Delivered to the Economic Club of Washington, DC, an appreciative audience whose sponsors include the major arms manufacturers Boeing and Northrop Grumman as well as financial giants like Bank of America and Goldman Sachs, the defense secretary's speech presented an unabashed declaration of Washington's intentions to assert its hegemony over the world's markets and resources by whatever means necessary, up to and including a nuclear holocaust.
The presentation made by Carter, a longtime technocrat of America's military industrial complex, provides a powerful vindication of the warnings made by the International Committee of the Fourth International and the World Socialist Web Site that the deepening crisis of US and global capitalism is posing a real and growing danger of a Third World War.
The biggest increase proposed in the Pentagon budget is the quadrupling of funding for the US military buildup against Russia in Europe—projected to rise from $800 million to $3.4 billion. In addition to the 65,000 troops Washington already garrisons on the European continent, the funding increase will pay for the "heel to toe" rotation of full armored combat brigades into the former Baltic republics, on Russia's doorstep, as well as other eastern European countries.
This proposal represents a flagrant and provocative violation of the agreements reached with Moscow in the wake of the Stalinist bureaucracy's dissolution of the Soviet Union not to station large numbers of NATO troops on Russia's borders.
In addition, large quantities of military hardware, including tanks, artillery, infantry fighting vehicles and other weaponry, are to be stockpiled in close striking distance to Russia to allow for the speedy intervention of additional US combat brigades from Estonia, Latvia and Lithuania to Poland Bulgaria and Romania.
President Barack Obama issued a statement Tuesday declaring that the 400 percent increase in funding to encircle Russia "will enable the United States to strengthen our robust military posture in Europe and improve our ability to uphold our Article 5 commitments to NATO members." By invoking Article 5, which requires NATO to militarily defend any member against attack, Obama was reiterating the vow he made in 2014 that the US would put "boots on the ground" to defend the Baltic republics, thereby making their right-wing and virulently anti-Russian regimes the trip wire for a war that would have incalculable consequences.
The other major focus of Carter's speech and of the proposed budget itself is the buildup of US military pressure against China under the banner of the "pivot to Asia," with particular emphasis on the modernization of the US war fleet for confrontations in the South China Sea.
Carter did not mince words about Washington objectives, which are to use military force to maintain US hegemony in Asia and quell any threat to its dominant position from the rising economic power of China, subordinating China to US economic and strategic interests and reducing it to a semi-colony of US imperialism.
The US, the defense secretary said, would act to "maintain the stability in the region that we have underwritten for 70 years," warning China that "to disrupt the security environment where half of humanity lives and half of humanity's economic behavior is not a good idea."
Washington, he continued, was carrying out its military buildup to be able "to impose unacceptable costs on an advanced aggressor that will either dissuade them from taking provocative action or make them deeply regret it if they do."
Employing the language of total war, Carter added, "In this context, Russia and China are our most stressing competitors."
All of these proposals to escalate military confrontations that lead in the direction of global catastrophe are being made without even the semblance of a public debate, never mind the support of the American people, who have repeatedly demonstrated their hostility to militarism and war. The drive toward World War III is unfolding largely behind the backs of the public, with the corporate media and the two major parties showing no interest whatsoever in making the chilling implications of the Pentagon's preparations known to the population.
As for Obama, the Nobel Peace Prize-winning president, his role as a rubber stamp for the US military and intelligence apparatus was briefly noted in Carter's remarks Tuesday. Asked whether there would be a further increase in the number of US troops deployed in Iraq and Syria—where funding for military operations is also being increased by 50 percent to $7.5 billion—he responded in the affirmative, adding, "Every time the chairman [of the Joint Chiefs of Staff] and I have asked the president for more capability to do that, he said yes, and I expect that will continue."
The massive spending on war preparations is to be paid for through ever more draconian attacks on the living standards, jobs and social conditions of the broad masses of working people. The extent of the diversion of social resources to militarism can be seen in the Pentagon's proposal to increase its spending on research and development for the production of newer and more deadly weapons to nearly $72 billion. This amount alone exceeds the entire US federal budget for education in 2015, never mind the trillions more that are to be spent in the coming years for new generations of nuclear submarines, bombers and intercontinental ballistic missiles.
In July 2014, the International Committee of the Fourth International (ICFI) issued a statement entitled "Socialism and the Fight Against Imperialist War." The statement drew out the fundamental dynamics of the drive toward world war that find expression in Carter's speech and the Pentagon's proposed budget. It declared:
"The danger of a new world war arises out of the fundamental contradictions of the capitalist system—between the development of a global economy and its division into antagonistic nation states, in which the private ownership of the means of production is rooted. This finds its most acute expression in the drive of US imperialism to dominate the Eurasian landmass, above all those areas from which it was excluded for decades by the Russian and Chinese revolutions. In the west, the US, in league with Germany, has orchestrated a fascist-led coup to bring Ukraine under its control. But its ambitions do not stop there. The ultimate objective is to dismember the Russian Federation, reducing it to a series of semi-colonies to open the way for the plunder of its vast natural resources. In the east, the Obama administration's pivot to Asia is aimed at encircling China and transforming it into a semi-colony. Here, the objective is to ensure domination of the cheap labour that is one of the key global sources of the surplus value extracted from the working class and the life-blood of the capitalist economy."The ICFI went on to explain that the objective roots of the US drive for world domination ensure that an imperialist world war is inevitable outside of the revolutionary intervention of the international working class to put an end to the capitalist system and establish socialism. It stressed that the same contradictions that are the driving forces for war provide the objective impulse for socialist revolution.
In the year and a half since the ICFI issued its statement, these contradictions have only sharpened, intensifying existing wars and heightening the danger of new ones from the Middle East, to Eastern Europe, to the South China Sea, while at the same time driving the working class into increasingly bitter struggles against austerity and exploitation.
The historic question confronting humanity is the necessity for the working class to carry out the world socialist revolution before the capitalist ruling class can complete its descent into a war that threatens nuclear extinction. This places the greatest urgency on the political task of building the Fourth International as the revolutionary leadership of the world working class.
February 8, 2016 | Categories: Articles & Columns | Tags: | Print This Article Print This Article
NOTE: Readers are asking to know who, in addition to the Western-financed NGOs, are the Fifth Columnists inside Russia. Michael Hudson and I left the description general as Atlanticist Integrationists and neoliberal economists. The Saker provides some specific names. Among the Fifth Columnists are the Russian Prime Minister, head of the Central Bank, and the two top economics ministers. They are springing a privatization trap on Putin that could undo all of his accomplishments and deliver Russia to Western control.
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Privatization Is the Atlanticist Strategy to Attack Russia
Paul Craig Roberts and Michael Hudson
Two years ago, Russian officials discussed plans to privatize a group of national enterprises headed by the oil producer Rosneft, the VTB Bank, Aeroflot, and Russian Railways. The stated objective was to streamline management of these companies, and also to induce oligarchs to begin bringing their two decades of capital flight back to invest in the Russia economy. Foreign participation was sought in cases where Western technology transfer and management techniques would be likely to help the economy.
However, the Russian economic outlook deteriorated as the United States pushed Western governments to impose economic sanctions against Russia and oil prices declined. This has made the Russian economy less attractive to foreign investors. So sale of these companies will bring much lower prices today than would have been likely in 2014
Meanwhile, the combination of a rising domestic budget deficit and balance-of-payments deficit has given Russian advocates of privatization an argument to press ahead with the sell-offs. The flaw in their logic is their neoliberal assumption that Russia cannot simply monetize its deficit, but needs to survive by selling off more major assets. We warn against Russia being so gullible as to accept this dangerous neoliberal argument. Privatization will not help re-industrialize Russia’s economy, but will aggravate its turn into a rentier economy from which profits are extracted for the benefit of foreign owners.
To be sure, President Putin set a number of conditions on February 1 to prevent new privatizations from being like the Yeltsin era’s disastrous selloffs. This time the assets would not be sold at knockdown prices, but would have to reflect prospective real value. The firms being sold off would remain under Russian jurisdiction, not operated by offshore owners. Foreigners were invited to participate, but the companies would remain subject to Russian laws and regulations, including restrictions to keep their capital within Russia.
Also, the firms to be privatized cannot be bought with domestic state bank credit. The aim is to draw “hard cash” into the buyouts – ideally from the foreign currency holdings by oligarchs in London and elsewhere.
Putin wisely ruled out selling Russia’s largest bank, Sperbank, which holds much of the nation’s retail savings accounts. Banking evidently is to remain largely a public utility, which it should because the ability to create credit as money is a natural monopoly and inherently public in character.
Despite these protections that President Putin added, there are serious reasons not to go ahead with the newly-announced privatizations. These reasons go beyond the fact that they would be sold under conditions of economic recession as a result of the Western economic sanctions and falling oil prices.
The excuse being cited by Russian officials for selling these companies at the present time is to finance the domestic budget deficit. This excuse shows that Russia has still not recovered from the disastrous Western Atlanticist myth that Russia must depend on foreign banks and bondholders to create money, as if the Russian central bank cannot do this itself by monetizing the budget deficit.
Monetization of budget deficits is precisely what the United States government has done, and what Western central banks have been doing in the post World War II era. Debt monetization is common practice in the West. Governments can help revive the economy by printing money instead of indebting the country to private creditors which drains the public sector of funds via interest payments to private creditors.
There is no valid reason to raise money from private banks to provide the government with money when a central bank can create the same money without having to pay interest on loans. However, Russian economists have been inculcated with the Western belief that only commercial banks should create money and that governments should sell interest-bearing bonds in order to raise funds. The incorrect belief that only private banks should create money by making loans is leading the Russian government down the same path that has led the eurozone into a dead end economy. By privatizing credit creation, Europe has shifted economic planning from democratically elected governments to the banking sector.
There is no need for Russia to accept this pro-rentier economic philosophy that bleeds a country of public revenues. Neoliberals are promoting it not to help Russia, but to bring Russia to its knees.
Essentially, those Russians allied with the West—“Atlanticist Integrationists”— who want Russia to sacrifice its sovereignty to integration with the Western empire are using neoliberal economics to entrap Putin and breach Russia’s control over its own economy that Putin reestablished after the Yeltsin years when Russia was looted by foreign interests.
Despite some success in reducing the power of the oligarchs who arose from the Yeltsin privatizations, the Russian government needs to retain national enterprises as a countervailing economic power. The reason governments operate railways and other basic infrastructure is to lower the cost of living and doing business. The aim of private owners, by contrast, is to raise the prices as high as they can. This is called “rent extraction.” Private owners put up tollbooths to raise the cost of infrastructure services that are being privatized. This is the opposite of what the classical economists meant by “free market.”
There is talk of a deal being made with the oligarchs. The oligarchs will buy ownership in the Russian state companies with money they have stashed abroad from previous privatizations, and get another “deal of the century” when Russia’s economy recovers by enough to enable more excessive gains to be made.
The problem is that the more economic power moves from government to private control, the less countervailing power the government has against private interests. From this standpoint, no privatizations should be permitted at this time.
Much less should foreigners be permitted to acquire ownership of Russian national assets. In order to collect a one-time payment of foreign currency, the Russian government will be turning over to foreigners future income streams that can, and will be, extracted from Russia and sent abroad. This “repatriation” of dividends would occur even if management and control remains geographically in Russia.
Selling public assets in exchange for a one-time payment is what the city of Chicago government did when it sold the 75 year revenue stream of its parking meters for a one-time payment. The Chicago government got money for one year by giving up 75 years of revenues. By sacrificing public revenues, the Chicago government saved real estate and private wealth from being taxed and also allowed Wall Street investment banks to make a fortune.
It also created a public outcry against the giveaway. The new buyers sharply raised street parking fees, and sued Chicago’s government for damages when the city closed the street for public parades or holidays, thereby “interfering” with the rentiers’ parking-meter business. Instead of helping Chicago, it helped push the city toward bankruptcy. No wonder Atlanticists would like to see Russia suffer the same fate.
Using privatization to cover a short-term budget problem creates a larger long-term problem. The profits of Russian companies would flow out of the country, reducing the ruble’s exchange rate. If the profits are paid in rubles, the rubles can be dumped in the foreign exchange market and exchanged for dollars. This will depress the ruble’s exchange rate and raise the dollar’s exchange value. In effect, allowing foreigners to acquire Russia’s national assets helps foreigners to speculate against the Russian ruble.
Of course, the new Russian owners of the privatized assets also could send their profits abroad. But at least the Russian government realizes that owners subject to Russian jurisdiction are more easily regulated than are owners who are able to control companies from abroad and keep their working capital in London or other foreign banking centers (all subject to U.S. diplomatic leverage and New Cold War sanctions).
At the root of the privatization discussion should be the question of what is money and why should it be created by private banks instead of central banks. The Russian government should finance its budget deficit by having the central bank create the necessary money, just as the US and UK do. It is not necessary for the Russian government to give away future revenue streams in perpetuity merely in order to cover one year’s deficit. That is a path to impoverishment and to loss of economic and political independence.
Globalization was invented as a tool of American Empire. Russia should be shielding itself from globalization, not opening itself to it. Privatization is the vehicle to undercut economic sovereignty and increase profits by raising prices.
Just as Western-financed NGOs operating in Russia are a fifth column operating against Russian national interests, so are Russia’s neoliberal economists, whether or not they realize it. Russia will not be safe from Western manipulation until its economy is closed to Western attempts to reshape Russia’s economy in the interest of Washington and not in the interest of Russia.