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The West Marches East, Part 1: The U.S.-NATO Strategy to Isolate Russia

The West Marches East, Part 1: The U.S.-NATO Strategy to Isolate Russia

By: Andrew Gavin Marshall

17 April 2014

Originally posted at The Hampton Institute

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In early March of 2014, following Russia’s invasion of Crimea in Ukraine, the New York Times editorial board declared that Russian President Vladimir Putin had “stepped far outside the bounds of civilized behavior,” suggesting that Russia should be isolated politically and economically in the face of “continued aggression.”

John Kerry, the U.S. Secretary of State, lashed out at Russia’s ” incredible act of aggression,” stating that: “You just don’t in the 21st century behave in 19th century fashion by invading another country on [a] completely trumped up pre-text.” Indeed, invading foreign nations on “trumped up pre-texts” is something only the United States and its allies are allowed to do, not Russia! What audacity!

Even Canada’s Prime Minister, Stephen Harper, proclaimed Russia’s actions in Ukraine to be “aggressive, militaristic and imperialistic ,” threatening “the peace and stability of the world.” This is, of course, despite the fact that Russia’s invasion and occupation of Crimea took place without a single shot fired, and “faced no real opposition and has been greeted with joy by many citizens in the only region of Ukraine with a clear majority of ethnic Russians.”

Indeed, Russia can only be said to be an “aggressive” and “imperial” power so long as one accepts the unrelenting hypocrisy of U.S. and Western leaders. After all, it was not Russia that invaded and occupied Afghanistan and Iraq, killing millions. It is not Putin, but rather Barack Obama, who has waged a “global terror campaign,” compiling “kill lists” and using flying killer robots to bomb countries like Afghanistan, Pakistan, Iraq, Yemen, Libya, Somalia, and even the Philippines, killing thousands of people around the world. It is not Putin, but rather, Barack Obama, who has been sending highly-trained killers into over 100 countries around the world at any given time, waging a “secret war” in most of the world’s nations. It was not Russia, but rather the United States, that has supported the creation of “death squads” in Iraq, contributing to the mass violence, civil war and genocide that resulted; or that has been destabilizing Pakistan, a nuclear-armed nation, increasing the possibility of nuclear war.

All of these actions are considered to be a part of America’s strategy to secure ‘stability,’ to promote ‘peace’ and ‘democracy.’ It’s Russia that threatens “the peace and stability of the world,” not America or its NATO and Western allies. That is, of course, if you believe the verbal excretions from Western political leaders. The reality is that the West, with the United States as the uncontested global superpower, engages the rest of the world on the basis of ‘Mafia Principles’ of international relations: the United States is the global ‘Godfather’ of the Mafia crime family of Western industrial nations (the NATO powers). Countries like Russia and China are reasonably-sized crime families in their own right, but largely dependent upon the Godfather, with whom they both cooperate and compete for influence.

When the Mafia – and the Godfather – are disobeyed, whether by small nations (such as Iraq, Syria, Libya, et. al.), or by larger gangster states like China or Russia, the Godfather will seek to punish them. Disobedience cannot be tolerated. If a small country can defy the Godfather, then any country can. If a larger gangster state like Russia can defy the Godfather and get away with it, they might continue to challenge the authority of the Godfather.

For the U.S. and its NATO-capo Mafia allies, Ukraine and Russia have presented a complex challenge: how does one punish Russia and control Ukraine without pushing Russia too far outside the influence of the Mafia, itself? In other words, the West seeks to punish Russia for its “defiance” and “aggression,” but, if the West pushes too hard, it might find a Russia that pushes back even harder. That is, after all, how we got into this situation in the first place.

A little historical context helps elucidate the current clash of gangster states. Put aside the rhetoric of “democracy” and let’s deal with reality.

The Cold War Legacy

The end of the Cold War and the collapse of the Soviet Union between 1989 and 1991 witnessed the emergence of what was termed by President George H.W. Bush a ‘new world order’ in which the United States reigned as the world’s sole superpower, proclaiming ‘victory’ over the Soviet Union and ‘Communism’: the age of ‘free markets’ and ‘democracy’ was at hand.

The fall of the Berlin Wall in 1989 prompted the negotiated withdrawal of the Soviet Union from Eastern Europe. The ‘old order’ of Europe was at an end, and a new one “needed to be established quickly,” noted Mary Elise Sarotte in the New York Times. This ‘new order’ was to begin with “the rapid reunification of Germany.” Negotiations took place in 1990 between Soviet president Gorbachev, German Chancellor Helmut Kohl, and President Bush’s Secretary of State, James A. Baker 3rd. The negotiations sought to have the Soviets remove their 380,000 troops from East Germany. In return, both James Baker and Helmut Kohl promised Gorbachev that the Western military alliance of NATO would not expand eastwards. West Germany’s foreign minister, Hans-Dietrich Genscher, promised Gorbachev that, ” NATO will not expand itself to the East.” Gorbachev agreed, though asked – and did not receive – the promise in writing, remaining a “gentlemen’s agreement.”

The U.S. Ambassador to the USSR from 1987 to 1991, John F. Matlock Jr., later noted that the end of the Cold War was not ‘won’ by the West, but was brought about “by negotiation to the advantage of both sides.” Yet, he noted, “the United States insisted on treating Russia as the loser .” The United States almost immediately violated the agreement established in 1990, and NATO began moving eastwards, much to the dismay of the Russians. The new Russian President, Boris Yeltsin, warned that NATO’s expansion to the East threatened a ‘cold peace’ and was a violation of the ” spirit of conversations ” that took place in February of 1990 between Soviet, West German and American leaders.

In 1990, President Bush’s National Security Strategy for the United States acknowledged that, “even as East-West tensions diminish, American strategic concerns remain,” noting that previous U.S. military interventions which were justified as a response to Soviet ‘threats’, were – in actuality – “in response to threats to U.S. interests that could not be laid at the Kremlin’s door,” and that, “the necessity to defend our interests will continue.” In other words, decades of justifications for war by the United States – blaming ‘Soviet imperialism’ and ‘Communism’ – were lies, and now that the Soviet Union no longer existed as a threat, American imperialism will still have to continue.

Former National Security Adviser – and arch-imperial strategist – Zbigniew Brzezinski noted in 1992 that the Cold War strategy of the United States in advocating “liberation” against the USSR and Communism (thus justifying military interventions all over the world), ” was a strategic sham, designed to a significant degree for domestic political reasons… the policy was basically rhetorical, at most tactical.”

The Pentagon drafted a strategy in 1992 for the United States to manage the post-Cold War world, where the primary mission of the U.S. was “to ensure that no rival superpower is allowed to emerge in Western Europe, Asia or the territories of the former Soviet Union.” As the New York Times noted, the document – largely drafted by Pentagon officials Paul Wolfowitz and Dick Cheney – “makes the case fora world dominated by one superpower whose position can be perpetuated by constructive behavior and sufficient military might to deter any nation or group of nations from challenging American primacy.”

This strategy was further enshrined with the Clinton administration, whose National Security Adviser, Anthony Lake, articulated the ‘Clinton doctrine’ in 1993 when he stated that: “The successor to a doctrine of containment must be a strategy of enlargement – enlargement of the world’s free community of market democracies,” which “must combine our broad goals of fostering democracy and marketswith our more traditional geostrategic interests.”

Under Bill Clinton’s imperial presidency, the United States and NATO went to war against Serbia, ultimately tore Yugoslavia to pieces (itself representative of a ‘third way’ of organizing society, different than both the West and the USSR), and NATO commenced its Eastward expansion . In the late 1990s, Poland, Hungary and the Czech Republic entered the NATO alliance, and in 2004, seven former Soviet republics joined the alliance.

In 1991, roughly 80% of Russians had a ‘favorable’ view of the United States; by 1999, roughly 80% had an unfavorable view of America. Vladimir Putin, who was elected in 2000, initially followed a pro-Western strategy for Russia, supporting NATO’s invasion and occupation of Afghanistan, receiving only praise from President George W. Bush, who then proceeded to expand NATO further east .

The Color Revolutions

Throughout the 2000s, the United States and other NATO powers, allied with billionaires like George Soros and his foundations scattered throughout the world, worked together to fund and organize opposition groups in multiple countries across Eastern and Central Europe, promoting ‘democratic regime change’ which would ultimately bring to power more pro-Western leaders. It began in 2000 in Serbia with the removal of Slobodan Milosevic.

The United States had undertaken a $41 million “democracy-building campaign” in Serbia to remove Milosevic from power, which included funding polls, training thousands of opposition activists, which the Washington Post referred to as “the first poll-driven, focus group-tested revolution,” which was “a carefully researched strategy put together by Serbian democracy activists with the active assistance of Western advisers and pollsters.” Utilizing U.S.-government funded organizations aligned with major political parties, like the National Democratic Institute and the International Republican Institute, the U.S. State Department and the U.S. Agency for International Development (USAID) channeled money, assistance and training to activists (Michael Dobbs, Washington Post, 11 December 2000).

Mark Almond wrote in the Guardian in 2004 that, “throughout the 1980s, in the build-up to 1989’s velvet revolutions, a small army of volunteers – and, let’s be frank, spies – co-operated to promote what became People Power.” This was represented by “a network of interlocking foundations and charities [which] mushroomed to organize the logistics of transferring millions of dollars to dissidents.” The money itself ” came overwhelmingly from NATO states and covert allies such as ‘neutral’ Sweden,” as well as through the billionaire George Soros’ Open Society Foundation. Almond noted that these “modern market revolutionaries” would bring people into office “with the power to privatize.” Activists and populations are mobilized with “a multimedia vision of Euro-Atlantic prosperity by Western-funded ‘independent’ media to get them on the streets.” After successful Western-backed ‘revolutions’ comes the usual economic ‘shock therapy’ which brings with it “mass unemployment, rampant insider dealing, growth of organized crime, prostitution and soaring death rates.” Ah, democracy!

Following Serbia in 2000, the activists, Western ‘aid agencies’, foundations and funders moved their resources to the former Soviet republic of Georgia, where in 2003, the ‘Rose Revolution’ replaced the president with a more pro-Western (and Western-educated) leader, Mikheil Saakashvili, a protégé of George Soros, who played a significant role in funding so-called ‘pro-democracy’ groups in Georgia that the country has often been referred to as ‘Sorosistan’. In 2004, Ukraine became the next target of Western-backed ‘democratic’ regime change in what became known as the ‘Orange Revolution’. Russia viewed these ‘color revolutions’ as “U.S.-sponsored plots using local dupes to overthrow governments unfriendly to Washington and install American vassals.”

Mark MacKinnon, who was the Globe and Mail‘s Moscow bureau chief between 2002 and 2005, covered these Western-funded protests and has since written extensively on the subject of the ‘color revolutions.’ Reviewing a book of his on the subject, the Montreal Gazette noted that these so-called revolutions were not “spontaneous popular uprisings, but in fact were planned and financed either directly by American diplomats or through a collection of NGOs acting as fronts for the United States government,” and that while there was a great deal of dissatisfaction with the ruling, corrupt elites in each country, the ‘democratic opposition’ within these countries received their “marching orders and cash from American and European officials, whose intentions often had to do more with securing access to energy resources and pipeline routes than genuine interest in democracy.”

The ‘Orange Revolution’ in Ukraine in 2004 was – as Ian Traynor wrote in the Guardian – ” an American creation, a sophisticated and brilliantly conceived exercise in western branding and mass marketing,” with funding and organizing from the U.S. government, “deploying US consultancies, pollsters, diplomats, the two big American parties and US non-governmental organizations.”

In Ukraine, the contested elections which spurred the ‘Orange Revolution’ saw accusations of election fraud leveled against Viktor Yanukovich by his main opponent, Viktor Yuschenko. Despite claims of upholding democracy, Yuschenko had ties to the previous regime, having served as Prime Minister in the government of Leonid Kuchma, and with that, had close ties to the oligarchs who led and profited from the mass privatizations of the post-Soviet era. Yuschenko, however, “got the western nod, and floods of money poured into groups which support[ed] him.” As Jonathan Steele noted in the Guardian, “Ukraine has been turned into a geostrategic matter not by Moscow but by the US, which refuses to abandon its cold war policy of encircling Russia and seeking to pull every former Soviet republic to its side.”

As Mark McKinnon wrote in the Globe and Mail some years later, the uprisings in both Georgia and Ukraine “had many things in common, among them the fall of autocrats who ran semi-independent governments that deferred to Moscow when the chips were down,” as well as being “spurred by organizations that received funding from the U.S. National Endowment for Democracy,” reflecting a view held by Western governments that “promoting democracy” in places like the Middle East and Eastern Europe was in fact “a code word for supporting pro-Western politicians .” These Western-sponsored uprisings erupted alongside the ever-expanding march of NATO to Russia’s borders.

The following year – in 2005 – the Western-supported ‘colour revolutions’ hit the Central Asian republic of Kyrgyzstan in what was known as the ‘Tulip Revolution’. Once again, contested elections saw the mobilization of Western-backed civil society groups, “independent” media, and NGOs – drawing in the usual funding sources of the National Endowment for Democracy, the NDI, IRI, Freedom House, and George Soros, among others. The New York Times reported that the “democratically inspired revolution” western governments were praising began to look ” more like a garden-variety coup .” Efforts not only by the U.S., but also Britain, Norway and the Netherlands were pivotal in preparing the way for the 2005 uprising in Kyrgyzstan. The then-President of Kyrgyzstan blamed the West for the unrest experienced in his country.

The U.S. NGOs that sponsored the ‘color revolutions’ were run by former top government and national security officials, including Freedom House, which was chaired by former CIA Director James Woolsey, and other “pro-democracy” groups funding these revolts were led by figures such as Senator John McCain or Bill Clinton’s former National Security Adviser Anthony Lake, who had articulated the national security strategy of the Clinton administration as being one of “enlargement of the world’s free community of market democracies.” These organizations effectively act as an extension of the U.S. government apparatus, advancing U.S. imperial interests under the veneer of “pro-democracy” work and institutionalized in purportedly “non”-governmental groups.

By 2010, however, most of the gains of the ‘color revolutions’ that spread across Eastern Europe and Central Asia had taken several steps back. While the “political center of gravity was tilting towards the West,” noted Time Magazine in April of 2010, “now that tend has reversed,” with the pro-Western leadership of both Ukraine and Kyrgyzstan both having once again been replaced with leaders ” far friendlier to Russia.” The “good guys” that the West supported in these countries, “proved to be as power hungry and greedy as their predecessors, disregarding democratic principles… in order to cling to power, and exploiting American diplomatic and economic support as part of [an] effort to contain domestic and outside threats and win financial assistance.” Typical behavior for vassal states to any empire.

The ‘Enlargement’ of the European Union: An Empire of Economics

The process of European integration and growth of the European Union has – over the past three decades – been largely driven by powerful European corporate and financial interests, notably by the European Round Table of Industrialists (ERT), an influential group of roughly 50 of Europe’s top CEOs who lobby and work directly with Europe’s political elites to design the goals and methods of European integration and enlargement of the EU, advancing the EU to promote and institutionalize neoliberal economic reforms: austerity, privatizations, liberalization of markets and the destruction of labour power.

The enlargement of the European Union into Eastern Europe reflected a process of Eastern European nations having to implement neoliberal reforms in order to join the EU, including mass privatizations, deregulation, liberalization of markets and harsh austerity measures. The enlargement of the EU into Central and Eastern Europe advanced in 2004 and 2007, when new states were admitted into EU membership, including Bulgaria, Romania, Poland, the Czech Republic, Hungary, Slovakia, Latvia, Estonia and Lithuania.

These new EU members were hit hard by the global financial crisis in 2008 and 2009, and subsequently forced to impose harsh austerity measures. They have been slower to ‘recover’ than other nations, increasingly having to deal with “political instability and mass unemployment and human suffering.” The exception to this is Poland, which did not implement austerity measures, which has left the Polish economy in a better position than the rest of the new EU members. The financial publication Forbeswarned in 2013 that “the prospect of endless economic stagnation in the newest EU members… will, sooner or later, bring extremely deleterious political consequences .”

In the words of a senior British diplomat, Robert Cooper, the European Union represents a type of “cooperative empire.” The expansion of the EU into Central and Eastern Europe brought increased corporate profits, with new investments and cheap labour to exploit. Further, the newer EU members were more explicitly pro-market than the older EU members that continued to promote a different social market economy than those promoted by the Americans and British. With these states joining the EU, noted the Financial Times in 2008, “the new member states have reinforced the ranks of the free marketeers and free traders,” as they increasingly “team up with northern states to vote for deregulation and liberalization of the market.”

The West Marches East

For the past quarter-century, Russia has stood and watched as the United States, NATO, and the European Union have advanced their borders and sphere of influence eastwards to Russia’s borders. As the West has marched East, Russia has consistently complained of encroachment and its views of this process as being a direct threat to Russia. The protests of the former superpower have largely gone ignored or dismissed. After all, in the view of the Americans, they “won” the Cold War, and therefore, Russia has no say in the post-Cold War global order being shaped by the West.

The West’s continued march East to Russia’s borders will continue to be examined in future parts of this series. For Russia, the problem is clear: the Godfather and its NATO-Mafia partners are ever-expanding to its borders, viewed (rightly so) as a threat to the Russian gangster state itself. Russia’s invasion of Crimea – much like its 2008 invasion of Georgia – are the first examples of Russia’s push back against the Western imperial expansion Eastwards. This, then, is not a case of “Russian aggression,” but rather, Russian reaction to the West’s ever-expanding imperialism and global aggression.

The West may think that it has domesticated and beaten down the bear, chained it up, make it dance and whip it into obedience. But every once in a while, the bear will take a swipe back at the one holding the whip. This is inevitable. And so long as the West continued with its current strategy, the reactions will only get worse in time.

Andrew Gavin Marshall is a 26-year old 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 hosts a weekly podcast show with BoilingFrogsPost.

State of Europe: How the European Round Table of Industrialists Came to Wage Class War on Europe

 

State of Power 2014: The Transnational Institute

By: Andrew Gavin Marshall

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Originally posted at the Transnational Institute, 21 January 2014

In its third annual ‘State of Power’ report, TNI uses vibrant infographics and penetrating essays to expose and analyse the principal power-brokers that have caused financial, economic, social and ecological crises worldwide.

In my contribution to the ‘State of Power’ report (and in cooperation with Occupy.com), “State of Europe: How the European Round Table of Industrialists Came to Wage Class War on Europe,” I examine the role of a major corporate interest group in shaping the policies of the European Union.

From the introduction:

“Founded in 1983, the European Round Table of Industrialists (ERT) quickly became – and today remains – one of the most influential voices of organized corporate interests in Europe. Not quite a lobby, not quite a think tank, the ERT is an action-oriented group made up of roughly 50 CEOs or Chairmen of Europe’s top industrial corporations who collectively push specific ideologies, pressure political elites, and plan objectives and programs designed to shape the European Union and the ‘common market’. 

The past thirty years of the ERT’s existence has revealed it one of the most influential organizations in Europe, widely known to the EU’s political, technocratic, and financial elites, holding regular meetings, dinners, and social events with prime ministers and cabinet officials of EU member states, as well as the leadership of the European Commission itself. In the wake of the European debt crisis of the past several years, the ERT has again been at the forefront of shaping the changes within the EU, promoting austerity and structural reforms as the ‘solution’ to the debt crisis.

As through their three-decade history, the Round Table today continues to promote the ideologies and interests of corporate and financial power at the expense of the interests of labour and the population more widely. This paper aims to examine this highly influential group in order to shed some light on an organization very well known to those who make the important decisions within the EU, yet largely in the shadows to those who have to suffer the consequences of those decisions.”

To read the full essay on the ERT and the European Union, click here.

To review and access all of the reports which contributed to the TNI ‘State of Power’ report, click here.

 

Austerity, Adjustment, and Social Genocide: Political Language and the European Debt Crisis

Austerity, Adjustment, and Social Genocide: Political Language and the European Debt Crisis

By: Andrew Gavin Marshall

Angela Merkel, Jose Manuel Barroso, and Mario Monti: Europe’s champions of austerity and adjustment

 

The following is a sample analysis from my upcoming book on the global economic crisis and global resistance movements. Please consider donating to The People’s Book Project to help support the effort to finish this book.

Political language… is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.

– George Orwell, “Politics and the English Language,” 1946

Political language functions through euphemism, by employing soft-sounding or simply meaningless words to describe otherwise monstrous and vicious policies and objectives. In the European debt crisis, political language employed by politicians, economists, technocrats and bankers is designed to make policies which create poverty and exploitation appear to be logical and reasonable. The language employed includes the words and phrases: fiscal austerity/consolidation, structural adjustment/reform, labour flexibility, competitiveness, and growth. To understand political language, one must translate it. This requires four steps: first, you look at the rhetoric itself as inherently meaningless; second, you examine the policies that are taken; third, you look at the effects of the policies. Finally, if the effects do not match the rhetoric, yet the same policies are pursued time and time again, one must translate the effects as the true meaning of the rhetoric. Thus, the rhetoric has meaning, but not at face value.

The debt crisis followed the 2007-2009 financial crisis, erupting first with Greece, then Ireland, Portugal, Italy and Spain, and threatens even to spread elsewhere. Of those mentioned, only Italy has not received a bailout. Though whether “bailed out” or not, Europe’s people are being forced to undergo “austerity measures,” a political-economic euphemism for cutting social spending, welfare, social services, public sector jobs, and increased taxes. The aim, they are told, is to get their “fiscal house in order.” The people protest, and go out into the streets. The state responds by meeting the people with riot police, batons, tear gas, pepper spray, and rubber bullets. This is called “restoring order.”

The effects of austerity are to increase poverty, unemployment, and misery. People are fired from the public sector, welfare and social benefits are reduced or lost, retirement ages are increased to keep people in the work force and off the pension system, which is also cut. Cuts to health care and education take a social and physical toll; as poverty increases the need for better health care, that very system is dismantled when it is needed most. Taxes are increased, and wages are decreased. People are deeper in debt, and destined for destitution. The objective, we are told, is to reduce public spending so that the government can reduce its deficit (the yearly debt).

In Europe, austerity has been the siren call of all the agencies, organizations, and individuals who represent the interests of elite financial control. In March 2010, the OECD (Organisation for Economic Co-operation and Development) suggested Europe undertake a program of austerity lasting for no less than six years from 2011 to 2017, which the Financial Times referred to as “highly sensible.” In April of 2010, the Bank for International Settlements (BIS) – the central bank to the world’s central banks – called for European nations to begin implementing austerity measures. In June of 2010, the G20 finance ministers agreed: it was time to enter the age of austerity! German Chancellor Angela Merkel, the European midwife of austerity, set an example for the EU by imposing austerity measures at home in Germany. The G20 leaders met and agreed that the time for stimulus had come to an end, and the time for austerity poverty was at hand. This was of course endorsed by the unelected technocratic president of the European Commission, José Manuel Barroso. The unelected president of the European Council, Herman Van Rompuy, also agreed, explaining in his unrelenting economic wisdom that austerity “has no real effect on economic growth.” Jean-Claude Trichet, president of the European Central Bank (ECB), also hopped on the austerity train, writing in the Financial Times that, “now is the time to restore fiscal sustainability.” Jaime Caruana, General Manager of the Bank for International Settlements (BIS) stated in June of 2011 that the need for austerity was “more urgent” than ever, while BIS chairman, Christian Noyer, also the governor of the Bank of France (and board member of the ECB), stated that apart from austerity, “there’s no solution possible” for Greece.

In April of 2011, the two president of the EU – Barroso and Van Rompuy – felt it was necessary to clarify (just in case people were getting the wrong idea), that: “Some people fear this work is about dismantling the welfare states and social protection… Not at all … It is to save these fundamental aspects of the European model… We want to make sure that our economies are competitive enough to create jobs and to sustain the welfare of all our citizens and that’s what our work is about.” However, the following year, the new European Central Bank president, Mario Draghi (former governor of the Bank of Italy), stated in an interview with the Wall Street Journal that, “there was no alternative to fiscal consolidation,” meaning austerity, and that Europe’s social contract was “obsolete” and the social model was “already gone.” However, Draghi explained, it was now necessary to promote “growth,” adding, “and that’s why structural reforms are so important.”

Thus, “austerity packages” will then prepare the state and economy for the next phase, which, we are told, would make the country “competitive” and create “growth.” This is how the country would pay off its total debt, which deficits merely add to. This process is called “structural adjustment” (or “structural reform”) and it requires “competitiveness” to facilitate “growth.”

As we can loosely translate “austerity” into poverty, we may translate “structural adjustment” into exploitation. After all, nothing goes better with poverty than exploitation! How does “structural adjustment” become exploitation? Well through competitiveness and growth, of course! Structural adjustment means that the state liberalizes the economy, so everything is deregulated, all state-owned assets are privatized, like roads, hospitals, airports, rivers, water systems, minerals, resources, state-owned companies, services, etc. This, as the story goes, will encourage “investment” in the country when it “needs it most.” This idea suggests that foreign banks and corporations will enter the “market” and purchase all these wonderful things, explaining that they work better when they are “competitive” in the “free market,” and then with their new investments, they will create new industries, employ local people, revive the economy, and with the “trickle down” from the most productive and profitable, all of society will rise in living standards and opportunity.

But first, other “structural adjustment” measures must be simultaneously employed. One of the most important ones is called “labour flexibility.” This means that if you have protected wages, hours, benefits, pensions… well, now you don’t! If you are a member of a union, or engage in collective bargaining (which has at its disposal the threat of a strike), soon you won’t. This is done because, as the story goes, wages must be decreased to increase the competitiveness of the labour force. Simply put, if less money goes into labour during the process of production, what is ultimately being produced will be cheaper on “the market,” and thus, will become more attractive to potential buyers. Thus, with lower wages comes greater profits. ECB president Mario Draghi himself emphasized that the “structural reforms” which Europe needs are, “the product and services market reform,” and then “the labour market reform which takes different shapes in different countries.” He added that the point was “to make labour markets more flexible and also fairer than they are today.” Isn’t that nice? He wants to make labour markets “fairer.” What this means is that, since some countries have protections for various workers, this is unfair to the workers who have no protections, because, as Draghi explained, “in these countries there is a dual labour market: highly flexible for the young part of the population… [and] highly inflexible for the protected part of the population.” Thus, “labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.” So to make the labour markets “fair,” everyone should be equally exploitable, and thus, equally flexible.

Labour flexibility will then help “specialize” your country in producing one or a few select goods, which you can produce better, cheaper, and more of than anywhere else. Then your economy will have success and the lives of all will prosper and grow… just not their wages. That is left to the “trickle down” from those whose wages are increased, the corporate, banking, and government executives and managers. That is because they take all the risk (remember, you are not risking anything when you passively accept your wages and standards of living to be rapidly decreased), and thus, they should get all of the reward. And because their rewards are so huge, large scraps will fall off of their table and onto the floor, which the wage-slaves below can fight over. By the laws of what I can only assume is “magic,” this will eventually lift the downtrodden from a life of poverty and labour and all will enjoy the fruits of being in a modern, technological, democratic-Capitalist paradise! Or so the fable goes.

The actual, predictable, and proven results of “structural adjustment” aimed at achieving “growth” through “competitiveness” is exploitation. The privatization of the economy allows foreign banks and corporations to come in and buy the entire economy, resources, commodities, infrastructure and wealth. Because the country is always in crisis when it does this, everything is sold very cheaply, pennies on the dollar kind of cheap. That is because the corporations and banks are doing the government and people a favour by investing in a country which is a large risk. The money the state gets from these sales is recorded as “revenue,” and helps reduce the yearly debt (deficit). The result for the people, however, is that mass layoffs take place, commodity prices increase, service costs increase, and thus, poverty increases. But privatization has benefits, remember; it encourages “competitiveness.” If everything was privatized, everyone would compete with each other to produce the best goods for the lowest costs, and everyone can subsequently prosper together in a society of abundance.

What actually takes place is that multinational corporations and banks, which already own most of the world’s resources, now own yours, too. This is not competitive, because they are ultimately all cartels, and collude together in exploiting vast resources and goods from around the world. They do compete in the sense of seeing which one can exploit, produce, and control more than the other. But at the bottom of this system, everyone else gets poorer. This is called “competitiveness,” but what it actually means is control. So if the economy needs to become more competitive, what is really being said is that it needs to come under more control, and of course, in private corporate and financial hands.

State owned industries are simply closed down, employees fired, and the product or resource which that industry was responsible for producing is then imported from another country/corporation. A corporation takes over that domestic good/resource and then extracts/produces it for itself. But this requires labour. It’s a good thing that the labour force has had its back broken through austerity and adjustment, because now there are no protected jobs, wages, hours, unions, or workers’ rights in general. Thus, the population is free to be exploited for long hours and minimal wages. This makes what they are producing to be cheaper, and thus, more “competitive.” This can become extremely profitable for corporations and banks which took all the risk in this entire process (remember: you don’t count; you had very little to begin with, so you lost very little. They have a lot, and thus, a lot more to lose. That’s what risk means). If workers attempt to form unions or organize and demand higher wages, the corporation can simply threaten to close down the plant, and move the jobs to somewhere else with a more “flexible” labour force. Or, the corporation could simply hire local immigrant populations (or ship in others) and pay them less for more hours, and leave you without any jobs. This is called “labour flexibility.” Labour flexibility translates as cheap labour: to bring everyone down to an equally low level of worker standards, and thus, to encourage “utilization,” which means exploitation.

In the ‘Third World,’ this has been best achieved through what are called “Export Processing Zones (EPZs),” a term used to describe a designated area outside of state control in which corporations may establish factories to freely exploit labour as they choose. Commodities are shipped in, goods are produced in the EPZs, from where they are then exported abroad, free of pesky national taxation and regulation. Ultimately, EPZs are mini corporate colonies. In late May of 2012, it was reported that Germany was looking for “alternatives” to its exclusive focus on austerity, and subsequently came up with a six-point plan for “growth.” One of the most notable points from Berlin was to establish “special economic zones to be created in crisis-plagued countries at the periphery of the euro zone,” as “foreign investors could be attracted to those zones through tax incentives and looser regulations.” Essentially, they are EPZs for the eurozone. The plan also calls for establishing trusts which would organize the sell-off of state assets in massive privatization schemes. Further, what is needed, according to Berlin, was to establish a “dual education system, which combines a standardized practical education at a vocational school with an apprenticeship in the same field at a company in order to combat high youth unemployment.” In other words, no more academic or intellectual education for youth, but rather “vocational” or labour-oriented education, to not allow the expectations of the youth to rise too far, and to simply prepare them for a life of ‘work’ by attaining the necessary vocational skills. And of course, the plan for “growth” from Germany also includes more efforts at establishing “labour flexibility,” which would include “a loosening of provisions that make it difficult to fire permanent employees and to create employment relationships with lower tax burdens and social security contributions.” In other words: make it easy to fire workers, have lower wages, and eliminate benefits.

Economists and politicians often talk about the need to “utilize labour flexibility to increase competitiveness and achieve growth.” What they are really saying is that they need to exploit cheap labour to increase control and achieve profits and power. Lucas Papademos was installed (unelected) as the “Technocratic” prime minister of Greece in November of 2011, in order to “help” Greece undertake the mandatory “reforms.” Papademos was the perfect candidate for the job: he was an economist educated in the U.S., served on the board of the Federal Reserve Bank of Boston, was chief economist at the Bank of Greece, he became Governor of the bank in 1994, where he oversaw the conversion of Greece into the euro, and in 2002, he joined the European Central Bank board, where he became a Vice President under Jean-Claude Trichet.

In a 2005 interview with the Financial Times while he was Vice President at the European Central Bank (ECB), Lucas Papademos said that European “growth” potential was looking good, but added: “There is a risk that, unless there are changes in policies – more reforms in labour and product markets – as well as in the behaviour of private economic agents, this [growth] range may have to be revised downwards.” He explained: “the main way that potential growth could increase is through policies that boost productivity growth and raise labour utilization by increasing the average hours worked and the participation rate in the labour market and by making this market more flexible and adaptable.” In May of 2010, Bank of England governor Mervyn King stated that the eurozone needed “structural reforms, changes in wages and prices in the countries that need to regain competitiveness.” Former ECB president Jean-Claude Trichet had also emphasized that what was needed was a program of fiscal austerity, “accompanied by structural reforms to promote long-term growth.” In other words, what was needed was impoverishment, accompanied by exploitation to promote long-term profits.

The European Financial Stability Facility (EFSF), the Euro-area bailout fund, was headed by a man named Klaus Regling. In an article he wrote for The Banker, Regling emphasized that funds from the EFSF would come with conditions, including of course, austerity measures, but also, “structural reforms, such as modernizing public administrations, improving labour market performance and enhancing the tax systems, with the aim of increasing a country’s competitiveness and growth potential.” In other words, the conditions imposed on countries receiving a bailout would amount to an impoverishment program (“austerity”), combined with increased exploitation (“structural reforms”), through privatization of state industries and assets (“modernizing public administration”), creating a cheap labour force (“improving labour market performance”), extracting all remaining domestic wealth (“enhancing the tax systems”), designed to increase control (“competitiveness”) and profits (“growth”).

Mario Draghi, as president of the ECB, called for a “growth pact” (or a “profit pact”) for Europe, to go alongside the “fiscal pact” (or “poverty pact”). This received quick endorsements from France’s new president Francois Hollande, Angela Merkel, and José Manuel Barroso. Merkel was sure to emphasize, however, that growth would be “in the form of structural reforms.

The combination of “fiscal austerity” and “structural adjustment” are generally referred to as a “comprehensive structural adjustment program” or a “restructuring of the economy.” This language is important to understand because “restructuring” as a word is used to describe two processes: one, is that it is what is needed to prevent a country from defaulting on its debt and to return the country to a period of growth; and, on the other hand, “restructuring” is used to describe what takes place after a country defaults. The words in both situations are the same, and so are the policies, though in a default they are inflicted more severely. The very process we are told we must undergo to prevent a default, is the very same process that we undergo after a default. Thus, the combination of fiscal austerity and structural adjustment is, in actuality, a slow and painful default.

This combination of austerity and adjustment amounts to a program and effect of social devastation. Thus, the words “structural adjustment program,” “restructuring,” and “default” in actuality translate into social genocide. These three terms provide further insight into their use: the class system is what is being restructured, as middle classes are wiped out and pushed into poverty, the poor are made destitute, and the elite become concentrated and in total control; the political and economic system is being adjusted to fit this restructuring; and the promise that people everywhere were told, that their leaders and society exists to serve their interests, is what is being defaulted on. The state does not default; it is the ‘social contract’ that is defaulted. Just as Mario Draghi told the Wall Street Journal, “the European social model has already gone… Fiscal consolidation is unavoidable in the present set up, and it buys time needed for the structural reforms.” Thus, social genocide.

As George Orwell wrote in his 1946 essay, “political language has to consist largely of euphemism,
question-begging and sheer cloudy vagueness.” But there remains intent and meaning behind the words that are used. When we translate the political language of the European debt crisis, it reveals a monstrous agenda of impoverishment and exploitation. Thus, we also see the necessity of political language for those who use it: one cannot argue openly for programs of impoverishment and exploitation for obvious reasons, so words like “fiscal consolidation” and “structural reform” are used, because they are vague and obscure.

Ultimately, one can get away with saying, “we need a comprehensive austerity package augmented by structural reforms, such as labour flexibility, designed to increase competitiveness and facilitate growth,” as opposed to: “We need to rapidly impoverish our populations, whom we will then exploit to the fullest, such as by creating a cheap labour force, which would increase elite control and generate private profits.” Such honesty and bluntness would lead to revolt, so, political language is used instead. In Europe, political language is part of a ‘power dialectic’ which supports policies and agendas that aim to take more for those who already have the most, and to take from all the rest; to impoverish, exploit and oppress; to plunder, profit and punish.

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.

Please donate to The People’s Book Project to help this book be finished by the end of summer:

Italy in Crisis: The Decline of the Roman Democracy and Rise of the ‘Super Mario’ Technocracy

Italy in Crisis: The Decline of the Roman Democracy and Rise of the ‘Super Mario’ Technocracy

Part 1 of “Italy in Crisis”, a series of excerpts from a chapter in an upcoming book.

By: Andrew Gavin Marshall

The “Super-Marios”: Mario Draghi (left), President of the European Central Bank, and Mario Monti (right), the Technocratic Prime Minister of Italy. [photo credit: Silvia Azzari / Milestone Media / ZUMAPRESS.com]

The European debt crisis continues into its third year, with four government bailouts – of Greece, Ireland, Portugal, and Spain – and having imposed harsh austerity measures upon the people of Europe, forcing them to pay – through reduced standards of living and increased poverty – for the excesses of their political and financial rulers. Italy, as Europe’s third largest economy, with one of the largest debt-to-GDP ratios, plays a central role in the unfolding debt crisis across Europe. Part 1 of this excerpt from a chapter on the economic crisis in my upcoming book covers the “suspension” of democracy in Italy and the imposition of a ‘Technocracy’ – an unelected government led by academics and bankers – with a mandate to punish the people, facilitate the financial elite, and serve the interests of the supranational, unelected, technocratic European Union. Power centralized, power globalizes, power plunders and profits on the punishment and impoverishment of people everywhere. This is the story of Italy’s debt crisis.

This is an unedited, rough draft excerpt from my upcoming book – the Preface to the People’s Book Project – which is due to be finished by the end of the summer, and covers the following subjects: the origins, evolution, and consequences of the global economic crisis; the expansion and effects of global imperialism and war; the elite-driven social engineering project of establishing an institutional structure of ‘global governance’; and the rising resistance of people around the world to this system, as well as the attempts of the imperial powers to co-opt, control, or destroy these socio-political movements – the embodiment of the ‘Global Political Awakening’ – from the Arab Spring, to the anti-austerity movements across Europe, the Indignados in Spain, the Occupy Movement, the Chilean Winter and the Maple Spring in Quebec, among others. This project needs your support: I am attempting to raise $2,500 in donations to support the efforts to finish this book by the end of the summer, with $530 raised so far, and $1,970 left to go. Please donate today!

Bilderberg, Berlusconi, and Italian Austerity

The Italian Finance Minister, Giulio Tremonti had attended the Bilderberg meeting in early June of 2011, alongside other notable Italian participants, including Franco Bernabe, CEO of Telecom Italia (and Vice Chairman of Rothschild Europe); John Elkann, the Chairman of Fiat; Mario Monti, the president of Bocconi university and a former EU Commissioner; and Paolo Scaroni, the CEO of Eni, an oil and gas company and Italy’s largest industrial corporation. The Bilderberg meeting for 2011 took place from June 9-12 in Switzerland, and of course was attended by a host of other major European elites, including: Josef Ackermann, Chairman and CEO of Deutsche Bank; Marcus Agius, Chairman of Barclays Bank; the Swedish Ministers for Foreign Affairs and Trade; Luc Coene, the Governor of the National Bank of Belgium; Frans van Daele, Chief of Staff to the President of the European Council; Werner Faymann, the Federal Chancellor of Austria; Douglas J. Flint, Group Chairman of HSBC Holdings; Neelie Kroes, Vice President of the European Commission; Bernardino Leon Gross, Secretary General of the Spanish Presidency; George Papaconstantinou, the Greek Minister of Finance; Herman Van Rompuy, President of the European Council; and Jean-Claude Trichet, President of the European Central Bank, among many others.[1]

In July of 2011, Silvio Berlusconi’s government announced a package of austerity measures hoping to calm markets, seeking to reduce the deficit by 40 billion euros. The package, largely designed by finance minister Giulio Tremonti, only attempted to address Italy’s debt, but markets were also concerned about the country’s “ultra-low-growth,” which has been consistent since Berlusconi returned to office in 2001. Once the austerity measures would be signed into law, several opposition politicians were suggesting the formation of a cross-party “technical government” without Berlusconi in office.[2] The Finance Minister Tremonti announced a wave of privatizations. Apparently, the privatizations and various liberalizations were urged into the austerity package by the main opposition party, the Democratic Party (PD), not Berlusconi’s Freedom People Party. The central bank governor of Italy, Mario Draghi, who was poised to become the next President of the European Central Bank (ECB) following the end of the term of Jean-Claude Trichet, warned the Italian government that “it would have to raise taxes or make further spending cuts” if it wanted to calm markets.[3] By July 14, the Italian Senate approved an increased austerity package worth 70 billion euros (or $99 billion), “aimed at convincing investors that the eurozone’s third-largest economy won’t be swept into the debt crisis.” Italy’s bonds (government debt) saw its borrowing rates (interest) hit record highs as investors were not calmed by the proposed austerity measures.[4]

Even as the austerity measures were being passed, market confidence was still lacking, which was largely credited to the fact that a rift emerged between Berlusconi and his Finance Minister Tremonti, who as a Bilderberg attendee, no doubt has the confidence of markets. Berlusconi reportedly viewed Tremonti as a “rival” and has “repeatedly attacked [Tremonti] as a traitor in newspapers owned by the Berlusconi family.”[5] After Tremonti, who was facing his own corruption charges, was caught on camera calling a colleague a “cretin,” Berlusconi told an Italian newspaper, “You know, he thinks he’s a genius and that everyone else is stupid… I put up with him because I’ve known him for a long time and one has to accept the way he is. But he’s the only one who is not a team player.” It was opined, then, that markets reacted to this rift between the Prime Minister and the Finance Minister, as articulated by an official at F&C Investments, who stated that markets view Tremonti as the “steady counterweight to the unpredictable and capricious” Berlusconi.[6]

In July of 2011, Nichi Vendola, a popular leftist opposition political figure in Italy, wrote an article for the Guardian, in which he critiqued the austerity measures imposed by the Berlusconi government. Vendola wrote that, “Italy will not survive this crisis by listening to the very people who got us into it, especially not when they demand that the middle class and poor foot the bill for their failures.” Vendola also put blame on the European managing of the crisis, as “governments now have an obsessive fixation on employing tighter control of budget deficits to satisfy the European stability pact.” Vendola referred to Tremonti’s austerity package as a “social catastrophe,” and that instead, he suggested, what Italy must do “is turn this policy on its head,” noting that, “Italy’s problem is as much about growth as it is debt.” To do this, Vendola wrote, it “will require a new government,” and that, “Italy needs elections, because only a completely new governing class can achieve the political consensus to design and implement a plan to tackle the crisis.” He suggested that the European stability pact would need to be re-negotiated, and concluded: “It does us little good to please the out-of-touch elite of our capitals while the people have to tighten their belts and our youth are robbed of their future.”[7]

Mario Monti, President of Bocconi University and a former European Commissioner, also agreed that Italy needed a new government, though for different reasons (and a different type of government). He wrote an article in a major Italian paper in August of 2011 in which he advocated – as a solution to Italy’s problems – the formation of a “supranational technical government” which would make all the major decisions in order to “remove the structural constraints to growth,” and opined that “an Italy respected and authoritative… would be of great help to Europe.”[8] Vendola wanted a new government to help the people, and Monti wanted a new government to help “Europe” (read: banks and elites). Guess who became the next leader of Italy!?

Berlusconi Bows Down to the Bankers and Punishes the People

In August, Silvio Berlusconi had to approve a new austerity package, the second in less than a month. In a letter which was leaked to the Italian press, it was revealed that Jean-Claude Trichet, the President of the European Central Bank, and Mario Draghi, the President of the Italian Central bank (from 2006 to 2011, who was set to secede Trichet at the ECB in October of 2011), put pressure on Berlusconi to “implement significant austerity measures.” The letter, written by the two central bankers, demanded “pressing action… to restore the confidence of investors.” Dated August 5, 2011, it was issued just days before the ECB announced its new programme to buy Italian bonds (debt), designed to reduce the country’s borrowing costs (interest on future debt). One of the measures mentioned in the letter instructed Berlusconi to take “immediate and bold measures to ensuring the sustainability of public finances,” to achieve a balanced budget in 2013. This was adopted in the subsequent austerity package put forward by Berlusconi in August. The letter also stated that, “it is possible to intervene further in the pension system, making more stringent the eligibility criteria for seniority pensions and rapidly aligning the retirement age of women in the private sector to that established for public employees.” Further, the “borrowing, including commercial debt and expenditures of regional and local governments should be placed under tight control, in line with the principles of the ongoing reform of intergovernmental fiscal relations.”[9]

In economic-speak, the letter asked for privatizations of public services: “Key challenges are to increase competition, particularly in services to improve the quality of public services and to design regulatory and fiscal systems better suited to support firms’ competitiveness and efficiency of the labour market.” This would require three key actions, the first of which was that, “a comprehensive, far-reaching and credible reform strategy, including the full liberalization of local public services and of professional services is needed,” and that, “this should apply particularly to the provision of local services through large-scale privatizations.” The second major step was “a need to further reform the collective wage bargaining system [meaning: undermine unions] allowing firm-level agreements to tailor wages and working conditions to firms’ specific needs and increasing their relevance with respect to other layers of negotiations.” In other words, destroy the unions so that companies can exploit labour to whatever degree they choose. And thirdly, according to Trichet and Draghi, what was needed was a “thorough review of the rules regulating the hiring and dismissal of employees [which] should be adopted in conjunction with the establishment of an unemployment insurance system and a set of active labour market policies capable of easing the reallocation of resources towards the more competitive firms and sectors.”[10]

In other words, labour rights and laws and the rights of workers need to be dismantled so that companies can do as they please. It’s not simply the unions that need to be destroyed, but the laws for worker security in general. Of course, no advice from central bankers would be complete if it didn’t advocate that the government “immediately take measures to ensure a major overhaul of the public administration in order to improve administrative efficiency and business friendliness.” Trichet and Draghi wrote that it was “crucial” that the government take these actions “as soon as possible with decree-laws, followed by parliamentary ratification,” or, in other words: skip the democratic process because it takes too long, rule by decree, something Italy has a “proud” history of. All of this was demanded to be done before the end of September 2011. In an interview with an Italian paper, Trichet admitted that this was not the first time the ECB had sent such letters to governments (such as Greece), saying, “We have sent messages and we do that on a permanent basis, through various means, addressed to individual governments. We do not make them public.”[11]

Indeed, the European Central Bank had demanded austerity measures be implemented by the governments of Greece, Ireland, Portugal, and Italy, and when Berlusconi submitted to the mandate from the central bankers, he complained that it made his administration look like “an occupied government.” A leading liberal MP in Italy, Antonio Di Pietro, said that, “Italy is under the tutelage of the EU, and a country under tutelage is not a free and democratic one.” An Irish MEP (Member of the European Parliament), Paul Murphy, stated that there had been a “massive shift away from democratic accountability since the start of the crisis,” and that: “There needs to be a check on the enormous power of the ECB, which is unelected, and has basically held a government to ransom.” Europe’s largest trade union federation, the European Public Sector Union, “accused the ECB of directing Italian fiscal and labour policy in secret,” which is, of course, true. The Deputy General Secretary of the federation, Jan Willem Goudriaan, said, “Europe cannot be governed through secret letters of bankers, officials or an unaccountable body.” EU officials, from Angela Merkel, Nicolas Sarkozy, to Herman Van Rompuy and Jean-Claude Trichet, have been increasing their calls for an “economic government” of Europe, tightening and deepening fiscal integration and proposing the creation of new council’s and organizations to impose sanctions on countries and “police the austerity measures of governments,” and even the creation of a European finance ministry. Paul Murphy stated that, “All these proposals, discussions about economic government, are about undermining democracy in order to impose a European shock doctrine… EU elites need to remove points of pressure that can be mounted on governments. If the mass of people are opposed to austerity, they can mount pressure on governments to hold that in check. So the only way it can then be imposed s undemocratically.” The head of a Belgian pro-transparency group stated that, “European powers [are] distancing themselves from voters while at the same time [there is] a growing tendency towards building closer relationships with corporate and specifically financial lobbies… These two trends are explosive and can only lead to a loss of legitimacy for the EU institutions.”[12]

Shortly after, on August 12, the Berlusconi government was meeting to approve the new austerity package to meet the ultimatum from the ECB, amounting to a package of “fiscal adjustments” (i.e., spending cuts) of 20 billion euros in 2012 and 25 billion euros in 2013, with the spending cuts and tax increases to be “enacted immediately by decree, but subject to approval by parliament later,” just as Draghi and Trichet instructed. The rapid tax increases did much to damage even long-time supporters of Berlusconi who had promised that he would “never put their hands in the pockets of the Italian people.” Fiscal federalism was the policy of giving the various regions in Italy more control over their finances. With the new austerity package, the governor of Lombardy, Roberto Formigoni, stated, “It seems clear [fiscal] federalism has vanished.”[13]

In mid-September, Berlusconi won final parliamentary approval for the 54 billion euro ($74 billion) austerity package, while police outside the parliament in Rome had to disperse protesters with tear gas. The German Economy Minister Phillip Roesler told a news briefing in Rome that, “The approval of the austerity package sends a signal of stability… I have respect for what Italy has done with its budget adjustment as this will benefit the whole euro area.” The legislation simply made legal the measures that Berlusconi’s government enacted through un-democratic decree the month before, and were formalized in exchange for the European Central Bank bond purchases which helped to reduce Italy’s borrowing costs. Silvio Peruzzo, an economist at the Royal Bank of Scotland, stated that the plan’s passage is a “very welcome step,” but that the slowing global economy still cast doubts on whether Italy could “meet its fiscal targets and will also render additional corrective measures [austerity packages] very likely.” Even with the endorsement and backing of the ECB, said Peruzzo, Italy’s debt remained “under pressure, which is indicative of a well-rooted lack of confidence in Italy and in the European policies to tackle the crisis.” One the plan was approved, said Italian Finance Minister Tremonti on September 10, “If there are things to change in our growth measures we will, and if there are things to add, we will.”[14]

The Economist reported on the new austerity package, noting that while Berlusconi had approved the austerity package in Italy, designed to cut roughly 45.5 billion euros from the deficit by the end of 2013, he almost immediately back-peddled on 7 billion euros worth of spending cuts and tax increases, “notably a tax on high earners that would have hurt his natural supporters,” meaning, rich people. Thus, even as the package went to the Senate in early September, Berlusconi was fine-tuning the details. Thus, noted the Economist, “the markets [were] again registering alarm,” and at the same time, Italy’s largest and most militant trade union federation, the CGIL, called for a one-day strike in opposition to the austerity package, “protesting over a clause making it easier to dismiss workers and, more generally, over a budget that the CGIL’s leader, Susanna Camusso,” referred to as “unjust because it attacks the weakest.” This further worried “the market” and “investors.” The Economist wrote that: “Mr. Berlusconi had consistently failed to react unless bullied. His first emergency budget in July followed a telephone call from the German chancellor, Angela Merkel,” while the second was of course at the prompting of the ECB.[15]

By October of 2011, the austerity measures in Italy had been wreaking havoc, as non-profit organizations lose their funding and had major bureaucratic obstacles put in their way for community projects, such as the Associazione Obiettivo Napoli, which ran two programs working with children in difficulty in Naples since 1998, helping them clean up local communities and provide counseling. As central government funding to town halls had been cut, organizations like Obiettivo Napoli, “which sit uneasily somewhere between education, welfare and rehabilitation budgets, have been the first to suffer.” Pietro Varriale, who works with the organization, commented on further obstacles put in their way: “They’re saying we need a second degree in education science to be able to do this work… It’s crazy. I have 15 years experience in this field, most of the team likewise, and we all have first degrees. A second degree is going to cost people a fortune, really a lot of money, and there’s no help or grant for that kind of thing. We’ve been given till 2013 to conform.” To add to that, the city of Naples simply stopped paying the bills for the organization, which had to then borrow money from a bank, forcing the employees such as Pietro to have to take on jobs working at bars, waiting tables, picking tomatoes and other piecemeal projects while they continue to work with the association being unpaid: “You keep going because of the kids, the relationships you build up.”[16]

Giancarlo Di Maio, a 23-year old university graduate in Naples working at a secondhand bookshop told the Guardian that, “University here is like a car park. You stay there as long as you can, because there’ll be nothing to do when you come out,” referring to the lack of jobs for youth. As he was employed, he explained: “Every morning, I wake up with a smile… How fortunate am I? Because otherwise, the only other work around here is black. The black economy is a huge, monumental issue for Italy.” His friends might make 30 euros for 10 hours working in a bar, or 20 euros for a night waiting tables in a restaurant. Di Maio, who works at a bookshop owned by his father, said that, “I know plenty of people in their 30s, even some in their 40s, still living with their parents… That’s not normal. For me, that’s one of the biggest problem [sic] in Italy – opportunities, any kind of prospects for young people.” When asked about Italian politics, he replied, “We have the worst political class in Europe, no question… Twenty years of Berlusconi, and not a single reform, nothing for the unemployed, nothing to address the economic crisis. Instead we talk about his sex life… we have a political class who do nothing. They don’t have solutions, and even if they did they wouldn’t try to do anything. They just speak air, it’s all they can do. Posturing.” Expressing some hope at the Occupy movement, though lamenting how it turned to violence in Italy, he explained that people were “finally starting to get angry. They are beginning to see that really, we can’t carry on like this. Italy really is sick. We can’t pretend to be the doctor any more; we need curing ourselves.”[17]

The Technocratic Coup

By early October 2011, it was clear that the “markets” were not satisfied with Berlusconi’s efforts at implementing a program of social genocide (fiscal austerity) which was to their liking. Thus, on October 5, the international ratings agency Moody’s cut Italy’s credit rating for the first time in two decades, adding to the downgrading from Standard & Poor’s two weeks prior. The Italian government responded that the actions of the ratings agencies were “politically motivated.” Even Moody’s acknowledged that the political situation within Italy played a part in its decision, including Berlusconi’s sex scandals, and the growing protests against the austerity measures.[18]

The effect of the downgrades is to make Italian bonds (government debt) less attractive to buy (as it is a riskier investment), and thus, Italy would have to pay higher interest rates. As a result of that, as we have seen with Greece, this makes the country’s overall debt larger (as it amounts to borrowing money to pay back borrowed money), except with the higher yields (interest rates), the future payments will be even more costly, likely to create potential for a bailout (again, just taking more debt to pay interest on older debts). All the while, the overall debt to GDP ratio increases, and austerity measures become the “conditions” for receiving bailouts, and the country is essentially taken over by the IMF, the ECB, and the EC (named the “Troika”), as occurred in Greece. This creates a permanent spiral of expanded debt, economic crisis, and social genocide. This is what is often called “market discipline.”

In mid-October, opposition to Berlusconi’s harsh austerity measures from within Italy was increasing, just as “market pressure” and EU-opposition from outside Italy was building against Berlusconi for his austerity measures being perceived as ‘too little, too late.’ Nine members of Berlusconi’s own coalition said the austerity package “unfairly targets the middle class and fails to tackle Italy’s massive tax evasion problem.” Susanna Camusso, the head of Italy’s largest and most militant labour federation, CGIL, said that a strike is the only way to “change the inequity of this package.”[19] During a global “day of rage” partly inspired by the Occupy Wall Street movement in the United States and the Indignados movement in Spain, October 15 saw various Occupy and other protests erupt around the world, in 950 cities in 80 different countries. In Italy, Rome saw roughly 200,000 protesters come out into the streets, protesting against the austerity measures, the government, the EU, the ECB and the IMF. The protests erupted into violence as hundreds of those assembled began fighting with riot police, who were using tear gas and water cannons against the protesters, and several hundred erupted in urban rebellion (what is often called “riots”) in which banks were destroyed, they set cars and garbage bins on fire, hurled rocks, bottles, and fireworks at the police who continually charged the crowd. Roughly two dozen demonstrators were injured, with one reported to be put in critical condition, and at least 30 riot police were injured.[20]

As Berlusconi’s own government began to fracture in the face of the austerity package, disagreeing on what and how and if to cut, one of Berlusconi’s main coalition partners, the center-right Northern League, hinted that new elections were a possibility. Considering the popularity of the anti-austerity leftist leader Nichi Vendola, this was perhaps too much to bear. European leaders Angela Merkel and Nicolas Sarkozy lost their patience, and in late October, demanded that Berlusconi move forward with the austerity package. In a series of EU summits in late October on handling the economic crisis, discussing specifically the plan to boost the funds of the European Financial Stability Facility (EFSF), there was concern, reported Der Spiegel, “that the current size of the (recently expanded) fund isn’t sufficient should additional countries, particularly Spain and Italy, be infected with debt contagion.”[21]

Following these meetings, it was made “abundantly clear” to the Italians that their “leadership is no longer taken seriously.” Italian papers and TV shows were overwhelmed with covering the “condescending smile” of Angela Merkel to Berlusconi, and comments made by Sarkozy. Merkel and Sarkozy and other EU leaders told Berlusconi in the talks that he had to present a plan within three days “for reducing Italian debt more quickly than current plans call for.” European Council President Herman Van Rompuy said that Berlusconi had “promised to do so.” The following evening, Berlusconi stated, “No one is in a position to be giving lessons to their partners.” European leaders were frustrated that even the austerity package passed earlier in the summer had not been fully implemented, and the government’s stability was continually threatened over debating each new measure. The European Commissioner for Economic and Monetary Affairs, Olli Rhen, said that all the details of the new plan were “unclear.” With the EU summits proposing increasing the EFSF bailout fund from 440 billion euros to 1 trillion, a central feature to the demands of the EU leaders was that countries like Italy impose more stringent austerity measures. As Der Spiegel reported, “A clear Italian commitment to austerity is a key component of that plan.” There was then a good deal of conjecture over the possible departure of Berlusconi. The Italian paper Corriere della Serra reported that Angela Merkel called the Italian President Giorgio Napolitano the previous week “to discuss concerns about Italy’s political leadership.”[22]

In fact, Angela Merkel did make such a phone call to Italy’s president Napolitano in October, violating “an unwritten rule” for Europe’s leaders “not to intervene in one another’s domestic politics.” But this is a new, changing EU, one in which democracy – even the withering façade Western governments maintain – simply no longer matters. Merkel was “gently prodding Italy to change its prime minister, if the incumbent – Silvio Berlusconi – couldn’t change Italy.” The Wall Street Journal reported on the events that led to this incident, explaining that at the annual meeting of the IMF in September, China, Brazil, and the U.S. “berated” Europe for its small bailout fund, and told Europe to borrow “hundreds of billions of euros from the ECB,” something Merkel had long been against, and which was refused by Jens Weidmann of the German central bank, explaining that the bailout fund “was an arm of the governments… and lending to governments was against the ECB’s charter.” On October 19, Sarkozy left his wife who was in labor at a clinic in Paris to fly to Frankfurt to confront Jean-Claude Trichet at a party being held for the President of the ECB to honour him as he prepared to leave the ECB at the end of the month (to be replaced by the president of the Central Bank of Italy, Mario Draghi). Sarkozy argued that the ECB needed to intervene in the bond markets (buying government debt), stating that, “Everything else is too small.” Trichet said that it wasn’t “the ECB’s job to finance governments.”[23]

The ECB had engaged already in certain bond purchases, which “had caused a political backlash in Germany,” and as Trichet said, “I did a bit, and I was massively criticized in Germany.” Merkel, who was present during the shouting match between Trichet and Sarkozy, was frustrated at Sarkozy’s pressure on Trichet, as she had always opposed the ECB printing money to handle the crisis, telling Trichet, “You’re a friend of Germany.” It was the following day, on October 20, that Merkel made her “confidential” phone call to the Italian President in Rome, “the man with authority to name a new prime minister if the incumbent were to lose parliament’s support.” President Napolitano informed Merkel that it was “not reassuring” that Berlusconi had only “recently survived a parliamentary vote of confidence by just one vote.” Merkel then thanked Napolitano for doing what was “within your powers” in promoting reform. Within days, Napolitano began “sounding out Italy’s political parties to test the support for a new government if Mr. Berlusconi couldn’t satisfy Europe and the markets.”[24] It no doubt did not help Berlusconi when he wrote in an Italian paper in late October that the word austerity “isn’t in my vocabulary.”[25]

In early November, at a G20 meeting in Cannes, President Obama and other leaders were “effectively ordering Silvio Berlusconi to accept surveillance of Italy’s austerity measures by the International Monetary Fund,” reported the Guardian. Berlusconi was advised by Merkel, Sarkozy, Herman Van Rompuy and other EU leaders the previous week to come to the G20 with “a specific austerity package,” but due to divisions within his cabinet, Berlusconi “arrived empty-handed.” It was reported that Berlusconi would likely not survive a vote of confidence in the Italian parliament set for the following week. The ECB had been purchasing Italian bonds since August in order to push the yields lower, which dropped to below 5%, but by early November they had been driven up to 6.5%, “levels that make it difficult to pay back debt.” Italian President Napolitano had been holding meetings with party leaders to discuss the possibility of “constructing an interim government if Berlusconi’s collapses.” The G20, which was discussing the possibility of adding $300 billion to the IMF’s bailout fund of $950 billion, and G20 leaders pressured Italy “to sign up to a more specific austerity package or else the US and other countries would not put extra funds into the IMF.”[26]

Just prior to heading to the G20 meeting, Berlusconi had attempted to issue a decree which would pass various austerity measures, “thus bypassing the parliament,” but, reported the EUobserver, he “was held back by [President] Giorgio Napolitano,” as well as the Finance Minister Giulio Tremonti. Instead, Berlusconi was pressured to attempt an amendment to a “law for stability” to be approved the following week, at which time he would likely face a vote of confidence. Enrico Letta, the deputy general secretary of the center-left Democratic Party (PD), the main opposition party, said that, “We think that next week will be a week in parliament where we try to force the situation if Berlusconi does not resign before.”[27]

As Jean-Claude Trichet retired from the ECB at the end of October, and Mario Draghi left the Bank of Italy to take up his new job as President of the ECB, the newly-appointed governor of the Bank of Italy, Ignazio Vasco, said that Italy “needed to take urgent action to boost confidence in the economy and initiate structural reforms,” insisting that the commitments already given to the EU in a “letter of intent” in late October (following Berlusconi being castigated by Merkel and Sarkozy), “must be honoured quickly and consistently.”[28] At the G20 conference, Berlusconi agreed under pressure to have the IMF oversee Italy’s implementation of austerity measures, following late-night talks with G20 leaders. Jose Manuel Barroso, President of the European Commission (EC), said that, “Italy had decided on its own initiative to ask the IMF to monitor. I see this as evidence of how important Italy’s commitment to reform is.” The EC would also monitor Italy’s progress, and was set to visit Italy the following week to undertake a more detailed study. One EU source told the Telegraph that, “We need to make sure there is credibility with Italy’s targets – that it is going to meet them. We decided to have the IMF involved on the monitoring, using their own methodology, and the Italians say they can live with that.” The chief financial officer of Commerzbank, Eric Strutz, said that, “The whole stability of Europe depends on whether Italy gets its act together.”[29]

On November 8, Berlusconi suffered a party revolt in parliament which failed to deliver him a majority, and would likely lead to a vote of non-confidence a few days later. Upon this defeat, Berlusconi announced that he would resign as Prime Minister “as soon as parliament passed urgent budget reforms demanded by European leaders.” President Napolitano announced that he would begin consultations on the formation of a new government, and stated that he would prefer a “technocrat or national unity government.” At the same time, the “markets” had pushed Italy’s bond yields (debt interest) to nearly 7%, figures that saw Greece, Ireland, and Portugal getting bailouts. The leader of the main opposition Democratic Party (PD), Pier Luigi Bersani, said, “I ask you, Mr. Prime Minister, with all my strength, to finally take account of the situation… and resign.” Berlusconi and some of his close allies, however, warned that appointing a technocratic government, the option which was said to be favoured by “markets,” would amount to an “undemocratic coup.”[30] Naturally, that’s just what happened.

Writing for the Guardian, John Hooper suggested that one of four scenarios would take place upon the event of Berlusconi’s resignation: one envisions Berlusconi leaving but the right gaining a broader majority, specifically under Umberto Bossi’s Northern League, who was in Berlusconi’s coalition but had advised him to resign, and was pushing for him to be replaced with the next in command in Berlusconi’s party, Angelino Alfano; another scenario envisioned a “grand coalition,” or a “government of national emergency or salvation,” bringing together all the parties; a third scenario had Italy calling an election, urged by both Berlusconi and Bossi; or the fourth option, “a cabinet of technocrats,” which Hooper wrote was “favoured by the markets and the Italian centre left,” which would consist of “a government filled with specialists who could pass the unpalatable legislation needed to revive Italy’s flagging economy without having to worry about re-election.” This happened before in Italy, when Berlusconi’s government fell in 1994, at which time he was replaced by Lamberto Dini, a central banker, who headed a government of “professors, generals and judges.” In this scenario, suggested Hooper, the likely prime minister would be Mario Monti.[31]

Upon Berlusconi’s failure to achieve a minority during the budget vote on November 8, many officials from the financial community began making their observations, such as Jan Randolph, the head of sovereign risk analysis at HIS Global Insight, who said that, “Berlusconi has effectively lost political capital to carry the country through a period of austerity and structural reform,” and that, “Berlusconi will have to resign.” He went on to suggest that it was possible “that a broad National Unity government headed by a respected technocrat like ex-EU commissioner Mario Monti could be formed.”[32]

As Berlusconi officially resigned on the night of November 12, 2011, he left the president’s palace through a side door as a crowd of over 1,000 people outside yelled, “buffoon,” “Mafioso,” and for him to “face trial.” A poll from early November reported that 71% of Italians favoured his resignation, and upon hearing of his official resignation, the crowd erupted in roars of “Halleluja.”[33]

On November 16 of 2011, Mario Monti was appointed as Prime Minister of Italy. Monti accepted the mandate to form a new government, and was expected to appoint technical experts as opposed to politicians to his cabinet. President Napolitano told Italian politicians that, “it is a responsibility we perceive from the entire international community to protect the stability of the single currency as well as the European frame work.” Berlusconi’s political party, the People of Liberty, said it would accept a Monti government for a short while before elections would have to be scheduled, and Berlusconi referred to his resignation as “an act of generosity.”[34]

Mario Monti is an economist and academic who served as European Commissioner for the Internal Market, Services, Customs and Taxation from 1995 to 1999, and European Commissioner for Competition from 1999 to 2004. Monti is founder and Honorary President of Bruegel, a European think tank he launched in 2005, based in Belgium, and which represents the interests of key European elites. Monti has also been a member of the advisory board of the Coca-Cola Company, and was an international advisor to Goldman Sachs, was a former member of the Steering Committee of the Bilderberg Group, having previously attended the meeting in Switzerland in June of 2011, and was European Chairman of the Trilateral Commission until he resigned when he became Prime Minister of Italy.

Monti’s think tank, Bruegel, represents key elite European interests. The Chairman of the Board of Bruegel is Jean-Claude Trichet, the former President of the European Central Bank (ECB) from 2003 to 2011, who is also a member of the board of directors of the Bank for International Settlements (BIS), and has joined the boards of a number of major corporations, including EADS. Other board members of Bruegel include: Jose Manuel Campa Fernandez, who was the Spanish Secretary of State for Economic Affairs at the Ministry of Economy and Finance from 2009 to 2011, and has been a consultant for the European Commission, the Bank of Spain, the Bank for International Settlements (BIS), the Federal Reserve Bank of New York, the Inter-American Development Bank, the International Monetary Fund and the World Bank; Anna Ekström, the president of the Swedish Confederation of Professional Associations, Saco, and formerly the Swedish State Secretary for the Ministry of Industry, Employment and Communication; Jan Fisher, Vice President of the European Bank for Reconstruction and Development (EBRD), former Prime Minister of the Czech Republic; Vittorio Grilli, the Deputy Minister of the Ministry of Economy and Finance of Italy (whom Monti appointed to his technocratic government in November of 2011), and a former Managing Director at Credit Suisse First Boston; Wolfgang Kopf, Vice President at Deutsche Telekom AG; Rainer Münz, head of Research and Development at Erste Group and Senior Fellow at the Hamburg Institute of International Economics (HWWI), former consultant to the European Commission, the OECD, and the World Bank; Jim O’Neill, Chairman of Goldman Sachs Asset Management; Lars-Hendrik Röller, the Director General of the Economic and Financial Policy Division of the German Federal Chancellery, and is President of the German Economic Association; Dariusz Rosati, former consultant economist at Citibank, former Minister of Foreign Affairs for Poland, former adviser to the President of the European Commission, and was a member of the European Parliament from 2004 to 2009; and Helen Wallace, a British academic expert on European integration.

In October of 2009, Mario Monti was asked by the President of the European Commission Manuel Barroso to draw up a report on how the EU should re-launch its single market. Barroso advised that the report, “should address the growing tide of economic nationalism and outline measures to complete the EU’s currently patchy single market.” Mario Monti was President of the Bocconi University at the time he was asked to write the report.[35] In May of 2010, Monti produced the report and officially handed it in to European Commission President Barroso. The report recommended ways to fight the potential of economic nationalism and to preserve and protect the regional bloc and to advance the process of integration, with Monti arguing that, “There is now a window of opportunity to bring back the political focus of the single market.”[36] The report eventually became the EU’s Single Market Act of 2011.[37]

After becoming the technocratic and unelected Prime Minister of Italy, Monti quickly appointed his new cabinet, of which more than a third of the 17-member cabinet consisted of professors and other technocrats. The cabinet position of Minister of Economic Development, Infrastructure and Transport was given to Corrado Passera, the chief executive of Italy’s largest bank, Intesa Sanpaolo. Passera told the Financial Times upon his appointment as “superminister” that, “If you want to build the wide consensus that is needed, we have to share sacrifices and benefits among all the segments of society with a balanced set of actions and with the right mix of austerity and development programmes.” British hedge fund manager Davide Serra stated, “Monti and Passera are the right guys for the job. They are the dream team.”[38] Upon appointing his new technocratic government, Monti declared: “We feel sure of what we have done and we have received many signals of encouragement from our European partners and the international world. All this will, I trust, translate into a calming of that part of the market difficulty which concerns our country.” On the lack of party representatives in his cabinet, Monti commented, “The absence of political personalities in the government will help rather than hinder a solid base of support for the government in parliament and in the political parties because it will remove one ground for disagreement.”[39]

A former ambassador who worked with Monti when he was an EU Commissioner recalled Mario’s style of governance, stating, “He didn’t have a very Italian way of going about things… His nickname in those days was ‘The Italian Prussian’.” An article in Reuters described Monti as “a convinced free marketeer with close connections to the European and global policy making elite, Monti has always backed a more closely integrated euro zone,” and went on to mention his leadership positions within the Bilderberg Group of “business leaders” and “leading citizens” and the Trilateral Commission, which “brings together the power elites of the United States, Europe and Japan.” Monti’s government would be given roughly 18 months to push through “reforms” and austerity measures, as another election would not be due until 2013. However, as one outgoing minister commented in November of 2011, “The decisions which Monti will take must pass in parliament and I think that with such a heterogeneous majority he will have many problems. I believe this solution will lead to many problems.”[40]

Monti of course received abundant praise from Europe’s leaders on becoming the new unelected technocratic Prime Minister of Italy. An article by Tony Barber in the Financial Times explained that Italian party politics was simply too problematic, as: “Even a centre-left government with a mandate from the voters would find it hard to maintain the unity and resolution required to implement the unpopular austerity measures and structural economic reforms demanded by Germany, France, the European Commission, the European Central Bank and the International Monetary Fund.” And with the prospect of labour resistance from workers and pensioners, “it is easy to see why Europe’s leaders were eager for Mr Monti to inherit the premiership.” Thus, wrote Barber, “technocracy has an irresistible appeal.”[41] Mario Monti  himself had acknowledged that “irresistible appeal” in August of 2011, when he wrote an article in a major Italian paper advocating the formation of a “supranational technical government” which would make all the major decisions in order to “remove the structural constraints to growth,” and opined that “an Italy respected and authoritative… would be of great help to Europe.”[42] And as it turned out, a great help to Monti.

In early December of 2011, after forming his cabinet and being approved by Italy’s lower chamber of Parliament with a rare majority, Mario Monti received the endorsement of Angela Merkel and Nicolas Sarkozy, declaring their “absolute trust” in Monti and in “his structural changes” to his governing of Italy. Monti, upon assuming power, warned Italians in a speech that, “It is not going to be easy, sacrifice will be required.” As Monti’s “technocratic government” is full of appointments from the ruling class, including bankers and other executives, many in Italy were raising concerns that this suggested an inherent conflict of interest in his government, as those who helped create the crisis are brought in to solve it, a highly political government, despite all the claims of an apolitical ‘technocracy’ (technocracies are always political entities, but instead of pushing party ideologies, they push ultra-elite ideologies in the management and maintenance of society). Monti replied that, “There is no conflict of interests… The fact that many of us have played a role in the institutions before doesn’t mean that we will not be totally transparent.” And with that note, Monti appointed Carlo Malinconic as undersecretary for publishing affairs, after having previously served as president of the Italian Federation of Publishing and Newspapers.[43]

Writing in the journal of the Council on Foreign Relations, Foreign Affairs, Jonathan Hopkin, a professor of comparative politics at the London School of Economics, commented that the replacement of Berlusconi with Monti “marks a new stage in the European financial crisis,” in which “the crisis now seems to be wiping out democratically elected governments.” Largely under pressure from bond markets, “Italian politicians have opted to hand power to technocrats, expecting that they will somehow enjoy greater legitimacy as they impose painful measures on an angry population.” Hopkin stated: “This will not work.”[44]

In early November, as democratically-elected governments in Greece and Italy were replaced with unelected and unaccountable technocratic governments, essentially run by and for the European Union and global banks, Tony Barber, writing in the Financial Times, suggested that this is but one of several responses to the economic crisis. Specifically, this response “involves the surgical removal of elected leaders in Greece and Italy and their replacement with technocratic experts, trusted within the EU to pass economic reforms deemed appropriate by policymakers in Berlin, the bloc’s top paymaster, and at EU headquarters in Brussels.” Barber referred to the “sidelining of elected politicians in the continent that exported democracy to the world” as a “momentous development.” In short, “eurozone policymakers have decided to suspend politics as normal in two countries because they judge it to be a mortal threat to Europe’s monetary union.” Thus, these policymakers “have ruled that European unity, a project more than 50 years in the making, is of such overriding importance that politicians accountable to the people must give way to unelected experts who can keep the show on the road.” In Greece, the government was put under the technocratic leadership of Lucas Papademos, a former vice president of the European Central Bank, and upon accepting his appointment, stated: “I am confident that the country’s participation in the eurozone is a guarantee of monetary stability.” In Italy, Mario Monti came to power, a technocrat who “is revered in Brussels as one of the most effective commissioners for competition and the internal market that the EU has known.” One prominent Italian banker commented: “We need a strong national unity government for one to one and a half years to do what the politicians haven’t had the courage to do.”[45]

Running the ECB can be such a ‘Draghi’

In late October of 2011, at a gala event to mark the end of Jean-Claude Trichet’s eight years as president of the European Central Bank, Mario Draghi, the governor of the Bank of Italy, who was selected to take over for Trichet at the start of November, was “working the room” of high-powered European elites, including Angeal Merkel, and IMF Managing Director Christine Lagarde. Between 1984 and 1990, Draghi was the Italian Executive Director at the World Bank, and in 1991, he became the director general of the Italian Treasury until 2001. Between 2002 and 2005, Draghi was the Vice Chairman and Managing Director of Goldman Sachs International, thereafter becoming the governor of the Bank of Italy from 2006 until 2011, also putting him on the Governing Board of the European Central Bank and the Bank for International Settlements (BIS). Draghi is not simply one of the individuals who has been most responsible for handling and managing the economic crisis, but he also played an important role in causing it. As Vice Chairman of Goldman Sachs, and in Italy at the Treasury and the central bank, “Draghi was a proponent of nations and other institutions like pension funds using derivatives to more efficiently manage their liabilities.” This means that Draghi advised that governments should essentially hide their debts in the derivatives market, where they would not be viewed as liabilities, but rather, transactions. These “transactions” were very popular in Greece and Italy, and had a great deal to do with accumulating and hiding the massive debts of these countries.[46]

When Draghi led the Italian Treasury in the 1990s, he “oversaw one of the largest European privatization efforts ever and paved the way for Italy’s entry into the euro,” earning him the nickname, “Super Mario.” Italy liberalized its financial markets, allowing for massive speculation, derivatives, and other banking excesses, and he privatized roughly 15% of Italy’s economy. While Italian governments came and went during this period, Draghi always remained. While both Draghi and Goldman Sachs said that “Super Mario” did not have anything to do with the especially controversial Greece-Goldman Sachs transactions, one Goldman Sachs executive in Europe, “who was not authorized to speak publicly,” told the New York Times that, “Mr. Draghi had discussed similar initiatives with other European governments.” When asked about his involvement at Goldman Sachs, Draghi once replied, “I was not in charge of selling stuff to the governments… In fact, I worked in the private sector even though Goldman Sachs expected me to work in the public sector when I was hired.” However, in a paper which Draghi wrote in 2002 just a couple months after being hired by Goldman Sachs, at which his job description was “to win investment banking business from European governments,” Draghi argued in favour of governments using derivatives “to stabilize tax revenue and avoid the sudden accumulation of debt,” which the New York Times politely described as “faithful to the spirit” of the Goldman-Greece deal.[47]

In an interview with the Financial Times in December of 2011, European Central Bank president Mario Draghi reflected upon the financial crisis and the actions taken to manage it. He explained that the ECB’s long-term refinancing operation (a half-trillion euro bank bailout) was not designed to give banks an incentive to buy government bonds from the “periphery” nations, but rather, that, “the objective is to ease the funding pressures that banks are experiencing,” and that the banks “will then decide what the best use of these funds is.” Draghi stated that, “we don’t know exactly” what banks were doing with the money, but that, “the important thing was to relax the funding pressures.” Draghi reiterated that the banks “will decide in total independence what they want to do.”[48]

It’s interesting to note that when governments get bailouts, they are told what and how to spend the money, and are forced to impose austerity measures that destroy the social fabric and punish the populations of their countries, and then, of course, have to pay back the money at exorbitant interest rates; but when banks get a half-trillion euro bailout, the banks will “decide what the best use” of the money is, and where it goes is not important, it’s only important to “relax” the pressure on the banks, who will repay the debt over a long-term period (3 years) with extremely low interest (averaging 1%). So people get pressure, and banks get pressure “relaxed.”

Draghi told the Financial Times that what is needed most is to “restore confidence,” and for this, there are four answers. The first one “lies with national economic policies, because this crisis and this loss of confidence started from budgets that had got completely out of control.” The second answer, explained Draghi, “is that we have to restore fiscal discipline to the euro area,” which means to impose austerity, “and this is in a sense what last week’s EU summit started [in mid-December 2011], with the redesign of the fiscal compact.” The third answer “is to have a firewall in place which is fully equipped and operational,” meaning a massive bailout fund, which “was meant to be provided by the EFSF.” The fourth answer, according to Draghi, is for countries “to undergo significant structural reforms that would revamp growth,” implying things like liberalization, privatization, and further deregulaiton. When Draghi was asked about the critics of the fiscal compact who suggest that it amounts to a “stagnation and austerity union,” Draghi replied that, “they are right and wrong at the same time.” Draghi repeated the mantra of pro-austerity voices, who always suggest with no historical evidence to support, that there is “no trade-off between fiscal austerity, and growth and competitiveness.” However, Draghi contended, “I would not dispute that fiscal consolidation [austerity] leads to a contraction in the short run.” The correspondent with the Financial Times asked: “But these austerity programmes are very harsh. Don’t [you] think that some countries are really in effect in a debtor’s prison?” Draghi replied: “Do you see any alternative?”[49]

In an interview with the Wall Street Journal in February, Mario Draghi warned European countries “that there is no escape from tough austerity measures and that the continent’s traditional social contract is obsolete.” Draghi said that Europe’s social model was “already gone,” and that the only way to return to “long-term prosperity” was “continuing economic shocks [that] would force countries into structural changes in labor markets and other aspects of the economy.” As European people were suffering through the increased austerity measures, Draghi warned that, “Backtracking on fiscal targets would elicit an immediate reaction by the market.” This of course implies that the market has the ‘right’ to determine the fate of Europe’s people. For Draghi, “austerity, coupled with structural change, is the only option for economic renewal.” The European Commission, headed by Jose Manuel Barroso, agreed with Draghi, stating that despite forecasting a deepened recession brought on by austerity measures, governments “should be ready to meet budgetary targets.” Simon Johnson, the former chief economist of the IMF, said that Draghi was “just sugarcoating the message.” Johnson explained: “A lot of this structural reform talk is illusory at best in the short run… but it’s a better story than saying you’re going to have a terrible 10 years.”[50]

In the interview, Draghi commented on the “positive changes” which had been taking place in the previous few months: “There is greater stability in financial markets. Many government shave taken decisions on both fiscal consolidation and structural reforms. We have a fiscal compact where the European governments are starting to release national sovereignty for the common intent of being together.” When Draghi was asked what his view was “of these austerity policies in the larger strategy right now, forcing austerity at all costs,” Draghi replied: “There was no alternative to fiscal consolidation, and we should not deny that this is contractionary in the short term.” Then, he added, it was necessary to promote growth, “and that’s why structural reforms are so important.” The interviewer asked Draghi what the “most important structural reforms” were for Europe at that time. Draghi replied:

In Europe first is the product and services market reform. And the second is the labour market reform which takes different shapes in different countries. In some of them one has to make labour markets more flexible and also fairer than they are today [in other words: more easily exploited]. In these countries there is a dual labour market: highly flexible for the young part of the population where labour contracts are three-month, six-month contracts that may be renewed for years. The same market is highly inflexible for the protected part of the popuation where salaries follows seniority rather than productivity. In a sense labour markets at the present time are unfair in such a setting because they put all the weight of flexibility on the young part of the population.[51]

When central bankers and politicians and others talk about “labour flexibility,” what they really mean is “worker insecurity.” This was bluntly stated by Alan Greenspan back when he was Governor of the Board of the Federal Reserve System, when in testimony before the US Senate in 1997, he discussed how America’s “favorable” economy was constructed. Greenspan discussed how wage increases for workers did not keep pace with inflation, which was, he explained, “mainly the consequence of greater worker insecurity.” He elaborated: “the willingness of workers in recent years to trade off smaller increases in wages for greater job security seems to be reasonably well documented.” Greenspan credited the creation of “worker insecurity” with technological changes, corporate restructuring and downsizing, as well as “domestic deregulation.”[52] The New York Times reported on this, stating that Greenspan described “job insecurity” as “a powerful recent force in the American economy,” and that Greenspan, “clearly elevated this insecurity to major status in central bank policy.” How does worker insecurity influence central bank policy? The article explained: “Workers have been too worried about keeping their jobs to push for higher wages… and this has been sufficient to hold down inflation without the added restraint of higher interest rates.” However, Greenspan warned that even though job insecurity continues to rise, once “workers become accustomed to their new level of uncertainty, their confidence may revive and the upward pressure on wages resume.”[53]

In his interview with the Wall Street Journal, Mario Draghi was asked if “Europe will become less of the social model that has defined it,” to which Draghi replied: “The European social model has already gone.” Draghi, repeating the mantra of so many in power, stated that, “there is no feasible trade-off between” austerity and growth: “Fiscal consolidation is unavoidable in the present set up, and it buys time needed for the structural reforms. Backtracking on fiscal targets would elicit an immediate reaction by the market.” In terms of “progress” – as Draghi defines it – throughout the crisis, he praised the fiscal compact treaty as “a major political achievement because it’s the first step towards a fiscal union. It’s a treaty whereby countries release national sovereignty in order to accept common fiscal rules that are especially binding, and accept monitoring and accept to have these rules in their primary legislation so they are not easy to change. So that’s a beginning.”[54]

In further testimony in 2000, Alan Greenspan again addressed the issue of “worker insecurity,” which he stipulated was the “consequence of rapid economic and technological change,” which in turn created a “fear of potential job skill obsolescence.” Greenspan stated that, “more workers currently report they are fearful of losing their jobs than similar surveys found in 1991 at the bottom of the last recession,” and that, “greater workers insecurities are creating political pressures to reduce fierce global competition that has emerged in the wake of our 1990s technology boom.” While Greenspan admitted that “protectionist policies” would “temporarily reduce some worker anxieties,” he felt this was a bad idea, as “over the longer run such actions would slow innovation and impede the rise in living standards.” Greenspan elaborated:

Protectionism might enable a worker in a declining industry to hold onto his job longer. But would it not be better for that worker to seek a new career in a more viable industry at age 35 than hang on until age 50, when job opportunities would be far scarcer and when the lifetime benefits of additional education and training would be necessarily smaller?.. These years of extraordinary innovation are enhancing the standard of living for a large majority of Americans. We should be thankful for that and persevere in policies that enlarge the scope for competition and innovation and thereby foster greater opportunities for everyone.[55]

This is called “labour market flexibility.” Of course, as Greenspan was full of praise for the fact that “job insecurity” is a necessary factor in “enhancing the standard of living for a large majority of Americans,” which “fosters greater opportunities for everyone,” what he really meant was that it benefits a tiny minority and creates better opportunities for exploitation. Ironically, this wonderful “boom” in the economy turned out to be a bubble, and it popped within a year of his giving this speech, and then of course, he resorted to building up the housing bubble thereafter… and we know how that went: more worker insecurity, more labour market flexibility, and thus, more benefits to a tiny minority and more opportunities for exploitation and profits. Isn’t the “free market” wonderful?

In April of 2012, Mario Draghi advised the eurozone to adopt a “growth compact” in order to boost economic prospects as he “scaled back his hopes for an early economic rebound,” stating that the eurozone bloc was “probably in the most difficult phases” in which the austerity measures were “starting to reverberate its contractionary effects,” he told the European Parliament. Austerity had, according to Draghi, “taken a larger than expected toll.” A “growth pact” was promoted by the front-runner in the French presidential elections, Francois Hollande, who would go on to win the May 6 elections against Sarkozy. Hollande had called for a “new Europe” stressing “solidarity, progress and protection,” warning against a North-South split in the EU countries. Angela Merkel also approved of Draghi’s call for a “growth pact,” agreeing that austerity was not “the whole answer” to the crisis, but insisted that growth would be “in the form of structural reforms,” which implies liberalization and privatization. She added: “We need growth in the form of sustainable initiatives, not simply economic stimulus programmes that just increase government debt.” While acknowledging the “economic weakness” created by the austerity packages across Europe, Draghi continued to say that, “Europe’s leaders should stay the course on fiscal consolidation.”[56]

European leaders were quick to endorse the calls from Draghi for a “growth pact” for Europe, including Angela Merkel in Germany, and France’s new Socialist president, Fancois Hollande, as well as EC President José Manuel Barroso. Following Draghi’s suggestion, Barroso stated that, “Growth is the key, growth is the answer.” Francois Hollande commented in references to Draghi’s proposal, “He doesn’t necessarily have the same measures in mind as me to foster growth,” as Draghi’s position was closer to that of Angela Merkel, who viewed the pact as consisting of “structural reforms,” not a stimulus which would “again increase national debt.” An analyst at the Cutch bank ING said: “For the ECB, a growth compact does not mean more fiscal stimulus,” which is, of course, only reserved for banks, not people. Instead, stated the analyst, Carsten Brzeski, it entails “structural reforms with a vision.”[57]

In May, this vision was publicly endorsed by Jorg Asmussen, the governor of the Bundesbank (the German central bank), and a member of the Executive Board of the European Central Bank, and was just previously the deputy finance minister of Germany. In a speech on May 21, Asmussen stated that, “we need both” austerity and growth, but that: “Talking about more growth does not mean moving away from the fiscal policy strategy pursued so far. It is not a matter of boosting growth over the next one to two quarters with credit-financed spending programmes, but of increasing potential growth. No one is against growth. The crucial and rather difficult question to answer is how, in ageing societies, to increase potential growth.” As to the question of ‘how’, Asmussen suggested three main components: product market reforms, labour market reforms, and financing of reforms. Product market reforms could include, according to Asmussen, “the completion of the internal market for services… [as] 70% of the EU’s GDP comes from services, but only 20% of services are provided on a cross-border basis.” As for labour market reforms, Asmussen suggested they should be “inspired by the Agenda 2010 programme in Germany,” and that, ultimately: “labour mobility needs to be increased in the euro area (the theory says, we remember, that an optimal currency area requires full mobility of labour). Mobility could be increased through broader recognition of qualifications within Europe, greater portability of pension rights, language courses and a European network of job centres.”[58] The Agenda 2010 programme was, explained Der Spiegel, “a series of labor market and social welfare reforms introduced by former Chancellor Gerhard Schröder that completely restructured Germany’s welfare state,” which included, “easing job dismissal protections, lowering bureaucratic hurdles for starting businesses, setting a higher retirement age and lowering non-wage labor costs,” all of which are “typical examples of structural reforms.”[59]

The Crisis Continues…

And so the European debt crisis continues, and so the austerity measures continue to punish the populations of Europe, and so Italy remains at the forefront of a growing global power grab: a ‘Technocratic Revolution’ in which even the trappings of formal democracy are pushed aside in favour of a government subservient to unelected councils of supranational institutions and global financial interests. In Par 2 of this excerpt on the Italian debt crisis, we examine the austerity programs and structural adjustments undertaken by the technocratic government of Mario Monti.

Andrew Gavin Marshall is an independent researcher and writer based in Montreal, Canada, writing on a number of social, political, economic, and historical issues. He is also Project Manager of The People’s Book Project. He also hosts a weekly podcast show, “Empire, Power, and People,” on BoilingFrogsPost.com.

Please donate to The People’s Book Project to help this book be finished by the end of summer:

Notes

[1]            Bilderberg Meetings, Participants, 2011:

http://www.bilderbergmeetings.org/participants_2011.html

[2]            John Hooper, “Italy’s politicians rally round to prevent market’s slide,” The Guardian, 12 July 2011:

http://www.guardian.co.uk/business/2011/jul/12/italy-rallies-financial-meltdown-austerity

[3]            Phillip Inman and John Hooper, “Italy hopes privatisations will calm markets,” The Guardian, 13 July 2011:

http://www.guardian.co.uk/business/2011/jul/13/italy-hopes-privatisations-will-end-run-on-shares

[4]            AP, “Italian Senate passes key austerity package,” The Independent, 14 July 2011:

http://www.independent.co.uk/news/world/europe/italian-senate-passes-key-austerity-package-2313765.html

[5]            Rachel Donadio, “Italy to Adopt Austerity Plan to Fend Off a Debt Crisis,” The New York Times, 14 July 2011:

http://www.nytimes.com/2011/07/15/world/europe/15italy.html

[6]            Emma Rowley, “Silvio Berlusconi v. Giulio Tremonti: a clash that spooked the markets,” The Telegraph, 14 July 2011:

http://www.telegraph.co.uk/finance/economics/8637058/Silvio-Berlusconi-v.-Giulio-Tremonti-a-clash-that-spooked-the-markets.html

[7]            Nichi Vendola, “Italian debt: Austerity economics? That’s dead wrong for us,” The Guardian, 14 July 2011:

http://www.guardian.co.uk/commentisfree/2011/jul/14/italian-debt-austerity-berlusconi

[8]            Mario Monti, “Il podestà forestiero,” Corriere della Sera, 7 August 2011, [original in Italian, translation provided by Google Translate]:

http://www.corriere.it/editoriali/11_agosto_07/monti-podesta_1a5c6670-c0c4-11e0-a989-deff7adce857.shtml

[9]            Central Banking Newsdesk, “Leaked letter reveals ECB austerity demands on Italy,” Central Banking, 29 September 2011:

http://www.centralbanking.com/central-banking/news/2113272/leaked-letter-reveals-ecb-austerity-demands-italy

[10]            Ibid.

[11]            Ibid.

[12]            Leigh Phillips, “ECB austerity drive raises fears for democratic accountability in Europe,” The Guardian, 22 August 2011:

http://www.guardian.co.uk/business/2011/aug/22/debt-crisis-europe

[13]            John Hooper, “Italy’s government meets to approve new austerity package,” The Guardian, 12 August 2011:

http://www.guardian.co.uk/business/2011/aug/12/berlusconi-italy-austerity-cuts-protest

[14]            Lorenzo Totaro, “Berlusconi’s Austerity Package Wins Final Approval in Italian Parliament,” Bloomberg, 14 September 2011:

http://www.bloomberg.com/news/2011-09-14/berlusconi-s-austerity-package-wins-final-approval-in-italian-parliament.html

[15]            “Italy’s Austerity Budget – Needed: A New Broom,” The Economist, 10 September 2011:

http://www.economist.com/node/21528674

[16]            Jon Henley, “Austerity in Italy: cuts compound bureaucratic obstacles,” The Guardian, 18 October 2011:

http://www.guardian.co.uk/world/blog/2011/oct/18/austerity-italy-cuts-bureaucratic-obstacles

[17]            Jon Henley, “Europe on the breadline: hopelessness and Berlusconi,” The Guardian, 18 October 2011:

http://www.guardian.co.uk/world/blog/2011/oct/18/jon-henley-breadline-europ-hopelessness-berlusconi

[18]            Bruno Mascitelli, “As Moody’s trashes Italy, voters can’t count on Berlusconi,” The Conversation, 5 October 2011:

http://theconversation.edu.au/as-moodys-trashes-italy-voters-cant-count-on-berlusconi-3486

[19]            The Canadian Press, “Italy Debt Crisis: Berlusconi Austerity Package Sets Up Showdown With Labour,” The Huffington Post, 14 October 2011:

http://www.huffingtonpost.ca/2011/08/14/italy-austerity-showdown_n_926389.html

[20]            Reuters, “Violent protests in Italian capital,” The Irish Times, 15 October 2011:

http://www.irishtimes.com/newspaper/breaking/2011/1015/breaking23.html;

Antonio Padellaro, “Come previsto,” Il Fatto Quotidiano, 16 October 2011, (original in Italian, translation courtesy of Google Translate):

http://www.ilfattoquotidiano.it/2011/10/16/come-previsto/164205/;

“Rome counts cost of violence after global protests,” BBC News, 16 October 2011:

http://www.bbc.co.uk/news/world-europe-15326561;

Alessandra Rizzo and Meera Selva, “Rioters hijack Rome protests; police fire tear gas,” The Denver Post, 16 October 2011:

http://www.denverpost.com/nationworld/ci_19123516

[21]            Spiegel Online, “German Parliament Expected To Hold Full Vote on EFSF,” Der Spiegel, 24 October 2011:

http://www.spiegel.de/international/europe/controversial-leveraging-plan-german-parliament-expected-to-hold-full-vote-on-efsf-a-793656.html

[22]            Hans-Jürgen Schlamp, “Berlusconi’s Government Wobbles in Face of EU Pressure,” Der Spiegel, 25 October 2011:

http://www.spiegel.de/international/europe/crumbling-coalition-berlusconi-s-government-wobbles-in-face-of-eu-pressure-a-793884.html

[23]            MARCUS WALKER, CHARLES FORELLE, and STACY MEICHTRY, “Deepening Crisis Over Euro Pits Leader Against Leader,” The Wall Street Journal, 30 December 2011:

http://online.wsj.com/article/SB10001424052970203391104577124480046463576.html

[24]            Ibid.

[25]            Armorel Kenna, “Austerity ‘Isn’t in My Vocabulary,’ Berlusconi Tells Il Foglio,” Bloomberg, 29 October 2011:

http://www.bloomberg.com/news/2011-10-29/austerity-isn-t-in-my-vocabulary-berlusconi-tells-il-foglio.html

[26]            Patrick Wintour and Larry Elliott, “G20 leaders press Italy to accept IMF checks on cuts programme,” The Guardian, 4 November 2011:

http://www.guardian.co.uk/world/2011/nov/04/g20-italy-imf-checks-cuts

[27]            Philip Ebels, “Berlusconi heads to G20 amid mutiny at home,” EUObserver, 3 November 2011:

http://euobserver.com/9/114156

[28]            Nick Squires, “Eurozone crisis: Italian coalition fails to reach austerity deal,” The Telegraph, 3 November 2011:

http://www.telegraph.co.uk/news/worldnews/europe/italy/8866954/PIC-AND-PUB-PLEASE-Eurozone-crisis-Italian-coalition-fails-to-reach-austerity-deal.html

[29]            Emily Gosden, “Italian Prime Minister Silvio Berlusconi agrees to IMF oversight of austerity measures,” The Telegraph, 4 November 2011:

http://www.telegraph.co.uk/finance/financialcrisis/8869346/Italian-Prime-Minister-Silvio-Berlusconi-agrees-to-IMF-oversight-of-austerity-measures.html

[30]            Barry Moody and James Mackenzie, “Berlusconi to resign after parliamentary setback,” Reuters, 8 November 2011:

http://www.reuters.com/article/2011/11/08/us-italy-idUSTRE7A72NG20111108

[31]            John Hooper, “What happens if Berlusconi resigns?” The Guardian, 8 November 2011:

http://www.guardian.co.uk/world/2011/nov/08/italy-after-berlusconi-scenarios

[32]            Graeme Wearden and Alex Hawkes, “Eurozone debt crisis: Berlusconi to resign after austerity budget passed,” The Guardian, 8 November 2011:

http://www.guardian.co.uk/business/blog/2011/nov/08/berlusconi-debt-greece#block-35

[33]            “The end of Berlusconi: Hallelujah,” The Economist, 13 November 2011:

http://www.economist.com/blogs/newsbook/2011/11/end-berlusconi

[34]            Rachel Donadino, “With Clock Ticking, an Economist Accepts a Mandate to Rescue Italy,” The New York Times, 13 November 2011:

http://www.nytimes.com/2011/11/14/world/europe/mario-monti-asked-to-form-a-new-government-in-italy.html

[35]            Andrew Willis, “Mario Monti to draw up single market report,” EUObserver, 21 October 2009:

http://euobserver.com/19/28856

[36]            “EU must put single market ‘back on stage’, says Monti,” EurActiv, 11 May 2010:

http://www.euractiv.com/priorities/eu-put-single-market-back-stage-news-494013

[37]            “Twelve projects for the 2012 Single Market: together for new growth,” The European Commission, 13 April 2011:

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/469

[38]            Rachel Sanderson, “‘Superminister’ emerges from Italy’s business elite,” The Financial Times, 16 November 2011:

http://www.ft.com/intl/cms/s/0/22c46df8-1060-11e1-8010-00144feabdc0.html#axzz1yY37v49b

[39]            John Hooper, “Mario Monti appoints technocrats to steer Italy out of economic crisis,” The Guardian, 16 November 2011:

http://www.guardian.co.uk/world/2011/nov/16/mario-monti-technocratic-cabinet-italy

[40]            James Mackenzie, “”Italian Prussian” Monti enters political storm,” Reuters, 13 November 2011:

http://www.reuters.com/article/2011/11/13/italy-monti-idUSL5E7MD0DO20111113

[41]            Tony Barber, “Why Europe’s leaders welcome Monti,” The Financial Times, 23 November 2011:

http://www.ft.com/intl/cms/s/0/ce6f96cc-15bb-11e1-8db8-00144feabdc0.html#axzz1yY37v49b

[42]            Mario Monti, “Il podestà forestiero,” Corriere della Sera, 7 August 2011, [original in Italian, translation provided by Google Translate]:

http://www.corriere.it/editoriali/11_agosto_07/monti-podesta_1a5c6670-c0c4-11e0-a989-deff7adce857.shtml

[43]            Viola Caon, “Mario Monti’s Italian technocracy reveals its true political colours,” The Guardian, 6 December 2011:

http://www.guardian.co.uk/commentisfree/2011/dec/06/mario-monti-technocracy-europe

[44]            Jonathan Hopkin, “How Italy’s Democracy Leads to Financial Crisis,” Foreign Affairs 21 November 2011:

http://www.foreignaffairs.com/articles/136688/jonathan-hopkin/how-italys-democracy-leads-to-financial-crisis

[45]            Tony Barber, “Eurozone turmoil: Enter the technocrats,” The Financial Times, 11 November 2011:

http://www.ft.com/intl/cms/s/0/93c5cb36-0c92-11e1-a45b-00144feabdc0.html#axzz1z1dPgKJf

[46]            Landon Thomas Jr. and Jack Ewing, “Can Super Mario Save the Day for Europe?” The New York Times, 29 October 2011:

http://www.nytimes.com/2011/10/30/business/mario-draghi-into-the-eye-of-europes-financial-storm.html?pagewanted=all

[47]            Ibid.

[48]            Lionel Barber and Ralph Atkins, “FT interview transcript: Mario Draghi,” The Financial Times, 18 December 2011:

http://www.ft.com/intl/cms/s/0/25d553ec-2972-11e1-a066-00144feabdc0.html#axzz1yY37v49b

[49]            Ibid.

[50]            Brian Blackstone, Matthew Karnitsching and Robert Thomson, “Europe’s Banker Talks Tough,” The Wall Street Journal, 24 February 2012:

http://online.wsj.com/article/SB10001424052970203960804577241221244896782.html

[51]            Brian Blackstone, Matthew Karnitschnig and Robert Thomson, “Q&A: ECB President Mario Draghi,” The Wall Street Journal, 23 February 2012:

http://blogs.wsj.com/eurocrisis/2012/02/23/qa-ecb-president-mario-draghi/

[52]            Alan Greenspan, “Testimony of Chairman Alan Greenspan: The Federal Reserve’s semiannual monetary policy report,” Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, February 26, 1997:

http://www.federalreserve.gov/boarddocs/hh/1997/february/testimony.htm

[53]            Louis Uchitelle, “Job Insecurity of Workers Is a Big Factor in Fed Policy,” The New York Times, 27 February 1997:

http://www.nytimes.com/1997/02/27/business/job-insecurity-of-workers-is-a-big-factor-in-fed-policy.html?pagewanted=all&src=pm

[54]            Brian Blackstone, Matthew Karnitschnig and Robert Thomson, “Q&A: ECB President Mario Draghi,” The Wall Street Journal, 23 February 2012:

http://blogs.wsj.com/eurocrisis/2012/02/23/qa-ecb-president-mario-draghi/

[55]            Alan Greenspan, “Remarks by Chairman Alan Greenspan: The revolution in information technology,” Before the Boston College Conference on the New Economy, Boston, Massachusetts, March 6, 2000:

http://www.federalreserve.gov/boarddocs/speeches/2000/20000306.htm

[56]            Ralph Atkins, Hugh Carnegy, and Quentin Peel, “Draghi calls for Europe ‘growth compact’,” The Financial Times, 25 April 2012:

http://www.ft.com/intl/cms/s/0/fc894164-8ead-11e1-ac13-00144feab49a.html#axzz1yY37v49b

[57]            Stefan Kaiser, “Austerity Backlash Unites European Leaders,” Spiegel Online, 17 April 2012:

http://www.spiegel.de/international/europe/european-austerity-backlash-leaders-back-draghi-s-growth-pact-a-830185.html

[58]            Jörg Asmussen, “WELT-Währungskonferenz,” Berlin, 21 May 2012:

http://www.ecb.int/press/key/date/2012/html/sp120521.en.html

[59]            Stefan Kaiser, “Austerity Backlash Unites European Leaders,” Spiegel Online, 17 April 2012:

http://www.spiegel.de/international/europe/european-austerity-backlash-leaders-back-draghi-s-growth-pact-a-830185.html

Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve

Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve
Global Power and Global Government: Part 3
Global Research, August 3, 2009

This essay is Part 3 of “Global Power and Global Government,” published by Global Research.

Part 1: Evolution and Revolution of the Central Banking System
Part 2: Origins of the American Empire: Revolution, World Wars and World Order



The Bilderberg Group and the European Union Project

In 1954, the Bilderberg Group was founded in the Netherlands, which was a secretive meeting held once a year, drawing roughly 130 of the political-financial-military-academic-media elites from North America and Western Europe as “an informal network of influential people who could consult each other privately and confidentially.”[1] Regular participants include the CEOs or Chairman of some of the largest corporations in the world, oil companies such as Royal Dutch Shell, British Petroleum, and Total SA, as well as various European monarchs, international bankers such as David Rockefeller, major politicians, presidents, prime ministers, and central bankers of the world.[2]

Joseph Retinger, the founder of the Bilderberg Group, was also one of the original architects of the European Common Market and a leading intellectual champion of European integration. In 1946, he told the Royal Institute of International Affairs (the British counterpart and sister organization of the Council on Foreign Relations), that Europe needed to create a federal union and for European countries to “relinquish part of their sovereignty.” Retinger was a founder of the European Movement (EM), a lobbying organization dedicated to creating a federal Europe. Retinger secured financial support for the European Movement from powerful US financial interests such as the Council on Foreign Relations and the Rockefellers.[3] However, it is hard to distinguish between the CFR and the Rockefellers, as, especially following World War II, the CFR’s main finances came from the Carnegie Corporation, Ford Foundation and most especially, the Rockefeller Foundation.[4]

The Bilderberg Group acts as a “secretive global think-tank,” with an original intent to “to link governments and economies in Europe and North America amid the Cold War.”[5] One of the Bilderberg Group’s main goals was unifying Europe into a European Union. Apart from Retinger, the founder of the Bilderberg Group and the European Movement, another ideological founder of European integration was Jean Monnet, who founded the Action Committee for a United States of Europe, an organization dedicated to promoting European integration, and he was also the major promoter and first president of the European Coal and Steel Community (ECSC), the precursor to the European Common Market.[6]

Declassified documents (released in 2001) showed that “the US intelligence community ran a campaign in the Fifties and Sixties to build momentum for a united Europe. It funded and directed the European federalist movement.”[7] The documents revealed that, “America was working aggressively behind the scenes to push Britain into a European state. One memorandum, dated July 26, 1950, gives instructions for a campaign to promote a fully-fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the CIA.” Further, “Washington’s main tool for shaping the European agenda was the American Committee for a United Europe, created in 1948. The chairman was Donovan, ostensibly a private lawyer by then,” and “The vice-chairman was Allen Dulles, the CIA director in the Fifties. The board included Walter Bedell Smith, the CIA’s first director, and a roster of ex-OSS figures and officials who moved in and out of the CIA. The documents show that ACUE financed the European Movement, the most important federalist organisation in the post-war years.” Interestingly, “The leaders of the European Movement – Retinger, the visionary Robert Schuman and the former Belgian prime minister Paul-Henri Spaak – were all treated as hired hands by their American sponsors. The US role was handled as a covert operation. ACUE’s funding came from the Ford and Rockefeller foundations as well as business groups with close ties to the US government.”[8]

The European Coal and Steel Community was formed in 1951, and signed by France, West Germany, Italy, Belgium, Luxembourg and the Netherlands. Newly released documents from the 1955 Bilderberg meeting show that a main topic of discussion was “European Unity,” and that “The discussion affirmed complete support for the idea of integration and unification from the representatives of all the six nations of the Coal and Steel Community present at the conference.” Further, “A European speaker expressed concern about the need to achieve a common currency, and indicated that in his view this necessarily implied the creation of a central political authority.” Interestingly, “A United States participant confirmed that the United States had not weakened in its enthusiastic support for the idea of integration, although there was considerable diffidence in America as to how this enthusiasm should be manifested. Another United States participant urged his European friends to go ahead with the unification of Europe with less emphasis upon ideological considerations and, above all, to be practical and work fast.”[9] Thus, at the 1955 Bilderberg Group meeting, they set as a primary agenda, the creation of a European common market.[10]

In 1957, two years later, the Treaty of Rome was signed, which created the European Economic Community (EEC), also known as the European Community. Over the decades, various other treaties were signed, and more countries joined the European Community. In 1992, the Maastricht Treaty was signed, which created the European Union and led to the creation of the Euro. The European Monetary Institute was created in 1994, the European Central Bank was founded in 1998, and the Euro was launched in 1999. Etienne Davignon, Chairman of the Bilderberg Group and former EU Commissioner, revealed in March of 2009 that the Euro was debated and planned at Bilderberg conferences.[11] This was an example of regionalism, of integrating an entire region of the world, a whole continent, into a large supranational structure. This was one of the primary functions of the Bilderberg Group, which would also come to play a major part in other international issues.

Interdependence Theory

The theoretical justifications for integration and regionalism arrived in the 1960s with what is known as “interdependence theory.” One of its primary proponents was a man named Richard N. Cooper. Two other major proponents of interdependence theory are Robert Keohane and Joseph Nye. Interdependence theory and theorists largely expand upon the notions raised by Keynes.

Richard Cooper wrote that, during the 1960s “there has been a strong trend toward economic interdependence among the industrial countries. This growing interdependence makes the successful pursuit of national economic objectives much more difficult.” He also identified that “the objective of greater economic integration involves international agreements which reduce the number of policy instruments available to national authorities for pursuit of their economic objectives.”[12] Further, “Cooper argues that new policies are needed to address the unprecedented conditions of international interdependence.”[13]

Cooper also opposed a return to mercantilist pursuits in order for nations to secure economic objectives, arguing that, “economic nationalism invited policy competition that is doomed to fail,” and thus concludes “that international policy coordination is virtually the only means to achieve national economic goals in an interdependent world.”[14]

Keohane and Nye go into further analysis of interdependence, specifically focusing on how interdependence transforms international politics. They tend to frame their concepts in ideological opposition to international relations realists, who view the world, like mercantilists, as inherently anarchic. Keohane and Nye construct what is known as “complex interdependence,” in which they critique realism. They analyze realism as consisting of two primary facets: that states are the main actors in the international arena, and that military force is central in international power. They argue that, “global economic interdependence has cast doubt on these assumptions. Transnational corporations and organizations born of economic integration now vie with states for global influence.”[15]

Keohane and Nye also discuss the relevance and importance of international regimes in the politics of interdependence, defining regimes as “networks of rules, norms, and procedures that regularize behavior.” They argue that, “Regimes are affected by the distribution of power among states, but regimes, in turn, may critically influence the bargaining process among states.”[16] Again, this contests the realist and mercantilist notions of the international sphere being one of chaos, as a regime can produce and maintain order within the international arena.

Interdependence theorists tend to argue that interdependence has altered the world order in that it has become based upon cooperation and mutual interests, largely championing the liberal economic notion of a non-chaotic and cooperative international order in which all nations seek and gain a mutual benefit. Ultimately, it justifies the continued process of global economic integration, while realist and mercantilist theorists, who interdependence theorists contest and debate, justify the use of force in the international arena in terms of describing it as inherently chaotic. In theory, the notions of mercantilism and liberalism are inimical to one another however, they are not mutually exclusive and are, in fact, mutually reinforcing. Events throughout the 1970s are a clear example of this mutually reinforcing nature of mercantilist behaviour on the part of states, and the “interdependence” of the liberal economic order.

As early mercantilist theorist Frederick List wrote in regards to integration and union, “All examples which history can show are those in which the political union has led the way, and the commercial union has followed. Not a single instance can be adduced in which the latter has taken the lead, and the former has grown up from it.”[17] It would appear that the elites have chosen the road less traveled in the 20th century, with the Bilderberg Group pursuing integration and union in Europe by starting with commercial union and having political union follow. This concept is also evident in the notions of interdependence theory, which focuses on global economic integration as changing the realist/mercantilist notions of a chaotic international order, as states and other actors become more cooperative through such economic ties.

Trilateralism

In the late 1960s, Western European economies (in particular West Germany) and Japan were rapidly developing and expanding. Their currencies rose against the US dollar, which was pegged to the price of gold as a result of the Bretton Woods System, which, through the IMF, set up an international monetary system based upon the US dollar, which was pegged to gold. However, with the growth of West Germany and Japan, “by the late 1960s the system could no longer be expected to perform its previous function as a medium for international exchange, and as a surrogate for gold.” On top of this, to maintain its vast empire, the US had developed a large balance-of-payments deficit.[18]

Richard Nixon took decisive, and what many referred to as “protectionist” measures, and in 1971, ended the dollar’s link to gold, which “resulted in a devaluation of the dollar as it began to float against other currencies,” and “was meant to restore the competitiveness of the US economy,”[19] as with devaluation, “U.S.-made goods would cost less to foreigners and foreign-made goods would be less competitive on the U.S. market.” The second major action taken by Nixon was when he “slapped a ten percent surcharge on most imports into the United States,” which was to benefit U.S. manufacturing firms over foreign ones in competition for the U.S. market. The result was that less imports from Asia were coming into the US, more US goods were sold in their markets at more competitive prices, forcing Japan and the European Economic Community (EEC) to relax their trade barriers to US products.[20]

An article in Foreign Affairs, the journal of the Council on Foreign Relations, referred to Nixon’s New Economic Policy as “protectionist,” encouraging a “disastrous isolationist trend,”[21] and that Nixon shattered “the linchpin of the entire international monetary system— on whose smooth functioning the world economy depends.”[22] Another article in Foreign Affairs explained that the Atlanticist, or internationalist faction of the US elite were in particular, upset with Nixon’s New Economic Policy, however, they “agreed on the diagnosis: the relative balance of economic strengths had so changed that the United States could no longer play the role of economic leader. But they also argued that further American unilateralism would fuel a spiral of defensive reactions that would leave all the Western economies worse off. Their suggested remedy, instead, was much more far-reaching coordination among all the trilateral [North American, European and Japanese] governments.”[23]

There was a consensus within the American ruling class that the Bretton Woods System was in need of a change, but there were divisions among members in how to go about changing it. The more powerful (and wealthy) international wing feared how US policies may isolate and alienate Western Europe and Japan, and they advocated that, “The world economic roles of America must be reconciled with the growth to power of Europe and Japan. There must be fundamental reform of the international monetary system. There must be renewed efforts to reduce world trade barriers. The underlying U.S. balance of payments has deteriorated.” However, Nixon “went much too far” as he alienated Western Europe and Japan.

In 1970, David Rockefeller became Chairman of the Council on Foreign Relations, while also being Chairman and CEO of Chase Manhattan. In 1970, an academic who joined the Council on Foreign Relations in 1965 wrote a book called Between Two Ages: America’s Role in the Technetronic Era. The author, Zbigniew Brzezinski, called for the formation of “A Community of the Developed Nations,” consisting of Western Europe, the United States and Japan. Brzezinski wrote about how “the traditional sovereignty of nation states is becoming increasingly unglued as transnational forces such as multinational corporations, banks, and international organizations play a larger and larger role in shaping global politics.” David Rockefeller had taken note of Brzezinski’s writings, and was “getting worried about the deteriorating relations between the U.S., Europe, and Japan,” as a result of Nixon’s economic shocks. In 1972, David Rockefeller and Brzezinski “presented the idea of a trilateral grouping at the annual Bilderberg meeting.” In July of 1972, seventeen powerful people met at David Rockefeller’s estate in New York to plan for the creation of the Commission. Also at the meeting was Brzezinski, McGeorge Bundy, the President of the Ford Foundation, (brother of William Bundy, editor of Foreign Affairs) and Bayless Manning, President of the Council on Foreign Relations.[24] So, in 1973, the Trilateral Commission was formed to address these issues.

A 1976 article in Foreign Affairs explained that, “Trilateralism as a linguistic expression—and the Trilateral Commission—arose in the early 1970s from the reaction of the more Atlanticist part of the American foreign policy community to the belligerent and defensive unilateralism that characterized the foreign economic policy of the Nixon Administration.”[25] The Commission’s major concerns were to preserve for the “industrialized societies,” in other words, seek mutual gain for the Trilateral nations, and to construct “a common approach to the needs and demands of the poorer nations.” However, this should be read as, “constructing a common approach to [dealing with] poorer nations.” As well as this, the Commission would undertake “the coordination of defense policies and of policies toward such highly politicized issues as nuclear proliferation, terrorism, and aerial hijacking, and such highly politicized geographic areas as the Middle East or Southern Africa.”[26]

Interestingly, interdependence theorist Joseph Nye is a member of the Trilateral Commission, as is Richard N. Cooper.[27] Today, Joseph Nye is a member of the Board of Directors of the Council on Foreign Relations,[28] and Richard N. Cooper was a Director of the Council on Foreign Relations from 1993-1994.[29]

The end of the link of the dollar to gold meant that, “the US was no longer subject to the discipline of having to try to maintain a fixed par value of the dollar against gold or anything else: it could let the dollar move as the US Treasury [and ultimately, the Federal Reserve] wished and pointed towards the removal of gold from international monetary affairs.” This created a dollar standard, as opposed to a gold standard, which “places the direction of the world monetary policy in the hands of a single country,” which was “not acceptable to Western Europe or Japan.”[30] Addressing this issue was among the reasoning behind the creation of the Trilateral Commission.

The Oil Crisis

The May 1973 meeting of the Bilderberg Group occurred five months prior to the extensive oil price rises brought about by the Yom Kippur War. However, according to leaked minutes from the meeting, a 400% increase in the price of oil was discussed, and meeting participants were creating a “plan [on] how to manage the about-to-be-created flood of oil dollars.”[31] Oil is no issue foreign to the interests of the Bilderberg Group, as among the 1973 participants were the CEOs of Royal Dutch Shell, British Petroleum (BP), Total S.A., ENI, Exxon, as well as significant banking interests and individuals such as Baron Edmond de Rothschild and David Rockefeller, and the US Secretary of State at the time, Henry Kissinger.[32]

In 1955, Henry Kissinger, a young scholar at the time, was brought into the Council on Foreign Relations, where he distinguished himself as a prominent Council member and became a protégé to Nelson Rockefeller, one of David Rockefeller’s brothers. In 1969, Kissinger became Richard Nixon’s National Security Adviser.[33] This Bilderberg meeting was taking place during a time of great international instability, particularly in the Middle East.

Kissinger, as National Security Adviser, was in a power struggle with Secretary of State William Rogers over foreign policy. Nixon even referred to the continual power struggle between Kissinger as National Security Advisor and Secretary of State William Rogers, saying that, “Henry’s personality problem is just too goddamn difficult for us to deal [with],” and that Kissinger’s “psychopathic about trying to screw [Secretary of State William] Rogers.” Nixon even said that if Kissinger wins the struggle against Rogers, Kissinger would “be a dictator.” Nixon told his Chief of Staff, Haldeman, that Kissinger feels “he must be present every time I see anybody important.”[34]

At the time of the Yom Kippur War, Nixon was in the middle of major domestic issues, as the Watergate scandal was breaking, leading to an increase in the power and influence of Kissinger, as “The president was deeply preoccupied, and at times incapacitated by self-pity or alcohol.”[35] By 1970, Kissinger had Rogers “frozen out of policy-making on Southeast Asia,” during the Vietnam War, so Rogers “concentrated on the Middle East.” Eventually, Nixon had Rogers resign, and then Henry Kissinger took the position as both National Security Advisor and Secretary of State.[36]

As Kissinger later said in a speech marking the 25th anniversary of the Trilateral Commission, “In 1973, when I served as Secretary of State, David Rockefeller showed up in my office one day to tell me that he thought I needed a little help,” and that, “David’s function in our society is to recognize great tasks, to overcome the obstacles, to help find and inspire the people to carry them out, and to do it with remarkable delicacy.” Kissinger finished his speech by saying, “David, I respect you and admire you for what you have done with the Trilateral Commission. You and your family have represented what goes for an aristocracy in our country—a sense of obligation not only to make it materially possible, but to participate yourself in what you have made possible and to infuse it with the enthusiasm, the innocence, and the faith that I identify with you and, if I may say so, with your family.”[37]

Kissinger sabotaged Rogers’ peace negotiations with Egyptian President Anwar Sadat, who, at the time, was trying to rally other Arab leaders against Israel. In 1972, King Faisal of Saudi Arabia had “insisted that oil should not be used as a political weapon.” However, “in 1973, Faisal announced that he was changing his mind about an oil embargo.” Faisal held a meeting with western oil executives, warning them. Sadat told Faisal of the plan to attack Israel, and Faisal agreed to help both financially and with the “oil weapon.” Days later, the Saudi oil minister, Sheik Ahmed Yamani, “began dropping hints to the oil companies about a cutback in production that would affect the United States.” Yamani said Henry Kissinger had been “misleading President Nixon about the seriousness of Faisal’s intentions.”[38]

On October 4, the US National Security Agency (NSA) “knew beyond a shadow of a doubt that an attack on Israel would take place on the afternoon of October 6.” However, the Nixon White House “ordered the NSA to sit on the information,” until the US warned Israel a few hours before the attack, even though “Nixon’s staff had at least two days’ advance warning that an attack was coming on October 6.”[39] Hours before the attack on Israel by Syria and Egypt, the U.S. warned its Israeli counterparts, however, “the White House insisted that the Israelis do nothing: no preemptive strikes, no firing the first shot. If Israel wanted American support, Kissinger warned, it could not even begin to mobilize until the Arabs invaded.” Israeli Prime Minister Golda Meir stood Israeli defences down, citing “Kissinger’s threats as the major reason.” Interestingly, Kissinger himself was absent from his office on the day of the attack, and he knew days before when it was set to take place, yet, still went to the Waldorf Astoria in New York. Further, he waited three days before convening a U.N. Security Council meeting.[40] The attack needed to go forward, as directed by the backdoor diplomacy of Kissinger.

With the outbreak of the Yom Kippur War on October 6, 1973, Kissinger “centered control of the crisis in his own hands.” After the Israelis informed the White House that the attack on them had taken place, Kissinger did not consult Nixon or even inform him on anything for three hours, who was at his retreat in Florida. After talking to Nixon hours later, Kissinger told him that, “we are on top of it here,” and “the president left matters in Kissinger’s hands.” Alexander Haig, Kissinger’s former second in command in the National Security Council, then Chief of Staff to Nixon, was with the President on that morning. Haig told Kissinger “that Nixon was considering returning to Washington, [but] Kissinger discouraged it—part of a recurring pattern to keep Nixon out of the process.” For three days, it was Kissinger who “oversaw the diplomatic exchanges with the Israelis and Soviets about the war. Israeli prime minister Golda Meir’s requests for military supplies, which were beginning to run low, came not to Nixon but to Kissinger.” On October 11, the British Prime Minister called asking to speak to Nixon, to which Kissinger responded, “Can we tell them no? When I talked to the President he was loaded,” but the British were told, “the prime minister could speak to Kissinger.”[41]

On October 12, the major American oil companies sent a letter to Nixon suggesting the Arab countries “should receive some price increase,” and Nixon, following Kissinger’s advice, sent arms to Israel, which precipitated the Arab OPEC countries to announce a 70% increase in the price of oil on October 16th, and announce an oil embargo against the US on the 17th.[42]

The Bilderberg meeting five months prior involved participants planning “how to manage the about-to-be-created flood of oil dollars.” At the meeting, an OPEC Middle East oil revenue rise of over 400% was predicted. A Bilderberg document from the meeting stated that, “The task of improving relations between energy importing countries should begin with consultations between Europe, the US and Japan. These three regions, which represented about 60 per cent of world energy consumption, accounted for an even greater proportion of world trade in energy products, as they absorbed 80 per cent of world energy exports.” The same document also stated that “an energy crisis or an increase in energy costs could irremediably jeopardize the economic expansion of developing countries which had no resources of their own,” and the “misuse or inadequate control of the financial resources of the oil producing countries could completely disorganize and undermine the world monetary system.”[43]

As economist F. William Engdahl noted in his book, A Century of War, “One enormous consequence of the ensuing 400 per cent rise in OPEC oil prices was that investments of hundreds of millions of dollars by British Petroleum, Royal Dutch Shell [both present at Bilderberg] and other Anglo-American petroleum concerns in the risky North Sea could produce oil at a profit,” as “the profitability of these new North Sea oilfields was not at all secure until after the OPEC price rises.”[44] In 2001, the former Saudi representative to OPEC, Sheik Ahmed Yamani, said, “’I am 100 per cent sure that the Americans were behind the increase in the price of oil. The oil companies were in real trouble at that time, they had borrowed a lot of money and they needed a high oil price to save them.” When he was sent by King Faisal to the Shah of Iran in 1974, the Shah said that it was Henry Kissinger who wanted a higher price for oil.[45]

An article in Foreign Policy, the journal published by the Carnegie Endowment for International Peace, concluded from exhaustive research, that, “Since 1971, the United States has encouraged Middle East oil-producing states to raise the price of oil and keep it up.” This conclusion was based upon State Department documents, congressional testimony and interviews with former policy-makers.[46] At the Eighth Petroleum Congress of the League of Arab States (Arab League) in 1972, James Akins, head of the fuel and energy section of the State Department, gave a speech in which he said that oil prices were “expected to go up sharply due to lack of short-term alternatives to Arab oil,” and that this was, “an unavoidable trend.” A Western observer at the meeting said Akins’ speech was essentially, “advocating that Arabs raise the price of oil to $5 per barrel.” The oil industry itself was also becoming more unified in their position. The National Petroleum Council (NPC), “a government advisory body representing oil industry interests, waited until Nixon was safely re-elected before publishing a voluminous series of studies calling for a doubling of U.S. oil and gas prices.”[47]

The summer before the Yom Kippur War, in 1973, James Akins was made U.S. Ambassador to Saudi Arabia. He also happened to be a member of the Council on Foreign Relations.[48] Saudi Arabian minister for petroleum and representative to OPEC, Sheik Ahmed Yamani, stated in February of 1973, that, “it is in the interests of the oil companies that prices be raised,” as “their profits are collected from the production stage.” It was also in the interests of the US, as OPEC will have a massive increase in revenues to be invested, likely in the US, itself.[49]

The oil companies themselves were also fearful of having their business facilities in OPEC countries nationalized, so they “were anxious to engage OPEC countries in the oil business in the United States, in order to give them an interest in maintaining the status quo.” Weeks before war broke out, the National Security Council, headed by Kissinger, issued a statement saying that military intervention in the event of a war in the Middle East was “ruled out of order.”[50]

U.S. Ambassador to Saudi Arabia, James Akins, later testified in congress on the fact that when, in 1975, the Saudis went to Iran to try to get the Shah to roll back the price of oil, they were told that Kissinger told the Iranians that, “the United States understood Iran’s desire for higher oil prices.”[51] Akins was removed from Saudi Arabia in 1975, “following policy disputes with Secretary of State Henry Kissinger.”[52]

The OPEC oil price increases resulted in the “removal of some withholding taxes on foreign investment” in the United States, “unchecked arms sales, which cannot be handled without U.S. support personnel, to Iran and Saudi Arabia,” as well as an “attempt to suppress publication of data on volume of OPEC funds on deposit with U.S. banks.”[53] Ultimately, the price increases “would be of competitive advantage to the United States because the economic damage would be greater to Europe and Japan.” Interestingly, “Programs for sopping up petrodollars have themselves become justifications for the continued flow of U.S. and foreign funds to pay for higher priced oil. In fact, a lobby of investors, businessmen, and exporters [was] growing in the United States to favor giving the OPEC countries their way.” Outside the United States, it is “widely believed” that the high-priced oil policy was aimed at hurting Europe, Japan, and the developing world.[54] There was also “input from the oil industry” which went “into the formulation of U.S. international oil policy.”[55]

In 1974, when a White House official suggested to the Treasury to force OPEC to lower the price of oil, his idea was swept under, and he later stated that, “It was the banking leaders who swept aside this advice and pressed for a ‘recycling’ program to accommodate to higher oil prices.” In 1975, a Wall Street investment banker was sent to Saudi Arabia to be the main investment adviser to the Saudi Arabian Monetary Agency (SAMA), and “he was to guide the Saudi petrodollar investments to the correct banks, naturally in London and New York.”[56]

In 1974, another OPEC oil price increase of more than 100 percent was undertaken, following a meeting in Tehran, Iran. This initiative was undertaken by the Shah of Iran, who just months before was opposed to the earlier price increases. Sheikh Yamani, the Saudi oil minister, was sent to meet with the Shah of Iran following his surprise decision to raise prices, as Yamani was sent by Saudi King Faisal, who was worried that higher prices would alienate the US, to which the Shah said to Yamani, “Why are you against the increase in the price of oil? That is what they want? Ask Henry Kissinger – he is the one who wants a higher price.”[57]

As Peter Gowan stated in The Globalization Gamble, “the oil price rises were the result of US influence on the oil states and they were arranged in part as an exercise in economic statecraft directed against America’s ‘allies’ in Western Europe and Japan. And another dimension of the Nixon administration’s policy on oil price rises was to give a new role, through them, to the US private banks in international financial relations.” He explained that the Nixon administration was pursuing a higher oil price policy two years before the Yom Kippur War, and “as early as 1972 the Nixon administration planned for the US private banks to recycle the petrodollars when OPEC finally did take US advice and jack up oil prices.”[58] Ultimately, the price rises had devastating impacts on Western Europe and Japan, which were quickly growing economies, but which were heavily dependent upon Middle eastern oil. This is an example of how the US, while championing a liberal international economic order, acted in a mercantilist fashion, depriving competitors through improving its own power and influence.

In 1973, David Rockefeller set up the Trilateral Commission to promote coordination and cooperation among Japan, Western Europe, and North America (namely, the US), yet, in the same year, his good friend and close confidante, Henry Kissinger, played a key role in promoting and orchestrating the oil price rises that had a damaging impact upon Japan and Western Europe. Also it should be noted, David Rockefeller’s Chase Manhattan Bank, of which he was CEO at the time, profited immensely off of the petrodollar recycling system promoted by Henry Kissinger, where the OPEC countries would reinvest their new excess capital into the American economy through London and New York banks.

How does one account for these seemingly diametrically opposed initiatives? Perhaps the oil crisis, having a negative effect on Japan and Western European economies, could have spurred the necessity for cooperation among the trilateral countries, forcing them to come together and coordinate future policies.

It is of vital importance to understand the global conditions in which the price rises and its solutions arose, particularly in relation to the Third World. Africa, since the late 1800s, had been under European colonial control. It was from the 1950s to the 1960s that almost all African countries were granted independence from their European metropoles. Africa is a very significant case to look at, as it is extremely rich in many resources, from agriculture to oil, minerals, and a huge variety of other resources used all around the world. If African nations were able to develop their own economies, use their own resources, and create their own industries and businesses, they could become self-sufficient at first, and then may become a force of great competition for the established industries and elites around the world. After all, Europe does not have much to offer in terms of resources, as the continent’s wealth has largely come from plundering the resources of regions like Africa, and in becoming captains of monetary manipulation. A revitalized, vibrant, economically independent and successful Africa could spell the end of Western financial dominance. “Between 1960 and 1975 African industry grew at the annual rate of 7.5 per cent. This compared favourably with the 7.2 per cent for Latin America and 7.5 per cent for South-East Asia.”[59] In Africa, “the 1960-73 period witnessed some important first steps in the process of industrialization,” however, “[t]he dramatic decline in rates of industrialization began to show after the first ‘oil crisis’. Between 1973 and 1984, the rate of growth” rapidly declined.[60]

So, by manipulating the price of oil, you can manipulate the development of the Third World, which was beginning to look as if it could grow into significant competition, as it was experiencing exponential growth. There were two oil shocks in the 1970s; one in 1973 and another in 1979. Following the price rises, there was a need for the developing countries of the world to borrow money to finance development.

The banks that were getting massive amounts of petrodollars deposited into them from the oil producing countries needed to “recycle” the dollars by investing them somewhere, in order to make a profit. Luckily for the banks, “[d]eveloping countries were desperate for funds to help them industrialize their economies. In some cases, developing countries were oil consumers and required loans to help pay for rising oil prices. In other cases, a decision had been made to follow a strategy of indebted industrialization. This meant that states borrowed money to invest in industrialization and would pay off the loans from the profits of their new industries. Loans were an attractive option because they did not come with the influence of foreign transnational corporations that accompanied foreign direct investment and most states had few funds of their own to invest.”[61]

The oil price rises “changed the face of world finance,” as: “In the new era of costly energy, scores of countries, not all of them in the Third World, were too strapped to pay their imported-oil bills. At the same time, Western banks suddenly received a rush of deposits from oil-producing nations. It seemed only logical, even humane, that the banks should recycle petrodollars.” This is where the true face of Trilateralism began to show: “It became an everyday event for one or two lead banks in the U.S. or Western Europe to round up dozens of partners by telephone to put together so-called jumbo syndicates for loans to developing countries. Some bankers were so afraid of missing out that during lunch hours they even empowered their secretaries to promise $5 million or $10 million as part of any billion-dollar loan package for Brazil or Mexico.” Interestingly, these banks argued, “that their foreign loans were encouraged by officials at the U.S. Treasury and Federal Reserve Board. They feared that developing countries would become economically and politically unstable if credit was denied. In 1976 Arthur Burns, chairman of the Federal Reserve, began cautioning bankers that they might be lending too much overseas, but he did nothing to curb the loans. For the most part, they ignored the warning. Financiers were confident that countries like Mexico, with its oil reserves, and Brazil, with abundant mineral resources, were good credit risks.”[62]

According to a report produced by the Federal Reserve, prior to the 1973 oil crisis, “the private Japanese financial system remained largely isolated from the rest of the world. The system was highly regulated,” and, “various types of banking firms and other financial service firms were legally and administratively confined to a specified range of activities assigned to each.” However, the “OPEC oil shock in 1973 signaled a turning point in the operation of the Japanese financial system.”[63] As part of this turning point, the Bank of Japan (the central bank of Japan), relaxed “monetary control by lending more generously to the major banks. The result was a growing budget deficit and a rapid rise in inflation.”[64] The deregulation of Japanese banking access to foreign markets went hand-in-hand with the deregulation of domestic markets. It was a two-way street; as Japanese industry and banks gained access to foreign markets, foreign industry and banks gained access to the Japanese market. This led to the growth of Japanese banks internationally, of which today many are among the largest banks in the world. This was a result of the Trilateral Commission’s efforts. Also evident of the Trilateral partnership was that western banks “made loans so that poor countries could purchase goods made in Western Europe and North America.”[65]

Of great significance was that, “the new international monetary arrangements gave the United States government far more influence over the international monetary and financial relations of the world than it had enjoyed under the Bretton Woods system. It could freely decide the price of the dollar. And states would become increasingly dependent upon developments in Anglo-American financial markets for managing their international monetary relations. And trends in these financial markets could be shifted by the actions (and words) of the US public authorities, in the Treasury Department and the Federal Reserve Board (the US Central Bank).”[66] This new system is referred to as the Dollar-Wall Street Regime (DWSR), as it is dependent upon the US dollar and the key actors on Wall Street.

The Federal Reserve’s response to the initial 1973-74 oil price shock was to keep interest rates low, which led to inflation and a devalued dollar. It’s also what allowed and encouraged banks to lend massive amounts to developing countries, often lending more than their net worth. However, in 1979, with the second oil shock, the Federal Reserve changed policy, and the true nature of the original oil crisis, petrodollar recycling and loans became apparent.

The Rise of Neo-Liberalism

In the early 1970s, the government of Chile was led by a leftist socialist-leaning politician named Salvador Allende, who was considering undertaking a program of nationalization of industries, which would significantly affect US business interests in the country. David Rockefeller expressed his view on the issue in his book, Memoirs, when he said that actions taken by Chile’s new government “severely restricted the operations of foreign corporations,” and he continued, saying, “I was so concerned about the situation that I met with Secretary of State William P. Rogers and National Security Advisor Henry Kissinger.”[67]

As author Peter Dale Scott analyzed in his book, The Road to 9/11, David Rockefeller played a pivotal role in the events in Chile. After a failed attempt at trying to solve the ‘situation’ by sending David’s brother Nelson Rockefeller, the Governor of New York, down to Latin America, David Rockefeller attempted a larger operation. David Rockefeller told the story of how his friend Agustin (Doonie) Edwards, the publisher of El Mercurio, had warned David that if Allende won the election, Chile would “become another Cuba, a satellite of the Soviet Union.” David then put Doonie “in touch with Henry Kissinger.”[68]

In the same month that Kissinger met with Edwards, the National Security Council (of which Kissinger held the top post) authorized CIA “spoiling operations” to prevent the election of Allende. David Rockefeller had known Doonie Edwards from the Business Group for Latin America (BGLA), which was founded by Rockefeller in 1963, later to be named the Council of the Americas. Rockefeller founded it initially, in cooperation with the US government, “as cover for [CIA’s] Latin American operations.” The US Assistant Secretary of State for Latin American Affairs at the time was Charles Meyer, formerly with Rockefeller’s BGLA, who said that he was chosen for his position at the State Department “by David Rockefeller.” When Allende was elected on September 4, 1970, Doonie Edwards left Chile for the US, where Rockefeller helped him “get established” and the CEO of PepsiCo, Donald Kendall, gave him a job as a Vice President. Ten days later, Donald Kendall met with Richard Nixon, and the next day, Nixon, Kissinger, Kendall and Edwards had breakfast together. Later that day, Kissinger arranged a meeting between Edwards and CIA director, Richard Helms. Helms met with both Edwards and Kendall, who asked the CIA to intervene. Later that day, Nixon told Helms and Kissinger to “move against Allende.”[69]

However, before Edwards met with the CIA director, Henry Kissinger had met privately with “David Rockefeller, chairman of the Chase Manhattan Bank, which had interests in Chile that were more extensive than even Pepsi-Cola’s.” Rockefeller even allowed the CIA to use his bank for “anti-Allende Chilean operations.”[70] After Allende came to power, “commercial banks, including Chase Manhattan, Chemical, First National City, Manufacturers Hanover, and Morgan Guaranty, cancelled credits to Chile,” and the “World Bank, Inter-American Development Bank, Agency for International Development, and the Export-Import Bank either cut programs in Chile or cancelled credits.” However, “military aid to Chile, which has always been substantial, doubled in the 1970-1974 period as compared to the previous four years.”[71]

On September 11, 1973, General Augusto Pinochet orchestrated a coup d’état, with the aid and participation of the CIA, against the Allende government of Chile, overthrowing it and installing Pinochet as dictator. The next day, an economic plan for the country was on the desks of “the General Officers of the Armed Forces who performed government duties.” The plan entailed “privatization, deregulation and cuts to social spending,” written up by “U.S.-trained economists.”[72] These were the essential concepts in neoliberal thought, which, through the oil crises of the 1970s, would be forced upon the developing world through the World Bank and IMF.

In essence, Chile was the neo-liberal Petri-dish experiment. This was to expand drastically and become the very substance of the international economic order.

Globalization: A Liberal-Mercantilist Economic Order?

Neo-Liberals Take the Forefront

In 1971, Jimmy Carter, a somewhat obscure governor from Georgia had started to have meetings with David Rockefeller. They became connected due to Carter’s support from the Atlanta corporate elite, who had extensive ties to the Rockefellers. So in 1973, when David Rockefeller and Zbigniew Brzezinski were picking people to join the Trilateral Commission, Carter was selected for membership. Carter thus attended every meeting, and even paid for his trip to the 1976 meeting in Japan with his campaign funds, as he was running for president at the time. Brzezinski was Carter’s closest adviser, writing Carter’s major campaign speeches.[73]

When Jimmy Carter became President, he appointed over two-dozen members of the Trilateral Commission to key positions in his cabinet, among them, Zbigniew Brzezinski, who became National Security Adviser; Samuel P. Huntington, Coordinator of National Security and Deputy to Brzezinski; Harold Brown, Secretary of Defense; Warren Christopher, Deputy Secretary of State; Walter Mondale, Vice President; Cyrus Vance, Secretary of State; and in 1979, he appointed David Rockefeller’s friend, Paul Volcker, as Chairman of the Federal Reserve Board.[74]

In 1979, the Iranian Revolution spurred another massive increase in the price of oil. The Western nations, particularly the United States, had put a freeze on Iranian assets, “effectively restricting the access of Iran to the global oil market, the Iranian assets freeze became a major factor in the huge oil price increases of 1979 and 1981.”[75] Added to this, in 1979, British Petroleum cancelled major oil contracts for oil supply, which along with cancellations taken by Royal Dutch Shell, drove the price of oil up higher.[76]

However, in 1979, the Federal Reserve, now the lynch-pin of the international monetary system, which was awash in petro-dollars (US dollars) as a result of the 1973 oil crisis, decided to take a different action from the one it had taken earlier. In August of 1979, “on the advice of David Rockefeller and other influential voices of the Wall Street banking establishment, President Carter appointed Paul A. Volcker, the man who, back in August 1971, had been a key architect of the policy of taking the dollar off the gold standard, to head the Federal Reserve.”[77]

Volcker got his start as a staff economist at the New York Federal Reserve Bank in the early 50s. After five years there, “David Rockefeller’s Chase Bank lured him away.”[78] So in 1957, Volcker went to work at Chase, where Rockefeller “recruited him as his special assistant on a congressional commission on money and credit in America and for help, later, on an advisory commission to the Treasury Department.”[79] In the early 60s, Volcker went to work in the Treasury Department, and returned to Chase in 1965 “as an aide to Rockefeller, this time as vice president dealing with international business.” With Nixon entering the White House, Volcker got the third highest job in the Treasury Department. This put him at the center of the decision making process behind the dissolution of the Bretton Woods agreement.[80] In 1973, Volcker became a member of Rockefeller’s Trilateral Commission. In 1975, he got the job as President of the New York Federal Reserve Bank, the most powerful of the 12 branches of the Fed.

In 1979, Carter gave the job of Treasury Secretary to Arthur Miller, who had been Chairman of the Fed. This left an opening at the Fed, which was initially offered by Carter to David Rockefeller, who declined, and then to A.W. Clausen, Chairman of Bank of America, who also declined. Carter repeatedly tried to get Rockefeller to accept, and ultimately Rockefeller recommended Volcker for the job.[81] Volcker became Chairman of the Federal Reserve System, and immediately took drastic action to fight inflation by radically increasing interest rates.

The world was taken by shock. This was not a policy that would only be felt in the US with a recession, but was to send shock waves around the world, devastating the Third World debtor nations. This was likely the ultimate aim of the 1970s oil shocks and the 1979 Federal Reserve shock therapy. With the raising of interest rates, the cost of international money also rose. Thus, the interest rates on international loans made throughout the 1970s rose from 2% in the 1970s to 18% in the 1980s, dramatically increasing the interest charges on loans to developing countries.[82]

In the developing world, states that had to import oil faced enormous bills to cover their debts, and even oil producing countries, such as Mexico, faced huge problems as they had borrowed heavily in order to industrialize, and then suffered when oil prices fell again as the recession occurring in the developed states reduced demand. Thus, in 1982, Mexico declared that it could no longer pay its debt, meaning that, “they could no longer cover the cost of interest payments, much less hope to repay the debt.” The result was the bursting of the debt bubble. Banks then halted their loans to Mexico, and “Before long it was evident that states such as Brazil, Venezuela, Argentina, and many sub-Saharan African countries were in equally difficult financial positions.”[83]

The IMF and World Bank entered the scene newly refurnished with a whole new outlook and policy program designed just in time for the arrival of the debt crisis. The IMF “negotiated standby loans with debtors offering temporary assistance to states in need. In return for the loans states agreed to undertake structural adjustment programs (SAPs). These programs entailed the liberalization of economies to trade and foreign investment as well as the reduction of state subsidies and bureaucracies to balance national budgets.”[84] Thus, the neoliberal project of 1973 in Chile was expanded into the very functioning of the International Financial Institutions (IFIs).

Neoliberalism is “a particular organization of capitalism, which has evolved to protect capital(ism) and to reduce the power of labour. This is achieved by means of social, economic and political transformations imposed by internal forces as well as external pressure,” and it entails the “shameless use of foreign aid, debt relief and balance of payments support to promote the neoliberal programme, and diplomatic pressure, political unrest and military intervention when necessary.”[85] Further, “neoliberalism is part of a hegemonic project concentrating power and wealth in elite groups around the world, benefiting especially the financial interests within each country, and US capital internationally. Therefore, globalization and imperialism cannot be analysed separately from neoliberalism.”[86]

Joseph Stiglitz, former Chief Economist of the World Bank, wrote in his book, Globalization and its Discontents, “In the 1980s, the Bank went beyond just lending for projects (like roads and dams) to providing broad-based support, in the form of structural adjustment loans; but it did this only when the IMF gave its approval – and with that approval came IMF-imposed conditions on the country.”[87] As economist Michel Chossudovsky wrote, “Because countries were indebted, the Bretton Woods institutions were able to oblige them through the so-called ‘conditionalities’ attached to the loan agreements to appropriately redirect their macro-economic policy in accordance with the interests of the official and commercial creditors.”[88]

The nature of SAPs is such that the conditions imposed upon countries that sign onto these agreements include: lowering budget deficits, devaluing the currency, limiting government borrowing from the central bank, liberalizing foreign trade, reducing public sector wages, price liberalization, deregulation and altering interest rates.[89] For reducing budget deficits, “precise ‘ceilings’ are placed on all categories of expenditure; the state is no longer permitted to mobilize its own resources for the building of public infrastructure, roads, or hospitals, etc.”[90]

Joseph Stiglitz wrote that, “the IMF staff monitored progress, not just on the relevant indicators for sound macromanagement – inflation, growth, and unemployment – but on intermediate variables, such as the money supply,” and that “In some cases the agreements stipulated what laws the country’s Parliament would have to pass to meet IMF requirements or ‘targets’ – and by when.”[91] Further, “The conditions went beyond economics into areas that properly belong in the realm of politics,” and that “the way conditionality was imposed made the conditions politically unsustainable; when a new government came into power, they would be abandoned. Such conditions were seen as the intrusion by the new colonial power on the country’s own sovereignty.”[92]

“The phrase ‘Washington Consensus’ was coined to capture the agreement upon economic policy that was shared between the two major international financial institutions in Washington (IMF and World Bank) and the US government itself. This consensus stipulated that the best path to economic development was through financial and trade liberalization and that international institutions should persuade countries to adopt such measures as quickly as possible.”[93] The debt crisis provided the perfect opportunity to quickly impose these conditions upon countries that were not in a position to negotiate and with no time to spare, desperately in need of loans. Without the debt crisis, such policies may have been subject to greater scrutiny, and with a case-by-case analysis of countries adopting SAPs, the world would become quickly aware of their dangerous implications. The debt crisis was absolutely necessary in implementing the SAPs on an international scale in a short amount of time.

The effect became quite clear, as the result “of these policies on the population of developing countries was devastating. The 1980s is known as the ‘lost decade’ of development. Many developing countries’ economies were smaller and poorer in 1990 than in 1980. Over the 1980s and 1990s, debt in many developing countries was so great that governments had few resources to spend on social services and development.”[94] With the debt crisis, countries in the developing world were “[s]tarved of international finance, [and] states had little choice but to open their economies to foreign investors and trade.”[95] The “Third World” was recaptured in the cold grasp of economic colonialism under the auspices of neo-liberal economic theory.

A Return to Statist Theory

Since the 1970s, mercantilist thought had re-emerged in mainstream political-economic theory. Under various names such as neo-mercantilism, economic nationalism or statism, they hold as vital the centrality of the state in the global political economy. Much “Globalization” literature puts an emphasis on the “decline of the state” in the face of an integrated international economic order, where borders are made illusory. However, statist theory at least helps us understand that the state is still a vital factor within the global political economy, even in the midst of a neo-liberal economic order.

Within the neo-liberal economic order, it was the powerful western (primarily US and Western European) states that imposed neo-mercantilist or statist policies in order to protect and promote their interests within the global political economy. Some of these methods were revolved around policy tools such as export subsidies, imposed to lower the price of goods, which would make them more attractive to importers, giving that particular nation an advantage over the competition.

For example, the US has enormous agriculture export subsidies, which make US agriculture and grain an easily affordable, attractive and accessible commodity for importing nations. Countries of the global south (the Lesser-Developed Countries, LDCs), subject to neo-liberal policies imposed upon them by the World Bank and IMF were forced to open their economies up to foreign capital. The World Bank would bring in heavily subsidized US grain to these poor nations under the guise of “food aid,” which would have the affect of destabilizing the nation’s agriculture market, as the heavily subsidized US grains would be cheaper than local produce, putting farmers out of business. Most LDCs are predominantly rural based, so when the farming sector is devastated, so too is the entire nation. They plunge into economic crisis and even famine.

With the statist approach, theorists examine how the state is still relevant in shaping economic outcomes and still remains a powerful entity in the international arena. One theorist who is prominent within the statist school is Robert Gilpin. Gilpin, a professor at the Woodrow Wilson School of Public and International Affairs at Princeton, is also a member of the Council on Foreign Relations. In his book, Global Political Economy, Gilpin postulated that multinational corporations were an invention of the United States, and indeed an “American phenomenon” upon which European and Asian states responded by internationalizing their own firms. In this sense, his theory postulated to a return to the competitive nature of mercantilist economic theory, in which one state gains at the expense of another. He also addresses the nature of the international economy, in that both historically and presently, there was a single state acting as the main enforcer and manager of the global economy. Historically, it was Britain, and presently, it was the United States.

One cannot deny the significance of the state in the global political economy, as it has been, and still remains very relevant. The events of 1973 are exemplary of this, however, more must be examined in order to better understand the situation. Though states are still prominent actors, it is vital to address in whose interest they act. Mercantilist and statist theorists tend to focus on the concept that states act in their own selfish interest, for the benefit of the state, both politically and economically. However, this is somewhat linear and diversionary, as it does not address the precise structure of the state economy, specifically in terms of its monetary and central banking system.

States, most especially the large hegemonic ones, such as the United States and Great Britain, are controlled by the international central banking system, working through secret agreements at the Bank for International Settlements (BIS), and operating through national central banks (such as the Bank of England and the Federal Reserve). The state is thus owned by an international banking cartel, and though the state acts in such a way that proves its continual relevance in the global economy, it acts so not in terms of self-interest for the state itself, but for the powerful interests that control that state. The same international banking cartel that controls the United States today previously controlled Great Britain and held it up as the international hegemon. When the British order faded, and was replaced by the United States, the US ran the global economy. However, the same interests are served. States will be used and discarded at will by the international banking cartel; they are simply tools.

In this sense, interdependence theory, which presumes the decline of the state in international affairs, fails to acknowledge the role of the state in promoting and undertaking the process of interdependence. The decline of the nation-state is a state-driven process, and is a process that leads to a rise of the continental state and the global state. States, are still very relevant, but both liberal and mercantilist theorists, while helpful in understanding the concepts behind the global economy, lay the theoretical groundwork for a political economic agenda being undertaken by powerful interests. Like Robert Cox said, “Theory is always for someone and for some purpose.”

Hegemonic-Stability Theory

In his book, Global Political Economy, Gilpin explained that, “In time, if unchecked, the integration of an economy into the world economy, the intensifying pressures of foreign competition, and the necessity to be efficient in order to survive economically could undermine the independence of a society and force it to adopt new values and forms of social organization. Fear that economic globalization and the integration of national markets are destroying or could destroy the political, economic, and cultural autonomy of national societies has become widespread.”[96]

However, Gilpin explains that the “Creation of effective international regimes and solutions to the compliance problem require both strong international leadership and an effective international governance structure.” Yet, he explains, “Regimes in themselves cannot provide governance structure because they lack the most critical component of governance – the power to enforce compliance. Regimes must rest instead on a political base established through leadership and cooperation.”[97] This is where we see the emergence of Hegemonic Stability Theory.

Gilpin explains that, “The theory of hegemonic stability posits that the leader or hegemon facilitates international cooperation and prevents defection from the rules of the regime through use of side payments (bribes), sanctions, and/or other means, but can seldom, if ever, coerce reluctant states to obey the rules of a liberal international economic order.” As he explained, “The American hegemon did indeed play a crucial role in establishing and managing the world economy following World War II.”[98]

The roots of Hegemonic Stability Theory (HST) lie within both liberal and statist theory, as it is representative of a crossover theory that cannot be so easily placed in either category. The main concept champions the liberal notion of the open international economic system, guided by liberal principles of open-markets and free trade, while bringing in the statist concept of a single hegemonic state representing the concentration of political and economic power, as it is the enforcer of the liberal international economy.

The more liberal-leaning theorists of HST argue that a liberal economic order requires a strong, hegemonic state to maintain the smooth functioning of the international economy. One thing this state must do is maintain the international monetary system, as Britain did under the gold standard and the United States did under the Dollar-Wall Street Regime, following the end of the Bretton-Woods dollar-gold link.

Regime Theory

Regime Theory is another crossover theory between liberal and mercantilist theorists. Its rise was primarily in reaction to the emergence of Hegemonic Stability Theory, in order to address the concern of a perceived decline in the power of the US. This was due to the rise of new economic powers in the 1970s, and another major purveyor of this theory was Robert Keohane. They needed to address how the international order could be maintained as the hegemonic power declined. The answer was in the building of international organizations to manage the international regime.

In this sense, Regime Theory has identified an important aspect of the global political economy, in that though states have upheld the international order in the past, never before has there been such an undertaking to institutionalize the authority over the international order through international organizations. These organizations, such as the World Bank, IMF, UN, and WTO, though still controlled and influenced by states, predominantly the international hegemon, the United States, represent a changing direction of internationalization and transnationalism. Regime Theorists tend to justify the formation of a more transnational apparatus of power, beyond just a single hegemonic state, into a more internationalized structure of authority.

Notes

[1]        CBC, Informal forum or global conspiracy? CBC News Online: June 13, 2006: http://www.cbc.ca/news/background/bilderberg-group/

[2]        Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. (South End Press: 1980), 161-171

[3]        Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. (South End Press: 1980), 161-162

[4]        CFR, The First Transformation. CFR History: http://www.cfr.org/about/history/cfr/first_transformation.html

[5]        Glen McGregor, Secretive power brokers meeting coming to Ottawa? Ottawa Citizen: May 24, 2006: http://www.canada.com/topics/news/world/story.html?id=ff614eb8-02cc-41a3-a42d-30642def1421&k=62840

[6]        William F. Jasper, Rogues’ gallery of EU founders. The New American: July 12, 2004: http://findarticles.com/p/articles/mi_m0JZS/is_14_20/ai_n25093084/pg_1?tag=artBody;col1

[7]        Ambrose Evans-Pritchard, Euro-federalists financed by US spy chiefs. The Telegraph: June 19, 2001: http://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalists-financed-by-US-spy-chiefs.html

[8]        Ambrose Evans-Pritchard, Euro-federalists financed by US spy chiefs. The Telegraph: June 19, 2001: http://www.telegraph.co.uk/news/worldnews/europe/1356047/Euro-federalists-financed-by-US-spy-chiefs.html

[9]        Bilderberg Group, GARMISCH-PARTENKIRCHEN CONFERENCE. The Bilderberg Group: September 23-25, 1955, page 7:

http://wikileaks.org/leak/bilderberg-meetings-report-1955.pdf

[10]      Who are these Bilderbergers and what do they do? The Sunday Herald: May 30, 1999: http://findarticles.com/p/articles/mi_qn4156/is_19990530/ai_n13939252

[11]      Andrew Rettman, ‘Jury’s out’ on future of Europe, EU doyen says. EUobserver: March 16, 2009: http://euobserver.com/9/27778

[12]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: page 110

[13]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: page 107

[14]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 107-108

[15]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: page 108

[16]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: page 108

[17]      George T. Crane, Abla Amawi, The Theoretical evolution of international political economy. Oxford University Press US, 1997: pages 50-51

[18]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: page 65

[19]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 215

[20]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: pages 66-67

[21]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: page 67

[22]      C. Fred Bergsten, The New Economics and US Foreign Policy. Foreign Affairs: January, 1972: page 199

[23]      Richard H. Ullman, Trilateralism: “Partnership” For What? Foreign Affairs: October, 1976: pages 3-4

[24]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: pages 76-78

[25]      Richard H. Ullman, Trilateralism: “Partnership” For What? Foreign Affairs: October, 1976: page 3

[26]      Richard H. Ullman, Trilateralism: “Partnership” For What? Foreign Affairs: October, 1976: page 5

[27]      Congressional Research Service, TRILATERAL COMMISSION. The Library of Congress: pages 13-14: http://www.scribd.com/doc/5014337/Trilateral-Commission

[28]      CFR, Joseph S. Nye, Jr.. Board of Directors: http://www.cfr.org/bios/1330/joseph_s_nye_jr.html

[29]      Annual Report, The Council on Foreign Relations. Historical Roster of Directors and Officers, 2008: page 78

[30]      Peter Gowan, The Globalization Gamble: The Dollar-Wall Street Regime and its Consequences. Page 19-20

[31]      William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order. (London: Pluto Press, 2004), 130-132

[32]      William Engdahl, A Century of War: Anglo-American Oil Politics and the New World Order. (London: Pluto Press, 2004), 286-287, 134

[33]      CFR, “X” Leads the Way. CFR History: http://www.cfr.org/about/history/cfr/x_leads.html

[34]      Robert Dallek, The Kissinger Presidency. Vanity Fair: May 2007: http://www.vanityfair.com/politics/features/2007/05/kissinger200705

[35]      Ibid.

[36]      David Stout, William P. Rogers, Who Served as Nixon’s Secretary of State, Is Dead at 87. The New York Times: January 4, 2001: http://query.nytimes.com/gst/fullpage.html?res=9B02E5D6113BF937A35752C0A9679C8B63

[37]     TC, Tributes to David Rockefeller, Founder and Honorary Chairman. The Trilateral Commission: December 1, 1998: http://www.trilateral.org/nagp/regmtgs/98/1201tribs.htm

[38]      John Loftus and Mark Aarons, The Secret War Against the Jews: How Western Espionage Betrayed the Jewish People. St. Martin’s Griffin: 1994: pages 304-307

[39]      John Loftus and Mark Aarons, The Secret War Against the Jews: How Western Espionage Betrayed the Jewish People. St. Martin’s Griffin: 1994: pages 308-310

[40]      John Loftus and Mark Aarons, The Secret War Against the Jews: How Western Espionage Betrayed the Jewish People. St. Martin’s Griffin: 1994: pages 310-311

[41]      Robert Dallek, The Kissinger Presidency. Vanity Fair: May 2007: http://www.vanityfair.com/politics/features/2007/05/kissinger200705

[42]      John Loftus and Mark Aarons, The Secret War Against the Jews: How Western Espionage Betrayed the Jewish People. St. Martin’s Griffin: 1994: pages 312-313

[43]      F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New  World Order. London: Pluto Press, 2004: pages 130-132

[44]      F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New  World Order. London: Pluto Press, 2004: pages 136-137

[45]      The Observer, Saudi dove in the oil slick. The Guardian: January 14, 2001: http://www.guardian.co.uk/business/2001/jan/14/globalrecession.oilandpetrol

[46]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: page 24

[47]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: pages 31-33

[48]      IPC, James Akins. Iran Policy Committee: Scholars and Fellows: http://www.iranpolicy.org/scholarsandfellows.php#1

[49]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: pages 35-36

[50]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: pages 37-38

[51]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: page 44

[52]      Time, The Cast of Analysts. Time Magazine: March 12, 1979: http://www.time.com/time/magazine/article/0,9171,948424,00.html

[53]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: page 48

[54]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: pages 50-51

[55]      V.H. Oppenheim, Why Oil Prices Go Up (1) The Past: We Pushed Them. Foreign Policy: No. 25, Winter, 1976-1977: page 53

[56]      F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New  World Order. London: Pluto Press, 2004: page 137

[57]  The Observer, Saudi dove in the oil slick. The Guardian: January 14, 2001: http://www.guardian.co.uk/business/2001/jan/14/globalrecession.oilandpetrol

[58] Peter Gowan, The Globalization Gamble: The Dollar-Wall Street Regime and its Consequences: marxsite.com/Gowan_DollarWallstreetRegime.pdf: page 10

[59]      Dharam Ghai, ed., The IMF and the South: The Social Impact of Crisis and Adjustment (London: United Nations Research Institute for Social Development, 1991), 81

[60]      Dharam Ghai, ed., The IMF and the South: The Social Impact of Crisis and Adjustment (London: United Nations Research Institute for Social Development, 1991), 82

[61]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 223

[62]      Gisela Bolte, et. al., Jumbo Loans, Jumbo Risks. Time Magazine: December 3, 1984: http://www.time.com/time/magazine/article/0,9171,923771,00.html

[63]      Allen B. Frankel and Paul B. Morgan, A Primer on the Japanese Banking System. Board of Governors of the Federal reserve System, International Finance Discussion Papers: Number 419, December 1991: page 3

[64]      A. W. Mullineux, International Banking and Financial Systems: A Comparison. Springer, 1987: page 63

[65]      Robert K. Schaeffer, Understanding Globalization: The Social Consequences of Political, Economic, and Environmental Change. Rowman & Littlefield, 2005: page 82

[66] Peter Gowan, The Globalization Gamble: The Dollar-Wall Street Regime and its Consequences: marxsite.com/Gowan_DollarWallstreetRegime.pdf: page 12

[67]      David Rockefeller, Memoirs. New York: Random House: 2002: Page 431

[68]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. University of California Press: 2007: page 39-40

[69]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. University of California Press: 2007: page 41

[70]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. University of California Press: 2007: pages 40-41

[71]      Daniel Brandt, U.S. Responsibility for the Coup in Chile. Public Information Research: November 28, 1998: http://www.namebase.org/chile.html

[72]      Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism. Macmillan: 2007: page 77

[73]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: pages 201-203

[74]      Holly Sklar, ed., Trilateralism: The Trilateral Commission and Elite Planning for World Management. South End Press: 1980: pages 91-92

[75]      Peter Dale Scott, The Road to 9/11: Wealth, Empire, and the Future of America. University of California Press: 2007: page 88

[76]      F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New  World Order. London: Pluto Press, 2004: page 173

[77]      F. William Engdahl, A Century of War: Anglo-American Oil Politics and the New  World Order. London: Pluto Press, 2004: page 174

[78]      Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 36

[79]      Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 37

[80]      Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: page 38

[81]      Joseph B. Treaster, Paul Volcker: The Making of a Financial Legend. John Wiley and Sons, 2004: pages 57-60

[82]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 223

[83]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 224

[84]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 224

[85]      A. Paloni and M. Zonardi, eds., Neoliberalism: A Critical Introduction. London: Pluto, 2005: page 3

[86]      A. Paloni and M. Zonardi, eds., Neoliberalism: A Critical Introduction. London: Pluto, 2005: page 1

[87]      Joseph Stiglitz, Globalization and its Discontents. New York: Norton, 2003: page 14

[88]      Michel Chossudovsky, The Globalization of Poverty and the New World Order, 2nd ed. Quebec: Global Research, 2003: page 35

[89]      Marc Williams, International Economic Organizations and the Third World. Hemel Hempstead: Harvester Wheatsheaf, 1994: page 85

[90]      Michel Chossudovsky, The Globalization of Poverty and the New World Order, 2nd ed. Quebec: Global Research, 2003: page 52

[91]      Joseph Stiglitz, Globalization and its Discontents. New York: Norton, 2003: pages 43-44

[92]      Joseph Stiglitz, Globalization and its Discontents. New York: Norton, 2003: pages 44-46

[93]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 224

[94]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 224

[95]      Robert O’Brien and Marc Williams, Global Political Economy: Evolution and Dynamics, 2nd ed. Palgrave Macmillan: 2007: page 225

[96]      Robert Gilpin, Global Political Economy: Understanding the International Economic Order, Princeton University Press, 2001: page 81

[97]      Robert Gilpin, Global Political Economy: Understanding the International Economic Order, Princeton University Press, 2001: page 97

[98]      Robert Gilpin, Global Political Economy: Understanding the International Economic Order, Princeton University Press, 2001: pages 97-98