December 15, 2003

Nothing changes

By Stephen Gowans

US president George W. Bush may be embarrassed that France, Germany and Russia are being asked to forgive Iraq's debt at the same time the US is blocking the trio's companies from bidding on handsome reconstruction contracts in Iraq, but you can hardly blame him for following a hoary presidential tradition.

The US has been here before. In the immediate aftermath of W.W.II.

Back then, the conquered country was Germany, which owed massive reparations for damages to a war-ravaged Soviet Union.

"America's policy regarding Germany was determined above all by economic factors," writes historian Jacques Pauwels. "In order to avoid a new economic crisis at home, Washington sought to open the world's markets to the export products of American industry. The principle of the open door therefore needed to be adopted, preferably all over the globe, but at the very least in those countries that as a result of the war found themselves in the American sphere of influence" {1}.

The Allies agreed at Yalta that Germany would pay the Soviet Union $10 billion in war reparations {2}. The damage was latter estimated to be no less than $128 billion {3}.

But for the Americans, "[i]f Germany were made to disgorge reparation payments for the benefit of the USSR for an unlimited period of time, then it would hardly be possible for American exporters and investors to engage in the kind of profitable business deals their eager minds associated with the coming reconstruction of Germany" {4}.

So, in May, 1946, the American military governor in Germany, General Lucius Clay, decided the Soviets would receive no war reparations from the Western occupation zones {5}.

In the end, the Soviet Union -- which had suffered war damages amounting to 25 years of GNP {6} -- received no more than $5.1 billion. For decades after, the Soviet Union's failure to catch up to the West would be attributed to the failures of communist economics.

Fast forward. In Iraq, war reparations (except those owed Kuwait ) aren't at issue, but debt is.

Iraq's total debt amounts to about $120 billion {7} , $8 billion of which is owed to Russia alone {8}. France is also a large creditor {9}.

The investments of Russian, French and German companies in pre-war Iraq account for why neither country was willing to back a US invasion. A war, and change in regime, would jeopardize the investments. With the US in charge of a post-war Iraq, it would be certain that Washington would manoeuvre US investors into a position of dominance, squeezing out Russian, French and German rivals. And so it has happened.

From the US perspective, so far, so good. But for the Bush administration a problem remains: How to fund the reconstruction. For now, Washington is seeking donors, and relying on $18 billion the White House secured from Congress to start the ball rolling.

But the Bush administration would like to rely on Iraqi oil to pay US firms to rebuild Iraq. Problem is, "Iraq's tens of billions of dollars in debt to foreign countries and companies...would almost certainly challenge the first claim of any Iraqi 'oil bonds' to oil revenues" {10}. In short, French, Russian and German creditors would have first dibs.

If you're the US president, where do you want Iraq's oil revenues spent -- on American exporters and investors, or on debt payments to foreign countries and companies, who are competing for the same business? The answer is obvious, and no different whether the occupant of the White House is a Republican, Democrat or Green.

(As to Washington's claim that it's seeking debt forgiveness out of a selfless desire to help Iraq back to its feet, it might be pointed out that there are scores of countries equally deserving of a helping hand, whose debt Washington has no intention of forgiving.)

Replace Germany with Iraq, substitute France, Germany and Russia for the USSR, and put debt payments in place of war reparations, and Pauwels' observations become:

If Iraq were made to disgorge debt payments for the benefit of Russia, France and Germany for an unlimited period of time, then it would hardly be possible for American exporters and investors to engage in the kind of profitable business deals their eager minds associated with the coming reconstruction of Iraq.

Or compare Pauwels' observation about Washington seeking an open door "at the very least in those countries that as a result of the war found themselves in the American sphere of influence," with Colin Powell in September announcing US plans to create "a huge free trade zone" in the Middle East {11}-- an area now increasingly in the American sphere of influence.

And as to the Pentagon dealing French, Russian and German firms out of the action, the reasons could hardly be clearer. As The New York Times reported in August, "The Bush administration has been reluctant to give the United Nations more than minimal authority in the reconstruction of Iraq" because the administration believes "France, Germany, Russia and other countries demanding such a role are actually doing so to try to get more contracts and economic benefits for themselves" {12}.

So, the Bush administration blocks Russian, French and German firms to give American firms clear sway in Iraq, who'll now only have to compete with the far less dominant and therefore less troublesome firms of Washington's mostly weak coalition partners. As the Washington Post put it, "Of the 61-member countries of the US-led coalition, only a handful boast companies with the resources and technology needed to be viable candidates for big contracts alongside established US firms" {13}. And Washington seeks to have Iraq's debt forgiven to pave the way for the country's oil revenues to flow straight into the coffers of American companies charged with Iraq's reconstruction.

What's more, "another $30 billion out of the $87 billion allocated by Congress for the US military occupation of Iraq and Afghanistan is being paid out in contracts to private companies," {14} mostly American. "This covers everything from food service and base construction for US troops to private security firms training Iraqi police or providing guards for personnel and installations" {15}. For corporate America, militarism has its attractions.

It's almost inevitable that a country's foreign policy should be fashioned to fatten the bottom line of corporations at home. A revolving door that sees corporate executives switch back and forth from the boardroom to government, the ability of corporate patrons and the wealthy to dominate electoral politics, and the enormous resources corporations invest in lobbyists and think tanks to influence government policy, as well their control over the media, ensure that corporate interests are equated with "national" interests and the public good.

But while foreign policy is formulated with the interests of investors, shareholders and corporate directors in mind, it's ordinary taxpayers who foot the bill, more so now that the principle of progressive taxation has been almost completely shuffled off the stage into forced retirement by governments pursuing the accustomed indulgent to the rich, harsh to the poor policies, so richly in vogue.

And plundering other countries' resources and prizing open their markets wouldn't be possible without ordinary people pulling the trigger, and laying their lives on the line, for the same investors, shareholders and corporate directors.

"It's very simple," explained Bush. "Our people risk their lives...and, therefore, the contracting is going to reflect that" {16}. Right. Joe Average, who lives one step above poverty, is getting shot at, and is shooting at people whose country he's occupying, so Halliburton, Bechtel and other American firms can rebuild infrastructure Lockheed-Martin, Boeing and Raytheon provided the missiles and bombs to destroy. It's a good deal if you're a shareholder, director or CEO; not so great if your risking your life. Which makes you wonder why we put up with it.

After one of yesterday's NFL games, a Marine, now confined to a wheel chair, was wheeled into the dressing room of the victor, where he was presented with the game ball, and feted by the coach, who declared  it was because of people like the maimed Marine who fought for his country in Iraq that "we can do what we do." For the loss of the use of his legs, the Marine gets a game ball, and is fed utter nonsense by a man reduced to the state of a simpleton by blind patriotism. Saddam Hussein being declared a threat to NFL football is truly breathtaking, and a measure of how highly brainwashed the US public is.

Why soldiers put up with this entirely one-sided deal has a lot to do -- as so much else -- with economics. It's not as if they have much of a choice. My grandfather joined the army during the Great Depression so he could get three meals a day and a roof over his head, the much vaunted free enterprise system not up to the task, though the means of supplying him, and millions of others like him, with food, shelter and clothing was beyond question. Soon enough, once idle factories were spitting out war materiel at a furious pace, and the free enterprise system was back on its feet. For years after, he would remark, whenever the economy would lapse into one of its frequent recessions, "What we need now is a good war."

The lash of hunger may not be quite as much a goad as it used to be, but there are plenty of people who enlist in the armed forces nowadays because they need a job, or training, or health care, not because they want to be part of an occupation army, or storm troopers for Becthel and Halliburton and Wall Street. Still, that's what economic necessity has made them, and will continue to make them.

Last month, Monthly Review, reprinted an excerpt from an article Leo Huberman and Paul Sweezy wrote a half a century ago.

"Republican tax cuts are always designed to leave more money in the hands of those who already have plenty. Hence they are not likely to have anything like a proportionate effect on consumption; and the limiting factor of investment is the relation of capacity to demand, not the amount of the capitalist's disposable income.

"Ultimately, the Eisenhower administration will find that the only way it can be sure of getting more money spent (since it obviously won't go in for redistributing income in favor of the poor), is to have the government itself spend it. Doling it out to the rich won't work: if conditions aren't right -- and of course they aren't in time of falling demand--the rich will simply grab whatever comes their way and put it into gilt-edged securities. A Republican tax cut might give a fillip to the securities markets; it would be unlikely to reverse the downward trend in investment.

"And so, soon or later, the Republicans, like the Democrats before them, will face the necessity of jacking up government spending to keep themselves in power and to prevent their vaunted system of 'free enterprise' from getting in a hopeless mess. And the Republicans, like the Democracts...are likely to conclude that the most painless, indeed the only acceptable, way to spend a lot of money is on militarism at home and imperialism abroad" {17}.

Sound familiar?

1. Jacques R. Pauwels, The Myth of the Good War: America in the Second World War, James Lorimer & Company Ltd., Toronto, 2002. p .219.

2. Pauwels, p. 235.

3. Ibid.

4. Ibid, p. 220.

5. Ibid. p. 235.

6. Clive Ponting, cited in Pauwels, p. 235.

7. "Allies Angered at Exclusion From Bidding," The New York Times, December 11, 2003.

8. Ibid.

9. "Bush Seeks Help of Allies Barred From Iraq Deals," The New York Times,  December 11, 2003.

10. "US Seeks Help With Iraq Costs, but Donors Want a Larger Say," The New York Times, July 14, 2003.

11. "Powell Tells Arab-Americans of Hopes to Develop Mideast," The New York Times, September 30, 3003.

12. "US Abandons Idea of Bigger UN Role in Iraq Occupation," The New York Times, August 14, 2003.

13. "French, Germans, Russians need not apply," The Washington Post, December 11, 2003.

14. "Iraqi 'reconstruction' as corporate looting," The World Socialist Web Site, December 13, 2003.

15. Ibid.

16. "Bush Defends Barring Nations From Iraq Deals," The New York Times, December 12, 2003.

17. Leo Huberman and Paul Sweezy, "The Economic Turning Point," Monthly Review, November 1953.


You may re-post this article, providing the text remains unchanged.

E-mail list. Send an e-mail to and write "subscribe" in the subject line.

What's Left