and the wider network of global corporate and financial institutions, manifesting as a relatively small cartel of roughly 150 large financial institutions that wield unparalleled financial power in the modern world. How did the cartel evolve? What institutions are dominant within it? Who are the individuals and groups that lead these organizations? How is the cartel’s wealth and power accumulated and exercised? What role does the cartel play in the world of global finance, economic and politics?
– Behind the major corporate and financial institutions are individuals and families, smaller units of concentrated power who own the largest shares and steer the operations of the global cartel. These individual oligarchs and family dynasties – from the Rockefellers in the US, to the Wallenbergs in Sweden, Agnellis in Italy, Desmarais’ in Canada, to the House of Saud in Saudi Arabia, Oppenheimer in South Africa, among others – control and.or influence large percentages of wealth within their respective nations and in the world of globalized financial and corporate networks. How did these dynasties and oligarchs emerge? What do they own and control? How is their wealth and power organized and exercised? What are their ideologies, beliefs, objectives?
– Empire and Economics: When people think of Empire, they often imagine the old European colonial powers venturing off to Africa, Latin America and Asia where they would militarily occupy and colonize foreign lands, regions and peoples for their own imperial benefit. While formal colonialism is largely an historical anachronism, unjustifiable and increasingly untenable in the modern world, Empire itself has never vanished. While the military and overtly political components of empire and imperialism remain relevant in the modern world (think: U.S. military, CIA, State Department, NATO, etc.) the most effective and evolved means of imperialism in the world are exercised through the economic and financial spheres. In these realms, empire is more effective because its ideology, objectives, actions and effects are hidden behind vague and obscure language, the “expertise” of economists, finance ministers, central bankers and other technocrats who claim to be separate of politics and only interested in economics. Empire is more evolved in these spheres because it has become the vanguard of the global Mafiocracy and imperial system, leading the political and often military apparatus of empire, far more institutionalized and advanced on a global scale than any parallel in political and military spheres.
– Global Financial Diplomacy and Governance: What are the institutions that manage and shape the imperial economic order? In the world of financial diplomacy and governance, those institutions which wield incredible (and increasingly expanding) power and authority remain largely unknown or misunderstood to the general public. The book will examine some of the origins, evolution and character of many of these institutions, including: the International Monetary Fund (IMF), World Bank, Bank for International Settlements (BIS), Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), central banks and finance ministries, among others. What are the specific roles, functions and objectives of these institutions? How do they wield power? In whose interest do they operate? Who leads them?
– State Power: The institutions that make up the world of financial diplomacy and governance rely principally upon state power for legitimacy and political might. Whether it’s a central bank, a finance ministry, the IMF or other agencies, the role of powerful nation states such as the United States and other rich nations is central to the system and structures of the global Empire of Economics. The centrality of state power is made all the more apparent through an examination of the origins and evolution of less formal groupings of nations, such as the Group of Seven (G7), the Group of Five (G5), the Group of Ten (G10) and the Group of Twenty (G20), the principal political forums for the system of global governance and empire. Who attends these forums? What institutions are represented? What are the ideologies and competing interests? What effect do they have? What is the role of the ’emerging market’ nations of China, Russia, Brazil, India, Turkey and South Africa within this system?
– The Global Financial Mafia: What is the relationship and interaction between state power, the various Groups of nations, international institutions, finance ministries and central banks with the global cartel of banks and corporations, and the oligarchs and family dynasties that control the cartel? In what forums do the individuals who lead these various institutions interact, cooperate, communicate, socialize and organize? At various global and national think tanks, foundations, forums, conferences and social events, politicians, finance ministers, central bankers and top technocrats meet, often in secret, with the heads of banks and corporations, patriarchs and matriarchs of powerful family dynasties and other oligarchs. Among such events and forums are: the Bilderberg Group, International Monetary Conference (IMC), World Economic Forum (WEF), the Trilateral Commission, the Institute of International Finance (IIF), and the Group of 30, among others. These forums and events provide political leaders and the heads of influential institutions with a private forum where they are able to have off-the-record, often secretive discussions on important issues of global importance to the populations of their respective nations and the planet as a whole. Collectively, this group, and the institutions which dominate it, compose the Global Mafiocracy: a global political, social and economic system dominated by relatively few nations and institutions that operate largely in the interests of a small, criminal cartel of banks and corporations, a global financial Mafia.
– Top-Down: These institutions, individuals and ideologies will be examined and discussed not as a dry, historical account, but in terms of telling a series of stories. I want to try to present this information and analysis in the same way in which it appeals most to me, a fantastic, interesting, often horrifying and shocking tale of intrigue, empire, power politics, petty tyrants, in-fighting, domination, destruction and empire. I want the people who lead and participate in this system to become as familiar to the reader as they are to me, to see an image and read stories about the personalities and complexities of those who rule and wield power. What emerges is a story, or series of stories, worthy of the the intrigue and interest in historical and fictional accounts of imperial families and ancient empires, of mythical worlds, fantasy tales and science fiction societies. Get a view of our world from the top-down.
– Bottom-Up: In parallel to the institutions, individuals and ideologies that dominate and shape our world from the top-down, there are also processes, people, protests and mass movements or revolutions that shape and re-create and re-imagine the world from the bottom up. While Europe’s finance ministers meet in secret, off the record conversations in distant castles located in Luxembourg, deciding the fate of Europe and its citizens, mass protests and demonstrations and riots take place on the streets of Athens, Madrid, Lisbon, Rome and Frankfurt, in which the populations oppose and reject the decisions being made in far-off places by largely unelected technocrats who do not serve their interests. What role do protests and popular movements have in shaping and changing the modern world? How do the dominant institutions and individuals view and respond to such events and processes? Do they fear the potential of the people? What is that potential, or what could it be? What is the bottom-up story of the Global Mafiocracy and Empire of Economics?
– A Series of Stories: History, its chief actors, institutions and evolution is best understood when told as a story, with characters that readers and observers can relate to, understand, find an interest in, to be intrigued and even horrified. It would seem that the best way to explain the overly and unnecessarily complicated world of economics and finance is to explain it not as one would read in a textbook or industry publication, nor reportage in the financial press, nor through the dry and deceptively dull language and rhetoric of economics, academics, finance ministers, central bankers, technocrats and politicians. No, this is a world best understood through the stories, characters, challenges, triumphs, disasters and wars waged by the personalities and people who have shaped and changed this world. A system of human ‘civilization’ is, after all, ultimately a product of humans, and is, therefore, as deeply flawed, complex, conflicted and intriguing as are most human tales of the rise and fall of kings, queens, emperors, dictators, or the triumphs and tribulations of the ‘common person’, those on the streets, in the schools, bustling around the cities, towns and in the urban slums. Human beings understand human struggles and human stories. Thus, this book is not a history of economics and finance, it is a story of human beings, struggle, suffering, success and complexity. In short, it is a story like any other.
I need your help to write these stories and complete this book, what will be the first in a series. For now, my objective is to write a sample chapter, drawing from the many thousands of pages of research I have done in recent months and years. This chapter would be made available online for all to read, to truly gain a better understanding of the focus, approach and objectives of this book. To do this, I need your help. If this is something you would be interested in reading, please consider donating or sharing and promoting this through social media and other avenues.
My objective is to raise $500 in the short-term. If that goal is reached, the sample chapter will be completed (in rough form) and published online for all to read in April of 2015.
Thank you very much for all the support and encouragement.
Andrew Gavin Marshall
The West Marches East, Part 2: Georgia Starts a War, Russia Draws a Line
By: Andrew Gavin Marshall
Originally posted at The Hampton Institute
19 June 2014
In Part 1 of this series – ‘The West Marches East’ – I examined the circumstance that while Russia has received the majority of the blame for the more than six-month-crisis in Ukraine, these events did not take place in a vacuum, and, in fact, the Western powers and institutions – notably the United States, NATO and the European Union – have broke promises made at the end of the Cold War to expand NATO – a Western military alliance that was created in opposition to the Soviet Union – to Russia’s borders. Simultaneously, the European Union has expanded eastwards, bringing Eastern and Central European countries within its orbit and in adherence to its economic orthodoxy. Further, many NATO powers had worked together to promote ‘colour revolutions’ across much of Eastern Europe over the previous decade or so, helping to overthrow pro-Russian leaders and replace them with pro-Western leaders.
After nearly a quarter-century of Western expansion – militarily, politically, economically – to Russia’s borders, Russia has had enough. But Ukraine was not the first instance in which Russia has been provoked by the West into a response that the West subsequently declared as an act of imperial “aggression.” In 2008, the small Caucasus nation and former Soviet republic of Georgia started a war with Russia, leading to Russia’s invasion of the tiny country, effectively ending nearly two decades of NATO and Western expansion. This report examines the 2008 war in Georgia and the roles played by Russia and the NATO powers.
Setting the Stage
As documented in part 1, Georgia was – in 2003 – subjected to a NATO sponsored ‘Colour Revolution’ which removed the previous leader and replaced him with a pro-Western (and Western-educated) politician, Mikeil Saakashvili. In December of 2003, Georgian defense officials met with the U.S. Secretary of Defense Donald Rumsfeld to discuss enhancing military cooperation between the two countries. The US had sent roughly 60 military trainers to Georgia in 2002, but the Georgians had been lobbying for a US military base in their country.
Instead, the Pentagon decided to ” privatize its military presence in Georgia” through a security contractor, Cubic, which signed a three-year $15 million contract with the Pentagon to support the Georgian ministry of defense. The team from Cubic would engage in training and equipping the Georgian military, as well as protection for the oil pipeline that was to take oil from Baku, Azerbaijan, to Turkey through Georgia. Western diplomats suggested that the country could become a “forward operations area” for the US military, “similar to support structures in the Gulf.” In return for the program, Georgia agreed to send 500 soldiers to Iraq.
As the BBC reported in 2006, Georgia was discarding its ties with Moscow and instead, leading “westwards – towards NATO, and perhaps eventually the European Union.” US military instructors were in the country “to drive that change,” training Georgian soldiers to manage checkpoints in US-occupied Iraq. Georgia was largely uneasy with Russia due to the fact that Moscow provided – since the early 1990s – moral and material support to the country’s two breakaway regions of South Ossetia and Abkhazia. A Georgian corporal deployed in Iraq was quoted in the New York Times in 2007 saying, “As soldiers here [in Iraq], we help the American soldiers… Then America as a country will help our country.” This reflected the implicit thinking within Georgia up until the 2008 war.
In early April of 2008, U.S. President George W. Bush said he “strongly supported” Ukraine and Georgia’s bids to join NATO, despite the enormous objections from Russia, which would then see NATO powers located directly on its borders. Bush made the comments following a NATO meeting, where France, Germany, Italy, Hungary, Belgium, the Netherlands and Luxembourg all opposed the U.S. position of fast-tracking Georgian and Ukrainian membership into NATO, seeing it as ” an unnecessary offense to Russia.” Shortly after Bush made his announcement, a former Russian armed forces chief of staff said that Russia would ” take military and other steps along its borders if ex-Soviet Ukraine and Georgia join NATO,” claiming that “such a move would pose a direct threat to its security and endanger the fragile balance of forces in Europe.”
Within Georgia and its separatist regions, which were home to Russian soldiers, tensions were increasingly flaring over the summer months of 2008. With both sides undertaking provocative measures, there was a growing awareness that war could break out. In July of 2008, following her visit to the Czech Republic where she signed an agreement to base part of a new U.S. missile defense system in the country, U.S. Secretary of State Condoleezza Rice traveled to Georgia to meet with the country’s leadership. At that time, U.S. military forces in the region had begun joint exercises with soldiers from Georgia, Armenia, Ukraine and Azerbaijan. The exercises were taking place less than 100km from Russia’s border, with roughly 1,000 U.S. soldiers and an equal number of Georgian troops. As Rice arrived in Georgia, the Russian foreign ministry issued a statement accusing Georgia “of pushing the region towards war through actions openly supported by the United States.”
Then-Russian President Dmitri Medvedev later explained that as tensions escalated into July of 2008, he was in contact with his Georgian counterparts. However, following Secretary Rice’s July 2008 visit to Georgia, he claimed, “my Georgian colleague simply dropped all communication with us. He simply stopped talking to us, he stopped writing letters and making phone calls. It was apparent that he had new plans now. And those plans were implemented later.”
Indeed, as the New York Times noted, when Rice went to Georgia, she had two different goals, one private, and one public. Privately, she reportedly told the Georgians “not to get into a military conflict with Russia that Georgia could not win.” However, in public, standing alongside the Georgian president, Rice spoke defiantly against Russia and in support of Georgia and its “territorial integrity” in the regions of South Ossetia and Abkhazia. Standing next to the president, Rice declared that Russia “needs to be a part of resolving the problem… and not contributing to it.” The NYT claimed that these public statements of support for Georgia – and antagonism toward Russia – not to mention the fact that the US was engaging in large-scale military exercises with Georgians, expanding military installations all across Eastern Europe and providing Georgia with military advisers, had the combined effect of sending the small country “mixed messages ” about U.S. support for a war with Russia.
No doubt contributing to these ‘mixed messages’ was when – at the very same news conference with President Saakashvili – Rice was asked a question about a potential conflict with Iran, to which she replied that, “We will defend our interests and defend our allies… We take very, very strongly our obligations to defend our allies and no one should be confused of that.” Apparently, Georgia was a little confused.
When the Soviet Union collapsed and Georgia declared independence, the two regions of South Ossetia and Abkhazia gained de facto independence in the early 1990s following conflict between the breakaway regions and the central state. Following this brief period of fighting, tensions were largely reduced, though Russian ‘peacekeepers’ were on the ground monitoring the fragile balance. That balance was upset when Saakashvili became president in 2004, making one of his pledges “national unification.” By 2008, when tensions were reaching a breaking point, there were over 2,000 American civilians in Georgia, according to the Pentagon, with over 130 U.S. military trainers and 30 Defense Department civilians.
Another facet to the increased tensions was the fact that Georgia was an important conduit for a major pipeline, bringing oil from Baku in Azerbaijan through Georgia and to the Turkish port of Ceyhan on the Mediterranean. When the pipeline was completed in 2006, it was the second-longest pipeline in the world, and its construction and use was specifically designed to “bypass Russia, denying Moscow leverage over a key resource and a potential source of pressure.” As Jonathan Steele wrote in the Guardian, the resulting war was about more than pipeline politics, however, as it represented “an attempt, sponsored largely by the United States but eagerly subscribed to by several of its new ex-Soviet allies, to reduce every aspect of Russian influence throughout the region, whether it be economic, political, diplomatic or military.”
The Wall Street Journal reported that the Baku-Tbilisi-Ceyhan pipeline was built by a consortium of major Western energy corporations, and was “the first pipeline on former Soviet territory that bypasse[d] Russia,” which “was strongly backed by the US as a way of loosening Moscow’s grip on the Caspian’s oil wealth.”
When War Broke Out
On August 7, 2008, war broke out. Georgia claimed that it was responding to an attack on the country by separatists in South Ossetia and Russian aggressors. However, independent military observers from the Organization for Security and Cooperation in Europe (OSCE) who were deployed in the region refuted the Georgian government’s claim, and instead reported that, “Georgia’s inexperienced military attacked the isolated separatist [South Ossetian] capital of Tskhinvali on Aug. 7 with indiscriminate artillery and rocket fire, exposing civilians, Russian peacekeepers and unarmed monitors to harm.” While Georgian President Saakashvili presented the Georgian military actions as “defensive,” in response to separatist and Russian shelling of Georgian villages, the OSCE monitors were unable to confirm that such villages had been attacked, with no shelling heard in the villages prior to the Georgian bombardment of Tskhinvali. Two senior Western military officials who were stationed in Georgia, working with the Georgian military, told theNew York Times that, “whatever Russia’s behaviour or intentions for the enclave, once Georgia’s artillery or rockets struck Russian positions, conflict with Russia was all but inevitable.”
A year after the war, an EU-commissioned report which took nine months to compile concluded that despite much of the blame at the time of – and since – the war being directed at ‘Russian aggression,’ the conflict began “with a massive Georgian artillery attack.” The “damning indictment” of Georgia, however, blamed both Georgia and Russia for committing war crimes during the conflict, and noted that the conflict resulted from months and years of growing conflict. However, the report flatly stated: ” There was no ongoing armed attack by Russia before the start of the Georgian operation… Georgian claims of a large-scale presence of Russian armed forces in South Ossetia prior to the Georgian offensive could not be substantiated… It could also not be verified that Russia was on the verge of such a major attack.” However, Vladimir Putin stated in 2012 that Russia had drawn up plans to counter a Georgian attack as far back as 2006 and 2007, when he was president. Still, while the Russians were clearly aware – and preparing – for a war, it was ultimately Georgia that fired the first shots.
Months before the war broke out, according to documents and interviews obtained by the Financial Times, senior U.S. military officials and U.S. military contractors were inside Georgia training special forces commandos. The two contractors, MPRI and American Systems, both of which are based in Virginia, were responsible for training the Georgian special forces as part of a program run by the Pentagon. The Pentagon had previously hired MPRI to train the Croatian military in 1995, just prior to the Croatian military’s invasion of the ethnically-Serbian region of Krajina, “which led to the displacement of 200,000 refugees and was one of the worst incidents of ethnic cleansing in the Balkan wars.” MPRI, of course – in both cases – denied “any wrongdoing.” The first phase of the training in Georgia took place between January and April of 2008, and the second phase was due to begin on August 11, with the trainers arriving in Georgia on August 3, four days before the war broke out.
Just prior to the outbreak of war, as U.S. diplomatic cables showed, the U.S. Embassy in Georgia knew and reported about the fact that Georgian forces were concentrating their forces near South Ossetia, “either as part of a show of force or readiness, or both.” The U.S. ambassador reportedly told Georgian officials “to remain calm, not overreact, and to de-escalate the situation.” As the diplomatic cables from Georgia revealed, unlike in neighboring countries, U.S. diplomats in Georgia “relied heavily on the Saakashvili government’s accounts of its own behavior” and embraced the “Georgian versions of important and disputed events.” Whereas in other regional countries, U.S. diplomats would report to Washington on their “private misgivings” about their host countries’ claims, in Georgia, the Saakashvili government’s “versions of events were passed to Washington largely unchallenged.”
The five-day war between Russia and Georgia lasted from August 7 – 12, leading to a decisive Russian victory and a humiliating defeat for the US-puppet regime in Georgia. Months of ‘mixed messages’ and indecision and divisions within the Bush administration directly led to the conflict, inflaming internal confrontations within the Bush administration itself. A New York Times article tells this brief story based upon interviews with diplomats and senior officials in the US, EU, Russia and Georgia. Five months before Georgia started the war – in March of 2008 – President Saakashvili had gone to Washington to lobby for NATO membership at Congress, the State Department and the Pentagon. Bush promised the Georgian president ” to push hard for Georgia’s acceptance into NATO.”
In early April, President Bush flew to the Russian resort city of Sochi where he met with President Putin. Putin delivered Bush a message: “the push to offer Ukraine and Georgia NATO membership was crossing Russia’s ‘red lines’.” The United States, however, clearly underestimated Russia and Putin’s determination to adhere to those ‘red lines’. Meanwhile, Vice President Dick Cheney saw Georgia as a “model” for the administration’s “democracy promotion campaign,” and continued to push for selling Georgia more arms and military equipment “so that it could defend itself against possible Russian aggression.” Opposing Cheney were Secretary of State Rice, National Security Adviser Stephen J. Hadley and Undersecretary of State for Political Affairs William J. Burns, who were arguing that ” such a sale would provoke Russia, which would see it as arrogant meddling in its turf.”
While the official line of the Bush administration after the war broke out was to blame Russia, quietly and internally, top U.S. officials noted that Georgia was largely to blame, and that U.S. officials had contributed to that process by sending confused messages. Indeed, as some administration officials reported, the Georgian military had created a “concept of operations” plan for a military operation in South Ossetia which “called for its army units to sweep across the region and rapidly establish such firm control that a Russian response could be pre-empted.” As early as January of 2008, Georgia’s Ministry of Defense laid out plans in a “strategic defense review” which “set out goals for the Georgian armed forces and refers specifically to the threat of conflict in the separatist regions.” U.S. officials had reportedly warned the Georgians that, ” the plan had little chance of success.”
Indeed, as the war was under way, debates were raging within the Bush administration regarding the possible US response. In particular, tensions started to erupt between Bush and Cheney, as Cheney’s office felt that when Bush had previously met Putin in April, his silent response to Putin’s warning “inadvertently gave Russia the all-clear to attack.” There was discussion within the administration (from Cheney’s side of the debate) of launching air strikes to halt the Russian invasion. After four days of talks with the National Security Council (NSC), George Bush “cut off the discussion,” siding with his somewhat more rational advisers, as there was “a clear sense around the table that any military steps could lead to a confrontation with Moscow.”
Putin had also spoken with Georgian president Saakashvili in February of 2008, where he warned the Georgian president: “You think you can trust the Americans, and they will rush to assist you?” Putin then reportedly claimed that, ” Nobody can be trusted! Except me.” Interestingly, in this respect, Putin happened to be correct.
European governments were not big fans of Saakashvili, either, seeing him as “an American-backed hothead who spelled trouble.” During the five-day war, French President Nicolas Sarkozy shuttled between Russia and Georgia attempting to negotiate a ceasefire. Sarkozy reportedly told the Georgians: “Where is Bush? Where are the Americans?… They are not coming to save you. No Europeans are coming, either. You are alone. If you don’t sign [the ceasefire], the Russian tanks will be here soon.”
The day after the war began, the Russians called an emergency session at the United Nations to find a resolution to the conflict. The Russian’s proposed a short, three-paragraph draft resolution calling on all parties to “renounce the use of force.” This phrase ran into opposition from the United States, France and Britain, who claimed the phrase was “unbalanced” because it “would have undermined Georgia’s ability to defend itself.” The US, British and French opposition to “renounce the use of force” led to a collapse of diplomatic attempts at the UN to end the fighting, according to the New York Times. When the French President eventually negotiated a ceasefire on August 12, at least one senior U.S. official (presumably Cheney) was reportedly ” appalled” by the ceasefire text.
Erosi Kitsmarishvili, a former Georgian diplomat and ambassador to Moscow (and confidante of President Saakashvili) caused controversy within Georgia when he testified at a parliamentary hearing in Georgia in November of 2008 that Georgian officials were responsible for starting the war. He said that he was told by Georgian officials in April of 2008 that they had “planned to start a war in Abkhazia,” saying that they “had received a green light from the United States government to do so.” However, he added, the officials later decided to start the war in South Ossetia instead, believing that ” United States officials had given their approval.” He discussed the July 2008 meeting between Georgian officials and Secretary of State Rice, saying, “Some people who attended the meeting between Condoleezza Rice and Saakashvili were saying that Condoleezza Rice gave them the green light for military action,” though U.S. and Georgian officials “categorically denied this information.”
When the war broke out, the United States military airlifted Georgian troops from Iraq back to Georgia to participate in the fighting against Russia. In the Pentagon, a 28-year-old junior staffer, Mark Simakovsky, “almost overnight… became a key policy adviser” to Secretary of Defense Robert Gates and other top administration officials. Serving as the Pentagon’s country director for Georgia, he “used his expert knowledge and contacts throughout the government and in Georgia to quickly gather information about developments on the ground.” He was pivotal in shaping the Pentagon’s response to the crisis, including the coordination of airlifting 2,000 Georgian soldiers from Iraq back to Georgia.
Within a week of the Georgian war ending on August 12, Secretary of State Condoleezza Rice declared that the United States “would not push for Georgia to be allowed into NATO” during an upcoming emergency meeting of the NATO countries in Brussels, in what the New York Times reported as, “a tacit admission that America and its European allies lack the stomach for a military fight with Russia.”
However, NATO foreign ministers were expected to reaffirm that they would eventually like to see both Georgia and Ukraine join NATO, but not to fast-track the process through the Membership Action Plan (MAP), for which Georgia and the US had previously been lobbying. In November of 2008, Rice affirmed that the US was no longer attempting to fast-track Georgian and Ukrainian membership into NATO, largely due to opposition from France and Germany . In 2011, Russian President Dmitri Medvedev stated that if Russia hadn’t invaded Georgia in 2008, NATO would have expanded already to include Georgia as a member.
In late August, Russian commanders were reportedly “growing alarmed at the number of NATO warships sailing into the Black Sea.” The U.S. said it was delivering “humanitarian aid on military transport planes and ships,” though the Russians suspected that the Pentagon was shipping in weapons and military equipment “under the guise” of humanitarian assistance.
Weeks following Georgia’s defeat, officials at the White House, Pentagon and State Department were “examining what would be required to rebuild Georgia’s military.” The U.S. Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, stated during a news conference that Georgia was ” a very important country to us” and that the U.S. would continue to pursue a “military-to-military relationship.” Both Democrats and Republicans proclaimed their unyielding support for Georgia, as both the John McCain and Barack Obama presidential campaigns had “cultivated close ties” to President Saakashvili. John McCain’s wife and Senator Joe Biden (who would become Obama’s Vice President) had gone to visit Georgia in August of 2008, just following the end of the war.
In early September, President Bush promised $1 billion in ” humanitarian and economic assistance” to help rebuild the country following the war, making Georgia one of the largest recipients of U.S. foreign aid, after Israel, Egypt and Iraq. Comparatively, in the previous 17 years, the United States had provided a total of $1.8 billion in aid to the country. The European Union also pledged to contribute funds to Georgia, as did the International Monetary Fund (IMF), declaring its intention to provide the country with a $750 million loan.
In September of 2008, Vice President Dick Cheney flew to Georgia “to deliver a forceful American pledge to rebuild Georgia and its economy, to preserve its sovereignty and its territory and to bring it into the NATO alliance in defiance of Russia.” Cheney, who arrived in Georgia a day after the U.S. announced a $1 billion rescue package to help the country, then flew to Ukraine to deliver a similar message. Russia, meanwhile, was entrenching its control over the breakaway regions of South Ossetia and Abkhazia, recognizing their independence from Georgia and keeping military units stationed within them.
Cheney’s visit, which began in Azerbaijan, then to Georgia and Ukraine, was orchestrated to confirm that the U.S. had “a deep and abiding interest” in the region, and notably in terms of ensuring that these and neighboring countries remained “free from a new era of Russian domination.” Cheney was the highest-ranking U.S. official to visit Azerbaijan since it gained independence in 1991. Underscoring the importance of the BP-led pipeline transporting oil from Azerbaijan through Georgia to Turkey, Cheney’s first meetings in Azerbaijan were not with political officials, but with representatives from BP and Chevron.
In the last weeks of the Bush administration, Condoleezza Rice and the Georgian Minister of Foreign Affairs signed the U.S.-Georgian Charter on Strategic Partnership. This was followed up by the Obama administration, holding the first meeting of the Strategic Partnership Commission meeting in Washington on June 22, 2009, marking the launch of four bilateral working groups on “democracy, defense and security, economic, trade and energy issues, and people-to-people cultural exchanges.” The Strategic Partnership reflected U.S. commitment “to deepening Georgia’s integration into Euro-Atlantic institutions and enhancing security cooperation,” including eventual membership into NATO.
The Obama administration sent Vice President Joe Biden to Georgia in July of 2009, with Saakashvili lobbying for the U.S. to sell the country weapons, which Russia strongly opposed, considering the rearmament of Georgia to be ” more serious than whether Georgia enters NATO.”
In 2010, Georgia began a “serious push” to lobby the U.S. for “defensive weapons,” notably air defense and anti-tank systems. To help achieve this objective, Georgia spent roughly $1.5 million at four top Washington, D.C. lobbying firms over the course of the year. Meanwhile, Russia had been “intimidating” many of Georgia’s past arms suppliers, including Israel and other Eastern European nations, not to resume arms sales to the country.
In 2010, the United States also resumed its military training exercises in Georgia, which have continued in recent years, much to Russia’s displeasure. However, Saakashvili lost the 2012 elections and was replaced with a billionaire Bidzina Ivanishvili, who had made his fortune in Russia, leading to slightly improved relations with Putin. In 2013, Russia accused the U.S. of ” putting peace at risk” by holding joint military exercises in Georgia.
Bidzina Ivanishvili was the Georgian Prime Minister from 2012 to 2013, during which time Saakashvili was still president. As the Economist reported in October of 2013, weeks before the Georgian presidential elections to replace him, Saakashvili, who came to power through the U.S.-sponsored ‘Rose Revolution’ in 2003, had, in the following decade, “fought and lost a war with Russia, cracked down on the opposition, dominated the media, interfered with justice and monopolized power .” No wonder Cheney saw him as an ideal representation of America’s “democracy promotion” project.
The billionaire oligarch prime minister, Ivanishvili, Georgia’s richest man, had put his weight behind a presidential candidate, Giorgi Margvelashvili, who subsequently won the October 2013 elections. Under reforms implemented by Saakashvili, the role of president would become “largely ceremonial, with the bulk of power resting with the prime minister.” Ivanishvili proclaimed his intention to turn Georgia into a ” perfect European democracy.”
In May of 2014, months into the Ukrainian conflict, NATO announced its intentions to find ways of bringing Georgia ” even closer” to the military alliance. Just days earlier, both France and Germany “assured Georgia that a deal bringing it closer to the European Union would be sealed soon.”
Georgian officials were holding “extensive discussions” with US and German and other NATO members seeking ways to accelerate the country’s membership into NATO. Whereas previously, the US and NATO powers had decided to put Georgia’s NATO membership on the backburner, the conflict in Ukraine had changed the situation. Georgia’s Defense Minister stated: “Clearly, what’s happening in Ukraine impacts the thinking in Europe… Now it’s very different.” The Defense Minister went to Washington in May 2014 to visit with Vice President Biden and U.S. Secretary of Defense Chuck Hagel.
And so, in the more than ten years since Georgia’s U.S. and NATO-supported colour revolution, the West – particularly the United States – have increased Georgia’s military capabilities, armed and trained its forces, all the while aggravating Russia as NATO and Western military, political and economic influence spread ever-closer to its borders. This ultimately resulted in a war. Though, since then – and with the recent conflict in Ukraine – it is clear that rearming Georgia and further aggravating Russia is back on the agenda.
The hypocrisy and imperious expansionism of the West in Georgia is but a minor reflection of a similar process which has been taking place across much of Eastern Europe, and most especially in Ukraine. Thus, despite the never-ending proclamations of “Russian aggression,” it is once again the Western powers, NATO, the EU, the IMF and especially the United States that are the most to blame for the current conflict in Ukraine.
The 2008 war in Georgia had seemingly put an end – or a halt – on NATO’s eastward expansion. Russia had – after 18 years of NATO expansion – finally drawn a line in the sand over how much it was willing to put up with. It was clear, then, that a similar process with Ukraine, a much larger and more strategically significant country than Georgia, was sure to incur a military response from Russia. If anything, the only surprise is that Russia’s military response has been so minimal, comparatively speaking; at least, for the time being. But as this process continues in response to Ukraine’s crisis, and as NATO and the U.S. military, the EU and the IMF accelerate their advance eastward, future conflict is seemingly all but inevitable.
No doubt, when that conflict comes, we will once again hear the amnesic proclamations of “Russian aggression” and Western benevolence.
Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is Project Manager of The People’s Book Project, chair of the Geopolitics Division of The Hampton Institute, research director for Occupy.com’s Global Power Project and the World of Resistance (WoR) Report, and hosts a weekly podcast show with BoilingFrogsPost.