TRANSNATIONAL ACTORS VS. NATIONAL STATES: LOST BATTLE?!

Author : Admin | Monday, September 3, 2012
Posted in category Eurasia Press, Special Analysis
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The worldwide economic evolution and many political developments in Europe and the world are showing to most analysts a worrying trend consisting in a balance of power shifting from national states towards transnational economic actors, corporate (the big multinational and transnational companies) as well as institutional (the international financial institutions such as the International Monetary Fund – IMF, the World Bank and the European Union’s financial bodies).

In the United States, a document from President Barack Obama’s free trade negotiations with eight Pacific states, released last June 2012, revealed the Administration’s intention to bestow new political powers upon multinational corporations.

The document is part of the Trans-Pacific Partnership trade pact and addresses a broad sweep of regulations governing international investment. Under the agreement currently being advocated by the Obama Administration, American corporations would continue to be subject to domestic laws and regulations on the environment, banking and other issues. But foreign corporations operating within the U.S. would be permitted to appeal key American legal or regulatory rulings to an international tribunal. That international tribunal would be granted the power to overrule American law and impose trade sanctions on the United States for failing to abide by its rulings.

The new regulations are similar to those provided by the North American Free Trade Agreement (NAFTA), passed by Congress in 1993, and other trade pacts that granted to corporations powers previously been reserved for sovereign nations and that have allowed companies to sue nations directly over issues.

Even if the current trade deal might pose a challenge to American sovereignty, large corporations headquartered in the U.S. would also benefit from it by using the same terms to oppose the laws of foreign governments. If one of the eight Pacific nations involved in the talks passes a new rule to which an American firm objects, the U.S. company could take the country to court directly in international tribunals. Such international tribunals would more likely not be independent since they would be staffed by private sector lawyers that rotate between acting as ‘judges’ and as advocates for the investors suing the governments”.

In a similar recent development, a tribunal at the World Bank agreed to hear a case involving foreign investment standards, in which El Salvador banned cyanide-based gold mining on the basis of objections from the Catholic Church and environmental activists. If the World Bank rules against El Salvador, it could overturn the nation’s domestic laws at the behest of a foreign corporation.

In Europe, the governments in Greece, Spain and Italy are becoming more dependent on foreign financial resources – provided by institutional as well as corporate lenders – as they face difficulties in enforcing the austerity measures, since such measures imposed on the people are more and more seen as not providing the solution for reducing the public debt burden.

According to recent analyses, Greece has fallen behind with its budget cuts and is asking lenders for more time to meet the conditions of the 130 billion euro aid package, a measure that would require fresh help of up to 50 billion Euros. The request comes at a moment when Germany and other important international creditors are not prepared to extend further loans, and the IMF too has signaled it won’t take part in any additional financing for Greece.

Spain and Italy are currently joining forces in order to make the European institutions to ease requirements on countries that request aid, mostly in order to prevent bailout.

In the case of Italy, the government imposed spending cuts – by overhauling the pension system and revamping labor laws – only to see that such measures destroy growth without the reward of cheaper borrowing costs.

The government had to sacrifice growth to get the country’s books in order with the economy shrinking for a fourth consecutive quarter in the three months through June and unemployment reaching a 13-year high of 10.8 percent. Popular support for the government and the parties that back it decreased, with anti-euro forces on the rise.

According to most analysts, the nations of the world are more and more at the mercy of a few elite institutions, developed regions and international financial firms and corporations. Members of this “global elite” are more at home with each other than with the other 99% of their own countries, and the economic fate of nations is decided to a great degree at international meetings. This is the result of a world of global trade, finances, and marketing that is not confined to national boundaries. Even if nations still have distinct legal systems, their financial fates and corporate legal disputes with local, state and federal governments are more and more determined by decisions made at a global level by individuals not related to the realities they are deciding about.

1. The growing power of the transnational companies

A transnational corporation (TNC) is defined as a company that does not identify itself with one national home, and that spreads out its operations in many countries sustaining high levels of local responsiveness. The term of “multinational” is also used to refer to such companies that, in time, became huge merged conglomerations that are increasingly seen as reducing competition and free enterprise, raising capital in host countries but exporting the profits, exploiting countries for their natural resources, limiting workers’ wages, eroding traditional cultures, and challenging national sovereignty.

Since transnational corporations are the main providers of the direct foreign investments (direct investment into one country by a company in production located in another country, either by buying a company in the country or by expanding operations of an existing business in the country), national and local governments often compete to attract TNC facilities, with the expectation of increased tax revenue, employment, and economic activity. The national political entities may offer MNCs incentives such as tax breaks, pledges of governmental assistance or subsidized infrastructure, or lax environmental and labor regulations. These ways of attracting foreign investment allow the TNC to gain more and more power, although the TNC also is potentially vulnerable to arbitrary government intervention such as expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc.

In time, the TNC became some of the most powerful economic entities in the world. According to recent figures, TNCs hold 90% of all technology and product patents worldwide and are involved in 70 % of world trade. More than 30% of this trade is “intra- firm”; in other words, it occurs between units of the same corporation.

The number of TNCs in the world has risen from 7000 in 1970 to 40000 in 1995. While global in reach, these corporations’ home bases are concentrated in the Northern industrialized countries, where 90% of all TNCs are based. More than half come from five nations: France, Germany, the Netherlands, Japan and the United States. But despite their growing numbers, power is concentrated at the top, i.e. the 300 largest corporations account for one-quarter of the world’s productive assets.

The United Nations has described these corporations as “the productive core of the globalizing world economy”. Their 250000 foreign affiliates account for most of the world’s industrial capacity, technological knowledge, international financial transactions, and ultimately the power of control. In terms of energy, they mine, refine and distribute most of the world’s oil, gasoline, diesel and jet fuel, as well as build most of the world’s oil, coal, gas, hydroelectric and nuclear power plants. They extract most of the world’s minerals from the ground. They manufacture and sell most of the world’s automobiles, airplanes, communications satellites, computers, home electronics, chemicals, medicines and biotechnology products. They harvest much of the world’s wood and make most of its paper. They grow many of the world’s major agricultural crops, while processing and distributing much of its food.

1.1.The “Corporatocracy”: master of the new empire

In his “Confessions”[1] as an insider of the corporation’s world, economic expert John Perkins describes how, using the so-called “economic hit men”, the US and multinational corporations managed to build a “clandestine” empire, having on its throne the “Corporatocracy”, that he defined as the group of individuals who run the biggest corporations and act as the emperor of this empire. They control the media, either through direct ownership or advertising. They control most of the politicians since they finance their campaigns, either through the corporations or through personal contributions that come out of the corporations. They’re not elected, then don’t serve a limited term, they don’t report to anybody, and at the very top of the Corporatocracy one can’t tell whether the person is working for a private corporation or the government because their always moving back and forth. A person can be, at one moment, the president of a big construction company like Halliburton, and the next moment he’s Vice President of the United States (Richard “Dick” Cheney), or the President (George Bush Sr.) who was in the oil business.

Due to the close ties between the Corporatocracy and the U.S. government, most of the policies are carried out by the corporations on one level or another, being basically forged by the Corporatocracy, and then presented to the government to become government policy. They all basically work under one primary assumption, and that is that they must maximize profits regardless of the social and environmental costs.

The process of manipulation by the Corporatocracy through the use of perpetual debt, inflation and interest, bribery and political overthrow is mostly using the World Bank and IMF. It is important to keep in mind that the World Bank is, in fact, a U.S. bank, supporting U.S. interests, since the United States holds veto-power over decisions, as it is the largest provider of capital.

The basic scheme is simple: put a country in debt then impose “conditionalities” or “structural adjustment policies” often consisting of the following:

  • Currency devaluation. When the value of a currency drops, so does everything valued in it. This makes indigenous resources available to predator countries at a fraction of their worth.
  • Large funding cuts from social programs. These usually include education and health care, compromising the well-being and integrity of the society leaving the public vulnerable to exploitation.
  • Privatization of state-owned enterprises. This means that socially important systems can be purchased and regulated by foreign corporations for profit. For example, in 1999 the World Bank insisted that the Bolivian government sell the public water system of its third-largest city to a subsidy of the US Corporation “Bechtel”. As soon as this occurred, water bills for the already impoverished local residents skyrocketed. It wasn’t until after full-blown revolt by the people that the Bechtel contract was nullified.

Then there is trade liberalization or the opening up of the economy by removing any restrictions on foreign trade. This allows for a number of abusive economic manifestations, such as transnational corporations bringing in their own mass-produced products undercutting the indigenous production and ruining local economies. An example is Jamaica, which after accepting loans and conditionalities from the World Bank lost its largest crop markets due to competition with western imports. The little farmers went out of work, being unable to compete with the large corporations. Another variation is the creation of numerous, seemingly unnoticed, unregulated, inhumane sweetshop-factories, which take advantage of the imposed economic hardship.

Additionally, due to production-deregulation, environmental destruction is perpetual as a country’s resources are often exploited by the indifferent corporations while outputting large amounts of deliberate pollution. One of the largest environmental lawsuit in the history was brought on behalf of 30000 Ecuadorian and Amazonian people against Texaco (currently owned by Chevron)[2]. Texaco was accused of an oil disposal estimated to be more than 18 times what the Exxon Valdez dumped into the Coast of Alaska, but in the case of Ecuador it wasn’t an accident. The oil companies did it intentionally; they knew they were doing it to save money rather than arranging for proper disposal.

A glance at the performance record of the World Bank reveals that the institution, which publicly claims to help poor countries develop and alleviate poverty, has done nothing but increase poverty and the wealth-gap, while corporate profits soared. In 1960, the income-gap between the fifth of the world’s people and the richest countries, versus the fifth in the poorest countries was thirty to one. By 1998, it was seventy-four to one. While global GNP rose 40% between 1970 and 1985, those in poverty actually increased, by 17%. While from 1985 to 2000, those living on less than one dollar a day increased by 18%. Even the Joint Economic Committee of the U.S. Congress admitted that there is a mere 40% success rate of all World Bank projects.

In the late 1960′s, the World Bank intervened in Ecuador with large loans. During the next 30 years, poverty grew from 50% to 70%. Under or unemployment grew from 15% to 70%. Public debt increased from 240 million to 16 billion, while the share of resources allocated to the poor went from 20% to 6%. In fact, by the year 2000, 50% of Ecuador’s national budget had to be allocated for paying its debts.

Of the world’s top 100 economies, as based on annual GDP, 51 are corporations. And 47 of that 51 are U.S. based. Walmart, General Motors, and Exxon, are more economically powerful than Saudi Arabia, Poland, Norway, South Africa, Finland, Indonesia, and many others. And, as protective trade-barriers are broken down, currencies tossed together and manipulated in floating markets, and State economies overturned in favor of open competition in global capitalism, the empire expands.

1.2 TNC power: from economic to political

Due to their economic power, transnational corporations exert significant influence over the domestic and foreign policies of the industrialized governments that host them, especially since the interests of the most powerful governments in the world are often intimately intertwined with the expanding pursuits of the transnational companies that they charter.

At the same time, transnational corporations are moving to circumvent national governments. The borders and regulatory agencies of most governments are caving in (or being paid off) to the globalization, allowing corporations to assume an ever more stateless quality, leaving them less and less accountable to any government anywhere.

These corporations, together with their host governments, are reorganizing the world economic structures – and thus the balance of political power – through a series of intergovernmental trade and investment accords. These treaties include:

-        The Uruguay Round of the General Agreement on Tariffs and Trade (GATT)

-        The World Trade Organization (WTO), which was created to enforce the GATT’s rules.

-        The proposed Multilateral Agreement on Investment[3]. (MAI)

-        The North American Free Trade Agreement (NAFTA).

-        The European Union (EU).

These international trade and investment agreements allow corporations to circumvent the power and authority of national governments and local communities.

The purpose of the MAI-type agreements is to remove virtually all barriers to investment by corporations. Foreign investors would be required to be treated the same as domestic investors. Moreover, NAFTA mechanisms, as well as the WTO, IMF, and World Bank are close for access by most of the people. They are run by the nations with the greatest wealth, the U.S. in the first place, with the corporations and banks pulling the strings.

Some analysts consider that the TNCs and domestic major corporations already control the governments of the United States and most of the industrialized nations. This is done by Corporate Politics, and the wholesale purchase of politicians. Already in place is a Corporate State, which wields the economic power of Money.

In the United States, this process was settled through the Fourteenth Amendment to the Constitution for the United States of America, whereby private corporations were given the status of persons – and thus allowed to enjoy the benefits of the Bill of Rights, without the commensurate liabilities of life.

1.3. Developing a world ruling elite

The roots of the current drive toward economic globalization and corporate power go back to the 1929 depression that preceded World War II. America’s policy elites were deeply concerned about ensuring that nothing similar would ever recur, with two major ideas as to how this might be accomplished. One would have required major reforms of the U.S. economy, including strong governmental intervention in the market. The other depended on ensuring the domestic American economy sufficient access to foreign markets and raw materials to sustain the continuous expansion required to maintain full employment without market reforms.

The latter was the more popular alternative among those in power, including a small elite group of foreign policy planners associated with the Council on Foreign Relations[4]. Less than two weeks after the outbreak of World War II, the Council’s experts began to develop and submit to the Administration studies and confidential expert recommendations on long-term problems of the war and plans for the peace. The planners anticipated that the defeat of Germany and Japan and the wartime devastation of Europe would leave the United States in an undisputed position to dominate the postwar economy. They believed the more open that economy was to trade and foreign investment, the more readily the United States would be able to dominate it. Working from that logic, the plans placed a substantial emphasis on creating an institutional framework that would create an open global economy.

Memorandum E-B34, issued by the Council to the president and the State Department on July 24, 1941, outlined the concept of a “Grand Area”. This was the area of the world that the United States would need to dominate economically and militarily to ensure materials for its industries with the “fewest possible stresses”. The minimum necessary Grand Area would consist of most of the non-German world. Its preferred scope would consist of the Western Hemisphere, the United Kingdom, the remainder of the British Commonwealth and Empire, the Dutch East Indies, China, and Japan. The concept outlined in the memo involved working for economic integration within the largest available core area and then expanding outward to weave other areas into the core, as circumstances allowed.

The memorandum called for the creation of worldwide financial institutions, for stabilizing currencies and facilitating programs of capital investment in the developing countries and to merge the economic interests of three regional partners: North America (the United States and Canada), Western Europe and Japan.

On 22 July 1944, at the Bretton Woods Conference, the International Monetary Fund (IMF) was created as an international organization with the stated goal to stabilize exchange rates and assist the reconstruction of the world’s international payment system post-World War II. It began to function on 27 December 1945, when 29 countries signed the Articles of Agreement.

As the three regional partners and the corporations’ power developed, in the early ‘70s a new forum – the Trilateral Commission – was created with the purpose to draw together the highest level unofficial group possible to look at the common problems facing the three areas. At a deeper level, there was a sense that the United States was no longer in a singular leadership position, as it had been in earlier post-World War II years, and that a more shared form of leadership – including Europe and Japan – would be needed for the international system to navigate successfully the major challenges of the coming years. The Commission’s members are about 325 persons with a variety of leadership responsibilities from the three regions.

The collective power of the Commission’s members is impressive. They include the heads of four of the world’s five largest non-banking transnational corporations (ITOCHU, Sumitomo, Mitsubishi, and Mitsui & Co.); top officials of five of the world’s six largest international banks (Sumitomo Bank, Fuji Bank, Sakura Bank, Sanwa Bank, and Mitsubishi Bank); and heads of major media organizations. U.S. Presidents Jimmy Carter, George Bush Sr. and Bill Clinton were all members of the Trilateral Commission.

Another similar forum is the so-called Bilderberg Group, created in the early ‘50s, an annual, unofficial, invitation-only conference that brings together approximately 120 to 140 influential guests from North America and Western Europe About one-third are from government and politics, and two-thirds from finance, industry, labor, education and communications. Its aim was to promote Atlanticism – the better understanding between the cultures of the United States and Western Europe, to foster cooperation on political, economic, and defense issues. In time, it became a meeting ground for top executives from the world’s leading multinational corporations and top national political figures to consider jointly the immediate and long-term problems facing the West. While not agreeing to the conspiracy theories – generated by the confidential nature of the Bilderberg meetings – most analysts consider that, when Bilderberg participants reach a form of consensus about what is to be done, they have at their disposal powerful transnational and national instruments for bringing about what they want.

The Council on Foreign Relations and the Trilateral Commission, as well as the Bilderberg group, brings together heads of competing corporations and leaders of competing national political parties for closed-door discussions and consensus-building processes that the public never sees. Although the participants may believe that they represent a broad spectrum of sectorial and even international perspectives, in fact it is a closed and exclusive process. Participants are predominantly male, wealthy, from industrial countries, and, except for the Japanese on the Trilateral Commission, Caucasian. They all accept without question the ideological premises of corporate libertarianism. The benefits of economic integration and a harmonization of the tax, regulatory, and other policies of the trilateral countries – and ultimately of all countries – are assumed as an article of faith.

The policy actions being advanced by the elite consensus constitute an increasingly effective attack on the institutions of democracy – the very purpose of which is to prevent a small inside elite from capturing control of the instruments of governance. The larger the economic unit, the larger its dominant players, and the more political power becomes concentrated in the largest corporations. The greater the political power of corporations and those aligned with them, the less the political power of the people, and the less meaningful democracy becomes.

2. The “economic hit men” against the sovereign state

Corporations have emerged as the dominant governance institutions on the planet, with the largest among them reaching into virtually every country of the world and exceeding most governments in size and power. Increasingly, it is the corporate interest that defines the policy agendas of states and international bodies.

The process was described in the book “Confessions of an Economic Hit Man”, published in 2004 by John Perkins, a former consultant of such a corporation, whose function was to convince the political and financial leadership of developing countries to accept enormous development loans from international financial institutions and corporations. Since the tools of such consultants included fraudulent financial reports, rigged elections, payoffs, extortion, sex, and even murder, John Perkins named them (including himself) “economic hit men”. According to his “confessions”, the money went into the coffers of the huge corporations and the pockets of a few wealthy families who control the countries’ natural resources.

According to John Perkins, the economic hit men have been responsible for creating the first global empire. Their main activities include identifying a country that has resources the big corporations are interested in, like oil, and then arranging a huge loan to that country from the World Bank or one of its sister organizations. The money does not go to the country, but to the big corporations that would build infrastructure projects in that country, like power plants, industrial parks, ports. Besides the corporations, such projects only benefit a few rich people in the “receiving” country and are of little or no use for the majority of the people. However, the people, the whole country is left holding a huge debt.

The country’s debt is usually calculated to be impossible to repay, due to its dimensions and above all to the interests that accumulate, so the representatives of the money-lender institutions (the “hit men”, as described by John Perkins) impose to the indebted country to take measures that affect their national sovereignty: to sell cheap the natural resources to the corporations, to allow the building of foreign military bases, to send troops in support of foreign wars, to vote with the lenders in the UN, to have their electric, water and sewage system and other utility companies privatized and sold to multinational corporations. The method is typical for the IMF and the World Bank. They put a country in such a debt it can’t pay and then offer to refinance the debt so the interest increases. In exchange, they impose on the debtor country the so-called “conditionality” or “good governance”, which means basically that the country is practically forced to sell off its resources, including many of the social services, the utility companies, even the school systems, the penal systems, the insurance systems, to foreign corporations.

Saddled with debts they could not hope to pay, those countries were forced to acquiesce to political pressure from the United States on a variety of issues. Perkins argues in his book that developing nations were effectively neutralized politically, had their wealth gaps driven wider and economies crippled in the long run. In 2006, Perkins argued that the proposed conditions of the G8 nations (the richest 8 countries of the world) to forgive Third World debt required the debtor countries to privatize their health, education, electric, water and other public services. Those countries would also have to discontinue subsidies and trade restrictions that support local business, but accept the continued subsidization of certain G8 businesses by the US and other G8 countries, and the erection of trade barriers on imports that threaten G8 industries.

2.1. The “economic hit man”’s cases

Iran, 1953: the CIA-backed precedent

According to John Perkins, the precedent for economic hit men began in Iran, in the early 50′s, with the democratic election of Mohammad Mossadegh, who was considered to be the hope for democracy in the Middle East and was even Time Magazine’s “Man of the Year”. But, one of his campaign promises was the idea that foreign oil companies needed to pay the Iranian people a lot more for the oil that they were taking out of Iran. The Iranian people should benefit from their own oil. He nationalized all Iranian petroleum assets, thus affecting the interests of British Petroleum (currently BP), the oil company that was exploiting Iranian natural resources. At Great Britain’s request for help, and fearing that military retaliation would provoke the Soviet Union into taking action on behalf of Iran, the U.S. sent CIA agent Kermit Roosevelt (former President Theodore Roosevelt’s grandson) to Iran with a few million dollars. He was very effective, and in a short time he managed to get Mossadegh overthrown, and to bring to power the Shah of Iran, who always was favorable to foreign oil corporations. In the United States, this action was considered a useful new way of manipulating countries. In order to avoid using the CIA (which meant a direct link to the US government), the decision was made to use private consultants (the “hit men”), to channel money through the World Bank, or the IMF or one of the other such agencies, so that if they got caught there would be no governmental ramifications.

Guatemala, 1954

When Jacobo Arbenz became president of Guatemala, the country was under the control of “United Fruit Company” and other big international corporations. And Arbenz decided to give the land back to the people.

Consequently, “United Fruit” hired a public relations firm, launched a huge campaign in the United States, to convince the people, the press and the U.S. that Arbenz was a Soviet puppet, and that if he was allowed to stay in power, the Soviets would have a foothold in this hemisphere. Out of this public relations campaign – that was done in a strong anti-Communist climate – came a commitment on the part of the CIA and the military to take Arbenz out. The U.S. sent in planes and soldiers, and removed Arbenz from power. His successor basically reinstated everything to the big international corporations including “United Fruit”.

Ecuador, 1981

For many years, Ecuador was ruled by pro U.S. dictators. The first democratic president, Jaime Roldos ran for office, having as main goal to make sure that Ecuador’s resources would be used to help the people. After winning the elections, he began to implement these policies, to make sure that the profits from oil went to help the people.

According to John Perkins, he was sent in Ecuador as one of several economic hit men, in order to change things either by corrupting Roldos or by threatening him with removal. Roldos wouldn’t listen. He died in a plane crash and many people suspected that he was assassinated.

They pointed out that as soon as the plane crashed, the whole area was cordoned off. The only people allowed in were U.S. military from a nearby base, and some of the Ecuadorian military. When an investigation was launched, two of the key witnesses died in car accidents before they had a chance to testify.

Panama 1981

John Perkins recalls that Omar Torrijos, the charismatic president of Panama, really wanted to help his country and refused the “hit man”’s offers of bribes. Instead, he declared that his aim was to have the Panama Canal back in the hands of the Panamanian people.

In May 1981, when the Ecuadorian leader Jaime Roldos was killed in a plane crash, Omar Torrijos was aware of this and he declared to his family “I’m probably next, but it’s Okay because I’ve done what I came here to do. I’ve renegotiated the canal. The canal will now be in our hands”. He’d just finished negotiating the treaty with Jimmy Carter.

In June of the same year, Torrijos also went down in an airplane crash. John Perkins is convinced that it was a CIA-sponsored plot done by the so-called jackals. He cites evidence that showed that one of Torrijos’ security guards handed him a small tape recorder that contained a bomb, before the Ecuadorian president got on the plane.

Venezuela 2002

In Venezuela, in 1998, the presidency was won by Hugo Chavez, who stood up to the United States, primarily by demanding that Venezuelan oil be used to help the Venezuelan people. So, in 2002, a coup was staged which most of the people believed was done by the CIA.

The way that coup was fomented was similar to what Kermit Roosevelt had done in Iran. People were paid to go out into the streets, to riot, to protest, to say that Chavez was very unpopular and magnify the images on television. Except that, in the case of Chavez, he was smart enough and the people were so strongly behind him that they overcame it.

Iraq, 2003

According to John Perkins, Iraq is “a perfect example” of the way the whole system works. The economic hit men are the first line. They go in, try to corrupt governments and get them to try to accept the huge loans which then are used as leverage, to basically own them. If failing, as was the case in Panama with Omar Torrijos, and Ecuador with Jaime Roldos, men who refused to be corrupted, then the second line is to “send in the jackals”. The jackals either overthrow governments or they assassinate. And once that happens, the next government will have to give in, since the new president knows what will happen if he doesn’t.

In the case of Iraq, both lines failed. The economic hit men were not able to get through to Saddam Hussein. They tried to get him to accept a deal, but he wouldn’t accept it. And so the jackals went in to take him out. They couldn’t do it. His security was very good, since Saddam Hussein was acquainted with the CIA procedures (John Perkins mentions that he had been hired to assassinate the former president of Iraq, and failed).

So in ’91, the troops were sent to take out the Iraqi regime militarily, but the U.S. decided not to remove Saddam Hussein, considering that he might have helped control the Kurds, keep the Iranians in their border, and keep pumping oil for the U.S. So the economic hit men went back in the 90′s without success. If they’d had success he’d still be running the country. “We’d be selling him all the fighter jets he wants, and everything else he wants, but they couldn’t, they didn’t have success. The jackals couldn’t take him out again, so we sent the military in once again and this time we did the complete job and took him out. And in the process created for ourselves some very lucrative construction deals, since we had to reconstruct a country that we’d essentially just destroyed. Which is a pretty good deal if you own construction companies, big ones” declared John Perkins.

2.2. Other cases around the world

Although “Confessions of an Economic Hit Man” was challenged by many analysts as “conspirational” and not supported by enough evidence, processes similar to those described by John Perkins are to be seen in various parts of the world.

Chile: Corporations’ interests against a popular regime

According to economic historians, the processes described by John Perkins originate in the 19th century Monroe Doctrine and the Roosevelt Corollary to the Monroe Doctrine – issued by Theodore Roosevelt in 1904 – that assert the right of the United States to intervene to stabilize the economic affairs of states in the Caribbean and Central America if they were unable to pay their international debts.

The doctrines were invoked to justify the military actions known as the Banana Wars (1889-1934) that the United States conducted in Central America and the Caribbean (Panama, Honduras, Nicaragua, Mexico, Haiti and the Dominican Republic). Such interventions were most often carried out by the United States Marine Corps, and were evoked by Major General Smedley Butler in his book, War Is a Racket, where the author confesses[5]:

I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers… I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents”.

An intervention of the same kind took place in the early ’70 in Chile, where the U.S. and transnational corporations felt threatened by the government led by Salvador Allende that was about to come to power. Among those companies, the International Telephone and Telegraph Company (ITT), that owned 70% of the national telephone company, approached the Central Intelligence Agency before the Chilean elections, offering financial aid aimed at stopping Salvador Allende’s coming to power. While no official confirmation was found that the offer was indeed accepted, the ITT papers made mention of a program “aimed at inducing economic collapse” in Chile, outlined to ITT by the CIA’s Clandestine Services Division.

The socialists’ ascent to power in Chile were seen as a danger not only by ITT and the mining corporations Anaconda and Kennecott, that might have their factories nationalized, but also from the political point of view, since the election of Allende would have interfered with the U.S. government’s attempts to isolate Cuba’s example of a communist-type revolution.

Recently released documents confirmed that the CIA launched a program called “FUBELT”, aimed at preventing Allende from becoming elected, or failing that, bring his time in office to a rapid conclusion. In a document dated September 17, 1970 (now available in the U.S. National Security Archives) describing the results of a meeting between CIA chief Richard Helms and National Security Advisor Henry Kissinger, instructions for CIA operatives were laid out. “President Nixon had decided that an Allende regime in Chile was not acceptable to the United States. The President asked the Agency to prevent Allende from coming to power or to unseat him. The President authorized ten million dollars for this purpose, if needed”.

Another secret CIA document dated October 16, 1970, read in part, “It is firm and continuing policy that Allende be overthrown by a coup. It would be much preferable to have this transpire prior to 24 October [the date Allende's election would be ratified] but efforts in this regard will continue vigorously beyond this date”.

After Allende’s election, the U.S. began a campaign of economic warfare, with President Richard Nixon demanding to “make the [Chilean] economy scream”. In line with this, U.S. Ambassador to Chile, Edward M. Korry, proclaimed, “Not a nut or bolt shall reach Chile under Allende. … We shall do all within our power to condemn Chile and all Chileans to utmost deprivation and poverty”. Consequently, aid from the U.S., which had amounted to $1 billion (US) during the six-year presidency of Allende’s predecessor, disappeared after Allende took office. Trade limited or refused by the U.S. caused exports to fall by 24 percent, and a slight drop in agricultural output (which was expected for a short period while land was redistributed) made it necessary to increase imports by 26 percent. On top of all this, the price of copper, Chile’s main export, which was set internationally, fell from $66 (U.S.) per ton in 1970 to $48 in 1972.

However, since the difficult economic conditions did not result in a decreasing popularity of the socialist regime, and several coup attempts failed, the right-wing opponents of the regime, that were in control of the Chamber of Deputies pushed through a resolution which formally called for another military coup. The resolution, entitled “Declaration of the Breakdown of Chile’s Democracy,” claimed that Allende had “the goal of establishing a totalitarian system” and called on the Military to overthrow a democratically elected president.

As a result of the coup d’État, the country was ruled by a military dictatorship headed by General Augusto Pinochet from 1973 until 1990. Pinochet’s 17-year regime was characterized by systematic suppression of political parties and the persecution of dissidents to an extent that was unprecedented in the history of Chile and made the country a typical example of a police state. In the 1980s, the military government took a neoliberal stance on economics which has been followed up by the democratic governments that succeeded the dictatorship.

The main artisans of the economic change were a group of Chilean economists called “the Chicago boys”, since most of them studied at the University of Chicago under Milton Friedman and Arnold Harberger, or at its affiliate in the economics department at the Catholic University of Chile. The training was the result of a “Chile Project” organized in the 1950s by the U.S. State Department and funded by the Ford Foundation, which aimed at influencing Chilean economic thinking. Juan Gabriel Valdés, Chile’s foreign minister in the 1990s, described the Chile Project as “a striking example of an organized transfer of ideology from the United States to a country within its direct sphere of influence”.

Argentina: lessons not learned by the International Monetary Fund

At the end of the 20th century, another Latin American country was forced to comply with pressures from the foreign financial institutions to accept economic measures that proved not only impossible to bear for the population, but also to be inefficient.

In the early 90s, in the hope of eliminating hyper-inflation and years of currency turmoil, Argentina adopted a “currency board regime”, which pegged the peso to the dollar. As a result, inflation dropped sharply, price stability was assured and the value of the currency was preserved. This raised the quality of life for many citizens who could now afford to travel abroad, buy imported goods or ask for credit in dollars at very low interest rates. But Argentina still had external debts and needed to borrow more money to pay them. The fixed exchange rate caused cheap imports, which yielded a constant flight of dollars from the country, as well as the progressive loss of industrial infrastructure and employment.

In the meantime, government spending stayed high and corruption was rampant. Argentina’s public debt grew enormously during the 1990s and the country showed no true signs of being able to pay it. The IMF, however, kept lending money to Argentina and postponing its payment schedules. Massive tax evasion and money laundering explained a large part of the evaporation of funds toward offshore banks. Corruption and tax evasion was still rife, the government routinely hid the true size of the budget deficit with heavy off-balance sheet spending, there was little if any progress in labor market and other forms of structural reform, and behind the candy floss of debt-fuelled, consumer-led growth there was progressive loss of competitiveness. Moreover, as the U.S. Federal Reserve tightened policy to choke off the overheating of the dot.com boom, Argentina plunged into deep recession, made even worse when Brazil, its largest export market, devalued.

In late 2001, confrontations between the police and citizens became a common sight, and fires were also set on Buenos Aires avenues. The declaration of the state of emergency worsened the situation worsened, giving way to violent protests, which ended up with several people dead, and precipitated the fall of the government and the escaping of the Argentine President in a helicopter. During the last week of 2001, the interim government, facing the impossibility of meeting debt payments, defaulted on the larger part of the public debt, totaling US$132 billion.

The economic situation became steadily worse with regards to inflation and unemployment during 2002. By that time the original 1-to-1 rate had increased to nearly 4 pesos per dollar, while the accumulated inflation since the devaluation was about 80%. The quality of life of the average Argentine was lowered proportionally; many businesses closed or went bankrupt, many imported products became virtually inaccessible, and salaries were left as they were before the crisis.

According to most economists, Argentina’s implosion had the IMF’s “fingerprints” all over it. The first and overwhelmingly most important cause of the country’s economic troubles was the government’s decision to maintain the fixed rate of one peso for one U.S. dollar. To maintain an overvalued currency, a country needs large reserves of dollars: the government has to guarantee that everyone who wants to exchange a peso for a dollar can get one. The IMF’s role here was crucial: It arranged massive amounts of loans to support the Argentine peso. This was the IMF’s second fatal error. It did not take long for Argentina to pile up a foreign debt that was literally impossible to pay back. If all that weren’t enough, the Fund made its loans conditional on a “zero-deficit” policy for Argentine government.

As the IMF put it: “Once the downturn had started, the currency board arrangement limited the authorities’ ability to prevent a tightening of monetary policy and the public debt dynamics, which were exacerbated by the protracted slump, ruled out loosening fiscal policy… The currency board arrangement remained viable as long as there was sufficient political will to subordinate fiscal policy to maintaining the peg… At some point during the 1990s, Argentina slipped back into a «fiscally dominant» regime, ultimately dooming the currency board arrangement”. The IMF concluded its post mortem by saying that when “debt dynamics are clearly unsustainable, the IMF should not provide its financing. To the extent that such financing helps stave off a needed debt restructuring, it only compounds the ultimate cost of such a restructuring”.

Yet this moment of realization was preceded by a prolonged period of denial, both by the Argentine government and the IMF, which in almost every detail mirrors current events in Greece. There were repeated IMF bail-outs, and successive rounds of ever deeper austerity measures. There were riots, yet more austerity, and as the flight of capital escalated, there were capital controls. There was even a “voluntary” debt forgiveness initiative very similar to the “rollover” proposed for private holders of Greek sovereign debt. None of it worked.

In fact, Argentina recovered from the crisis through so-called “non-orthodox measures” aimed to stimulate economic growth. The devalued peso made Argentine exports cheap and competitive abroad, while discouraging imports. In addition, the high price of soy in the international market produced an injection of massive amounts of foreign currency (with China becoming a major buyer of Argentina’s soy products). The government encouraged import substitution and accessible credit for businesses, staged an aggressive plan to improve tax collection, and set aside large amounts of money for social welfare, while controlling expenditure in other fields. As a result of the administration’s productive model and controlling measures (selling reserve dollars in the public market), the peso slowly revalued, reaching a 3-to-1 rate to the dollar. Agricultural exports grew and tourism returned.

In 2005, as a large and consistently growing fiscal surplus made it possible, Argentina shifted to a policy of debt relief towards the IMF: paying the IMF in schedule, with no negotiation whenever possible, with the intention of gaining independence from it. On December 15, 2005, following a similar action by Brazil, Argentina announced that it would pay the whole debt to the IMF. The debt payments, totaling 9.810 billion USD, were previously scheduled as installments until 2008. Argentina paid it with the central bank’s foreign currency reserves.

Not surprisingly, Argentina’s relationship with the IMF became complicated, especially since 2006, when Argentina ceased to submit its economic statistics to be validated by the IMF.

In spring 2012, the measure triggered angry reactions from the U.S. In a State Department report, released before the IMF-World Bank 2012 spring meetings with top officials from Argentina’s economic team, the U.S. government expressed “deep disappointment” about the fact that Argentina did not honored its commitment to submit stats info to the IMF for review, and assured the IMF that it will count with the full support from the U.S. every time it urges Argentina to comply with its obligation.

The report also contained a critical review of the relation of Argentina with the IMF and a detailed account of the so-called trade ‘barriers’ implemented by Argentina not only on imports but also on investments. This referred to several restrictions on the remitting of benefits and dividends overseas as well as the compulsory “government authorization” to acquire dollars to finance any overseas purchase.

Further negative reactions were noticed after Argentina announced the plans to expropriate 51% of the oil company YPF from its mother corporation, Spain’s Repsol. The European Commission called off a meeting with officials in Argentina, and EC President Jose Manuel Barroso said he expected Argentina to uphold international agreements on business protection with Spain. Moreover, Argentina is becoming an outcast at the International Monetary Fund meetings in Washington, where the Obama administration is increasingly punishing President Cristina Fernandez de Kirchner’s government for abusing foreign investors. Outgoing World Bank President Robert Zoellick called the seizure of Argentina’s largest energy company a “mistake” and the “wrong thing to do”, while another IMF official said policy making in Argentina runs the risk of becoming “more unpredictable”.

The U.S. also has been stepping up pressure on Argentina, with President Barack Obama suspending trade preferences for the country in retaliation for the government’s failure to pay damages owed U.S. investors including Houston-based water utility Azurix Corp. Under the new rules, goods worth $477 million, about 11 percent of total U.S. imports from Argentina in 2011, are no longer eligible for tariff reductions under the Generalized System of Preferences, a program to assist trade from developing nations.

At their turn, the Argentine representatives accused the IMF of a “systematic bias” against the country, saying that the lender has repeatedly failed to recognize the government’s success in making the economy grow and reducing poverty.

Iraq: economic reasons behind the war

While most of the Iraq war historians and analysts recognized that it was launched on “thin” reasons, since neither the “mass destruction weapons” not the “terrorism sponsoring” accusations were proved by good evidence, there were quite few analyses that approached the facts under the economic perspective[6]. They were quick to discover the U.S. and transnational oil corporations’ interests to control Iraq.

According to these analyses, the U.S. approached Baghdad in the 80’s, through Donald Rumsfeld, who was appointed Special Envoy to the Middle East by President Ronald Reagan, when Iraq was fighting Iran in the Iran–Iraq War. Rumsfeld was sent to the Middle East to serve as a mediator on behalf of the President and visited Baghdad on December 20, 1983. He met Saddam Hussein at Saddam’s palace and had a 90-minute discussion, during which Rumsfeld suggested that if U.S.-Iraq relations could improve, the U.S. might support a new oil pipeline across Jordan, which Iraq had opposed but was now willing to reconsider. Rumsfeld also informed Iraqi Deputy Prime Minister and Foreign Minister Tariq Aziz that “Our efforts to assist were inhibited by certain things that made it difficult for us … citing the use of chemical weapons”.

Rumsfeld wrote in his memoirs, Known and Unknown, that his meeting with Hussein “has been the subject of gossip, rumors, and crackpot conspiracy theories for more than a quarter of a century… Supposedly I had been sent to see Saddam by President Reagan either to negotiate a secret oil deal, to help arm Iraq, or to make Iraq an American client state. The truth is that our encounter was more straightforward and less dramatic”. In fact, State Department documents dealing with the 1980-88 Iran-Iraq declassified and released under the Freedom of Information Act in 2002 revealed that the American government helped arm Saddam during the 1980s in a war against Iran, which at that time Washington regarded as its biggest enemy in the region. Terrified that the Iranian Islamic revolution would spread through the Gulf and into Saudi Arabia – threatening US oil supplies – President Reagan sent Mr. Rumsfeld to prop up Saddam and keep the Iranian militants within their own borders. Subsequently, Rumsfeld arranged for the Iraqis to receive loans to buy weapons and CIA Director William Casey used a Chilean front company to supply Iraq with cluster bombs. A Senate committee investigating the relationship between the US and Iraq discovered that in the mid-1980s, following the Rumsfeld visit, dozens of biological agents were shipped to Iraq under license from the Commerce Department, despite widespread suspicions that they were being used for chemical warfare.

Failing to secure control over Iraq, the neo-conservative “Project for the New American Century” (PNAC), a think tank representing the interests of the oil industry (but also closely linked with Israel), was created in 1997 and advocated the Iraq war in a letter addressed to President Clinton in 1998. Most of the PNAC members became the architects of the Iraq war (Richard Cheney, Vice-President, Donald Rumsfeld, Defense Secretary, Paul Wolfowitz, Deputy Defense Secretary in the Bush Administration).

A major step towards the war was triggered by Saddam Hussein’s decision in 2000 to switch to the Euro (and later converted his $10 billion reserve fund at the U.N. to Euros), and the fear of the US Administration and corporations that it would enhance the OPEC countries’ tendency to adopt the Euro as an oil transaction currency standard. To prevent this, Iraq and its oil would need to be taken under control before the so-called Peak Oil[7] (predicted to occur around 2010). The neo-conservative framework entailed a large and permanent military presence in the Persian Gulf region in a post-Saddam era, just in case the U.S. would need to surround and control Saudi’s large Ghawar oil fields in the event of a Saudi coup by an anti-western group.

At that time, the effect of a possible OPEC switch to the Euro was estimated to be that oil-consuming nations would have to flush dollars out of their (central bank) reserve funds and replace these with Euros. The dollar would crash anywhere from 20-40% in value and the consequences would be those one could expect from any currency collapse and massive inflation. Moreover, a large spike in oil prices could create huge problems for the imperiled Japanese banking system, the world’s largest holder of U.S. dollar reserves. The Bush Administration chose a military option instead of a multilateral conference on monetary reform to resolve these issues. There was no talk of an “exit strategy”, since the military would be needed to protect the newly installed regime, and to send a message to other OPEC producers that they too might receive “regime change” if they convert their oil payments to Euros.

In fact, “Operation Iraqi Freedom” was a war designed to install a pro-U.S. government in Iraq, establish multiple U.S military bases before the onset of Peak Oil, and to reconvert Iraq back to petrodollars while hoping to thwart further OPEC momentum towards the euro as an alternative oil transaction currency. After the war, in 2003, Iraqi oil sales returned to the international markets denominated in US Dollars, not Euros.

A similar development occurred in Iran in 2005-2006, when the Iranian government developed a plan to compete in international oil trades with New York’s NYMEX and London’s IPE (bought in 2001 by a consortium that includes BP, Goldman Sachs and Morgan Stanley), using a Euro-denominated international oil-trading mechanism. Tehran’s objective, as well as the steps taken by Tehran to establish an Iranian oil Bourse[8], constitute an obvious encroachment on U.S. dollar supremacy in the international oil market. One of the Federal Reserve’s nightmares may begin if international buyers will have a choice of buying a barrel of oil for $50 dollars on the NYMEX and IPE – or purchase a barrel of oil for 37 – 40 Euros via the Iranian Bourse. The Bourse would introduce petrodollar versus petro-Euro currency hedging, and fundamentally new dynamics to the biggest market in the world – global oil and gas trades. Analysts see this possibility as one of the main reasons for an eventual U.S. military action against Iran.

Africa: the next battleground

The international financial institutions’ pattern aimed to subvert the powers of the sovereign states that was used in Latin America is still to be seen in sub-Saharan Africa, a region that offers considerable natural resources to be taken under control by the transnational corporations.

During a trip to West Africa at the beginning of 2012, the managing director of the International Monetary Fund, Christine Lagarde ordered the governments of Nigeria, Guinea, Cameroon, Ghana and Chad to relinquish vital fuel subsidies. Consequently, the prices of fuel and transport have near tripled without notice, causing widespread violence on the streets of the Nigerian capital of Abuja and its economic center, Lagos. Public discontent was channeled towards incompetent and self-serving domestic elite, compliant to the interests of foreign institutions.

Consequently, in the case of Nigeria, a country which holds the most proven oil reserves in Africa after Libya, its people are expected to pay a fee closer to what the average American pays for the cost of fuel, an exorbitant sum in contrast to its regional neighbors. Other oil producing nations such as Venezuela, Kuwait and Saudi Arabia offer their populations fuel for as little as $0.12 USD per gallon. While Lagos has one of Africa’s highest concentration of billionaires, the vast majority of the population struggle daily on less than $2.00 USD. Although Nigeria produces 2.4 million barrels of crude oil a day intended for export use, the country struggles with generating sufficient electrical power and maintaining its infrastructure.

The local government is formed by many Goldman Sachs employees, in addition to the former Vice President of the World Bank, Ngozi Okonjo-Iweala, who is widely considered by many to be the de facto Prime Minister. Even after decades of producing lucrative oil exports, Nigeria has failed to maintain its own refineries, forcing it to illogically purchase oil imports from other nations. Society at large has not benefited from Nigeria’s natural riches, so it comes as no surprise that a severe level of distrust is held towards the government, who claims the fuel subsidy needs to be lifted in order to divert funds towards improving the quality of life within the country.

Amid a staggering 47% youth unemployment rate and thousands of annual deaths related to preventable diseases, the IMF has pulled the rug out from under a nation where safe drinking water is a luxury to around 80% of its populace. Ironically enough, less than 6% of bank depositors own 88% of all bank deposits in Nigeria.

Like other nations, Nigeria suffered from a systematically reduced living standard after being subjected to the IMF’s Structural Adjustment Policies (SAP)[9]. SAPs encourage borrower countries to focus on the production and export of domestic commodities and resources to increase foreign exchange, which can often be subject to dramatic fluctuations in value. Without the protection of price controls and an authentic currency rate, extreme inflation and poverty subsist to the point of civil unrest. The people of Nigeria have been one of the world’s most vocal against IMF-induced austerity measures, student protests have been met with heavy handed repression since 1986 and several times since then, resulting in hundreds of civilian deaths. As a testament to the success of the loan, the average laborer in Nigeria earned 35% more in the 1970’s than he would of in 2012.

Working through the direct representation of Western Financial Institutions and the IMF in Nigeria’s Government, a new IMF conditionality calls for the creation of a Sovereign Wealth Fund (SWF), which was hastily pushed through and enacted prior to the country’s national elections. If huge savings are amassed from oil exports and austerity measures, one cannot realistically expect that these funds will be invested towards infrastructure development based on the current track record of the Nigerian Government. Furthermore, it is increasingly more likely that any proceeds from a SWF would be beneficial to Western institutions and markets, which initially demanded its creation.

The abrupt simultaneous removal of fuel subsidies in several West African nations is a clear indication of who is really in charge of things in post-colonial Africa. As the United States African Command (AFRICOM) begins to gain a foothold into the continent with its troops officially present in Eritrea and Uganda in an effort to maintain security and remove other theocratic religious groups, the sectarian violence in Nigeria provides a convenient pretext for military intervention in the continuing resource war.

It is interesting to note that United States Army War College in Carlisle, Pennsylvania conducted a series of African war game scenarios in preparation for the Pentagon’s expansion of AFRICOM under the Obama Administration. In the presence of US State Department Officials, employees from The Rand Corporation and Israeli military personnel, a military exercise was undertaken which tested how AFRICOM would respond to a disintegrating Nigeria on the verge of collapse amidst civil war. The scenario envisioned rebel factions vying for control of the Niger Delta oil fields (the source of one of America’s top oil imports), which would potentially be secured by some 20000 U.S. troops if a US-friendly coup failed to take place. At a press conference at the House Armed Services Committee, AFRICOM Commander, General William Ward then went on to brazenly state the priority issue of America’s growing dependence on African oil would be furthered by AFRICOM operating under the principle theatre-goal of “combating terrorism”.

At an AFRICOM Conference held at Fort McNair in 2008, Vice Admiral Robert T. Moeller openly declared the guiding principle of AFRICOM is to protect “the free flow of natural resources from Africa to the global market”, before citing China’s increasing presence in the region as challenging to American interests. Three years later, after the regime change in Libya, nurturing economic destabilization, civil unrest and sectarian conflict in Nigeria is seen as another effort to secure Africa’s second largest oil reserves. During the war in Libya, its SFW accounts worth over 1.2 billion USD were frozen and essentially absorbed by Franco-Anglo-American powers; it would be realistic to assume that much the same would occur if Nigeria failed to comply with Western interests. While agents of foreign capital have already infiltrated its government, there is little doubt that Nigeria might become a new front in the “War on Terror”.

Iceland and Greece: Europe hit by the “hit men”

A similar pattern was recently analyzed by John Perkins in the case of Iceland and Greece, two European countries gravely hit by the economic crisis, although they did not qualify into the “poor” or “third world” category.

Before 2007, Iceland was ranked by the World Bank as the world’s third wealthiest country per capita. At that point, Alcoa, one of the world’s largest aluminum producers, was interested to develop a large aluminum smelter in Eastern Iceland that would use the country’s cheap electricity. “Economic hit men” were sent to Iceland to convince them to take out a huge loan, in order to build a 600 megawatts hydroelectric plant just for Alcoa, (the whole country was only using 300 megawatts). Alcoa approached the Iceland authorities using the “hit men” usual procedures (selective purchasing of leaders, astroturfing[10], advertising pieces posing as neutral reporting etc.)

Construction began, and their sheer scale swamped the Icelandic economy. The government jacked interest rates to 15% to keep the economy from overheating in the face of a tsunami of foreign capital. The new assets Icelanders had acquired proved not to be worth what they had paid. Offshore lenders got nasty as collateral shrank. The IMF rode to the rescue, but that amounted to little more than another Alcoa loan. Consequently, Iceland became the first developed country to go bankrupt.

According to John Perkins, Greece was also struck by economic hit men. Set to default on its debts, the Athens government is the first country using the common European currency to be declared in “selective default” on its debt. The Greek people did not agree to accept these debts and for the most part they did not benefit from them; yet they will be burdened for years to come because they were fooled by the international banking community and their own corrupt leaders.

Although protesters swarm the streets of Athens, objecting to the draconian measures being imposed by the EU and the IMF, the country’s leaders are accepting the bailouts. This method of borrowing against the well-being of a country’s citizens merely serves to increase the power of the central banks, the IMF and corporate CEOs.

This is clearly demonstrated by the fact that whenever “debt restructuring” or “debt forgiveness” deals are struck, they include privatizing parts of the economy that were previously considered public. Utilities, schools, prisons, even significant parts of the military are sold to multinational corporations. These corporations are usurping the economic engines of growth that historically have been considered as belonging to the public domain.

Romania: worrying signs

In the case of Romania, which has currently an impressive sum of money borrowed from the IMF, analysts noted that the process started after the country managed to get rid of the IMF debt in the last days of the communist regime.

In 1972, Romania joined the IMF, the World Bank and other similar institutions and started receiving loans from western bankers. In 1983, Romania was approximately 13 billion dollars in debt and the Ceausescu regime decided to pay off this entire debt, mostly by selling off Romania’s food and other products and services. In April 1989, Romania was debt free.

Since 2009, Romania borrowed about 13 billion Euros from the IMF which the borrowing government intended to pay off very slowly, ensuring that with interest payments (on the original loan) and by gutting domestic infrastructure, that Romania will be paying back the loans for generations to come.

Similarly to other countries, once the Romanian government decided to borrow the money, the IMF (and its related institutions, including the EBRD) steps in and starts dictating how the government can spend the money it just borrowed. If the IMF says “cut salaries by a quarter” then Romania has to do it. If the IMF says “raise the VAT to 24%” then Romania has to do it. If the IMF says “import Chinese toothpicks and don’t invest in a domestic toothpick-making factory” then Romania has to do it. Regardless of the fact that in the entire 70-year history of these institutions, there have been few if any “positive” results and lots of horror stories of economies and infrastructures completely gutted solely to service the short-term profit of the bankers.

On the other hand, countries like Romania have certain resources, whether that’s gold, oil or food, and “super banks” like the IMF are exceedingly efficient in strip mining this value out of the countries in question. Corrupt government officials are seen as ready to be bought off or pressured into falsifying the economic in order to receive the loans and their collaterals, considering the profit that is to be made by those who serve the IMF (or control it).

In this aspect, it is worth noticing that, after the controversial issue of the Rosia Montana gold resources, the shale gas exploitation proposed by the oil giant Chevron recently came to the attention, with the new Romanian government imposing a moratorium in the wake of large scale protests against the pollution risks. In this context, last May US Ambassador in Romania Mark Gitenstein pointed out that the new government might want to wait for a while before deciding, but if the moratorium lasts too long the Romanian government’s contract with Chevron will not be applied. “Chevron has an exploration permit. The Romanian government and the Romanians will have to decide whether they want to pay for natural gas a price five times higher than the Americans pay. It’s possible there may not be shale gas deposits in Romania, in which case the price of natural gas will remain unchanged. But if there is a way of extracting shale gas without affecting the environment I believe Romanians would want to do that,” Gitenstein stated.

2.3 Using “Gladio”-type networks

According to John Perkins and other analysts, the corporations are the source of the current economic system’s failure, since they have taken over governments in the current economic system. Present corporations are now able to influence governments in a big way, and the states have given most of their power to corporations, which know no national borders and do business with any country that has resources and markets.

The current activity of the economic hit men is seen to be greater than ever, and most of the big corporations have their own economic hit men. Large corporations like Nike, Monsanto, Exxon and pharmaceutical giants all have their version of a new generation economic hit men, who are just trying to bring in business for these particular corporations.

Analysts in Europe (and not only) consider that the new “economic hit men” might make use of people and resources such as those developed by NATO during the Cold War, that are generally known as “NATO’s secret Army” or, after their Italian name, the “Gladio” (Latin for double-edged sword) networks.

“Gladio” was a clandestine Cold War operation run by European secret services, collaborating with NATO, the CIA and Britain’s MI6 against a possible Soviet invasion, internal communist takeovers, or others on the political left gaining power. The network included France, Germany, Belgium, Norway, Denmark, Netherlands, Italy, Spain, Portugal, Turkey, Greece, Luxemburg, as well as politically neutral European countries – Austria, Finland, Sweden and Switzerland. “Gladio” remained secret until August 1990, when the Italian Prime Minister Giulio Andreotti confirmed Italy’s participation in a terrorism-related testimony before Parliament.

According to a 1959 Italian military secret service document, “these armies had a two-fold strategic purpose: firstly, to operate as a so-called ‘stay-behind’ group in the case of a Soviet invasion and to carry out a guerrilla war in occupied territories; secondly, to carry out domestic operations in case of ‘emergency situations’.”

In most of the European countries, during the ‘70s and the early ’80, the “Gladio” networks were found to be related to a series of internal terrorist acts that were blamed on the extreme-left groups. They also helped to create in Europe a climate of insecurity in order to justify severe government measures against political opponents.

Once the “Gladio” network’s existence was confirmed, the EU parliament drafted a sharply critical resolution, stating that these organizations operated completely outside the law, not subject to any parliamentary control, and called for a full investigation into the nature, structure, aims and all other aspects of such clandestine organizations.

In 2000, the Italian Senate was more explicit, saying: “Those massacres, those bombs, those military actions had been organized or promoted or supported by men inside Italian state institutions and, as had been discovered more recently, by men linked to the structures of United States intelligence”, meaning CIA mainly.

Former CIA director William Colby admitted in his memoirs that covert western armies were a major CIA initiative, begun post-WW II, and restricted “to the smallest possible coterie of the most reliable people, in Washington (and) NATO” to keep the initiative secret. According to former CIA agent Philip Agee, it also served as “a nucleus for rallying a citizen army against the threat of a leftist coup”, each of several groups “capable of mobilizing and carrying on guerrilla warfare with minimal or no outside direction”. Agee also explained that “paramilitary groups, directed by CIA officers, operated in the sixties throughout Europe”, stressing that “perhaps no activity of the CIA could be as clearly linked to the possibility of internal subversion”.

Starting with the ‘80s, there were several incidents in Europe where persons with connections in the police and intelligence services (as were usually the “Gladio” people) were involved in the development of so-called “staged security threats” against the state, that are usually used to manipulate public opinion; as a smear campaign against political opposition; as a tool to restrict freedom of speech and the right to demonstrate; to establish state emergency; to start wars against another nation etc.

According to some analysts, a new wave of political terror has been growing in Europe in recent years, with parcel bombs addressed to top politicians by supposed radical left, or a “communist” group taking credit of a small bomb that exploded in Davos, Switzerland in early 2011.

One clear case of a “false flag” hit, was the murder of Greek journalist Sokratis Giolias in July 2010. He was murdered in front of his home in Athens, supposedly by a left wing group calling themselves the “Sect of Revolutionaries”. But the odd part is that Giolias’ colleagues have told that he was working on a large expose story about Greek corruption. It was seen as highly improbable that a real left wing group would kill a journalist who was trying to expose the very same people the left-wingers are fighting against: corrupt officials, political parties and the big-business.

3. Lost war or new outcomes?

While more and more countries and organizations are challenging the increasing power of the transnational corporations and financial institutions, it is less probable that a radical change is to be seen, in the near future, in the process of the transnational actors eroding the power of the sovereign states.

The proposed alternatives, mostly coming from different NGOs, are seen as mostly utopian, with little chance of coming to real life.

3.1 The Venus Project

One of these movements that brought to the light many of the transnational actors actions and processes – and proposed solutions – was The Zeitgeist Movement, inspired by a vision launched in the 70s and called “the Venus project”.

The Venus Project was started around 1975 by self-educated structural engineer, industrial designer, and futurist Jacque Fresco. Fresco’s project aims to restructure society through worldwide utilization of a theoretical design that he calls a “resource-based economy”. Those ideas use a version of sustainable cities, energy efficiency, natural resource management and advanced automation with a global socio-economic system based on social cooperation and scientific methodology. The Venus Project was featured prominently in the documentary film Zeitgeist: Addendum, which was followed by the founding of an organization called the Zeitgeist Movement that aimed to promote the aims of the Venus Project. In 2011, an additional film, Zeitgeist: Moving Forward, was released. At that time Zeitgeist was a promoter-advocate of the Venus Project. However, in April 2011, the Venus Project disassociated itself from Zeitgeist as it no longer felt represented by it.

The members of The Zeitgeist Movement seem to face an intimidating wall of those who decree their goals as unattainable. Most of its critics pointed out to various aspects of the Zeitgeist movement, specifically: (a) utopianism, (b) reduced work incentives in their proposed economy, (c) practical difficulties in a transition to that economy, and (d) subscribing to 9/11 conspiracy theories. But with 250 international chapters forming in just one year and the membership count rapidly growing, it’s undeniable that many easily identify with the message. The Zeitgeist Movement highlights that there are individuals who believe in a sustainable future where humanity is not united by religious or political ideology, but by the scientific method, venerated as the savior that can develop a system of human equality, thriving from the cooperation and balance of technology and nature.

3.2. A new type of “good governance”

On the other hand, national governments, mainly those in Europe and North America, are increasingly being forced to re-examine their ideas of “good governance” as a means to avoid losing their sovereignty. According to most analysts, it’s no coincidence that the political systems in the US, Europe and Japan are all discovering their limits almost simultaneously. Their traditional tools, such as their currency control instruments, have repeatedly proven to be powerless when faced with the sheer might of global financial groups.

Until just a few years ago the issue of good governance was only discussed in relation to developing and newly industrialized countries. That’s no longer the case. Good governance has become a benchmark against which even the highly developed industrial nations of the West should be judged, partly because of stiffer competition between them. But also because, as is clear from the shift of entire industrial and production segments to former Eastern Bloc countries, or to China and India, they are increasingly competing with nations beyond the OECD’s borders.

According to recent studies, Sweden is currently the world’s best-governed country, while North Korea is the worst. Denmark ranks third overall, Germany 11th. But while the findings may be more-or-less expected for the countries at the top and bottom of the scale, there are quite a few surprises in between. France, for instance, ranks behind Chile, Turkey and Mexico because its government is less accountable to parliament, its citizenry and the media than in many developing nations. Another interesting revelation is that faith in democratic institutions has recently fallen dramatically in several countries, including Hungary and Argentina that seemed for many years to be moving particularly stridently toward democracy.

Brazil – a success story of “responsive government”

As opposed to the utopian visions of the “Zeitgeist” – type groups, the solution of the national state governments vs. transnational actors’ game seems rather to be offered by the so-called “good governance” process, for which Brazil is one of the most significant examples.

Brazil was considered a country with great potential, but doomed forever to languish in that sense of possibility because the country’s chaotic governments could never seem to get their act together. Instead, it became one of the so-called “BRIC” countries, and many believe it is on its way to becoming a global power. The country has a nearly balanced budget, little debt and almost full employment. It is in the process of overtaking France and the United Kingdom, and to become one of the world’s five largest economies. Despite being a newly industrialized country, Brazil gives development aid, and its dollar reserves of over $350 billion (€290 billion) make it one of the countries with the potential to help save the European Union.

According to the analysts, Brazil has achieved a rare record: high growth, political freedom, and falling inequality. International organizations such as the World Bank, and politicians from US President Barack Obama to Chinese Prime Minister Wen Jiabao, are full of admiration as well.

For much of its history, Brazil has been treated as a pawn by foreign powers. The Portuguese conquerors were brutal in their treatment of the region’s indigenous people. They also dragged millions of slaves over from Africa and generally exploited Brazil however they saw fit from the 16th to late 19th century. In the 20th century, the country lurched from coup to coup, and for two decades, starting in 1964, it was ruled by a military dictatorship that Washington sometimes tolerated and sometimes actively supported. By the early 1990s, Brazil’s economy had hit rock bottom. Violent crime in the major cities had reached nightmarish levels, lumber-cutting mafias oversaw the ruthless exploitation of the rainforests, and while a few people grew outrageously rich, babies in the slums died of malnutrition. The government didn’t provide even the most rudimentary services, and hyperinflation gobbled up more than pay raises could match.

Such circumstances could have provided fertile ground for a revolution. Yet, the situation was turned around by the moderate social democrat, Fernando Henrique Cardoso, now 81, who brought together in 1993 the country’s brightest minds. He created a new currency, the modern real, restructured foreign credit and lifted tariff barriers. Some protected industries didn’t survive these drastic changes, but the new approach brought a return in confidence, and consumption began to rise. He opened up the country, creating international economic connections. Still, he failed to achieve one of the central aims of good governance: an equitable distribution of wealth.

That effort was taken up by his successor, who became president in 2002: Luiz Inácio Lula da Silva, known to all as “Lula,” leader of the left-wing Workers’ Party. He succeeded in easing the desperate situation of the underprivileged with welfare programs such as Fome Zero (“Zero Hunger”), which he implemented against the express advice of his own advisers, the World Bank and the International Monetary Fund. He was accused of “assistencialism”, a form of poverty relief that’s limited to handouts with little potential to make long-term change. Yet Lula was successful. More than 20 million people made the leap from lower to middle class under his watch, and the proportion of Brazilians living in absolute poverty decreased by 50 percent. “Responsive government” is the name political scientists and sociologists use for a leadership style that acts more or less in anticipation of its electorate’s questions and concerns, integrating people across class lines and creating a shared sense of identity.

Lula’s successor, former guerrilla fighter Dilma Rousseff, who took office in 2011, was quick to root out the slightest hint of corruption, kicking out seven ministers within her first year in office. The strategies Rousseff is implementing are ones that have emerged at the forefront in the global debate over good governance: professionalizing political work, being willing to experiment and able to learn.

What the current president learned from her experiences stands in stark contrast to the lessons others have taken away from globalization. Unlike the Republicans in the US or many European neoliberals, Rousseff believes in government involvement, active industrial policies and taxes that are applied intelligently and increased if necessary.

Despite the government’s ruthless intervention, regulation and taxation, Brazilian businesses have nothing to complain about. The country’s major corporations have become some of the world’s most important agricultural producers and Brazil is making a name for itself in areas besides consumer goods, such as in the high-tech industry.

South America’s model nation is without a doubt one of globalization’s major success stories, emerging from the global financial crisis of 2008 stronger than before. Still, long-term sustainability depends on factors beyond just those decided in Brazil’s presidential palace.

The Brazilian real is now considered one of the world’s strongest currencies, which can be a nightmare, and not just for tourists. Brazil is increasingly being flooded with cheap plastic goods, mostly from China, which choke out small, labor-intensive domestic industries. The country is also flooded with speculation.

Oil, managed by Petrobras, the same resource that proves more of a curse than a blessing for so many countries and often leads to “bad governance” may play a decisive role in setting Brazil’s future course. Just how important it is to the country’s president can be seen in Rousseff’s choice for Petrobras new CEO: Maria das Graças Foster, 58, who is both a widely recognized energy expert, and yet another one of Brazil’s breathtaking success stories. Foster comes from Rio’s favelas and worked her way through college, raising a daughter at the same time. With hard work, in the space of 30 years she climbed the career ladder from intern, to oil platform technician, to overseeing the company’s natural gas division.

One major challenge for Brazil is how to avoid the “Dutch disease” (an economic term that refers to a decrease in the competitiveness of a country’s manufacturing sector as its exploitation of natural resources increases). It also wants to prevent the cronyism that tends to plague oil-extracting nations and, instead, ensure that the people get a fair share of the profit obtained from the country’s natural resources. So far, Norway has provided the best solution to this problem, through a sovereign wealth fund that funnels a portion of the country’s oil profits into investments. Petrobras holds up Norway’s example as its stated ideal.

* * *

While Brazil’s example is most positive for the chances of the state against the transnational competitors, the economic and political situation and foreseeable trends in most of the world makes it difficult to foresee that governments would readily assume such responsibilities and political risks, leaving enough space for the transnational actors to impose their rules.


[1] John Perkins: Confessions of an Economic Hit Man, Berrett-Koehler Publishers, New York, 2004, see infra. and quotes from John Perkins’ interventions in the documentary Zeitgeist:Addendum, by Peter Joseph, 2008

[2] The origins of the case go back to the 1970s, when Texaco, which was later acquired by Chevron, operated as a partner with the Ecuadorian state oil company. The villagers sued in 1993, claiming that Texaco had left an environmental mess that was causing illnesses. Chevron bought Texaco in 2001, before the case was resolved. In 2011, Chevron was sentenced to pay more than $9 billion in damages, one of the largest environmental awards ever.

[3] A draft agreement negotiated during the 90s between members of the OECD, but intensely criticized because it would have made it difficult to regulate foreign investors. After an intense global campaign was waged against the MAI by the treaty’s critics, the host nation France announced in October 1998 that it would not support the agreement, effectively preventing its adoption due to the OECD’s consensus procedures.

[4] A meeting ground for powerful members of the U.S. corporate and foreign policy establishments, the Council on Foreign Relations is an incubator of leaders and ideas, often involving influential world figures or foreign policy thinkers, in settings that are conducive to candid off-the-record discussion. It similarly styles its influential Foreign Affairs journal as a forum for the open debate of significant foreign policy issues.

[5] Quote from www.wikipedia.org

[6] Including John Perkins, see previous chapter

[7] “Peak oil” is the point in time when the maximum rate of petroleum extraction is reached, after which the rate of production is expected to enter terminal decline.

[8] The Iranian Oil Bourse (IOB) opened on February 17, 2008 on the island of Kish, as an oil bourse for petroleum, petrochemicals and gas in various currencies other than the United States dollar, primarily the Euro and the Iranian rial. This was analyzed in a previous paper.

[9] Before a loan can be taken from the World Bank or IMF, a country must follow strict economic policies, which include currency devaluation, lifting of trade tariffs, the removal of subsidies and detrimental budget cuts to critical public sector health and education services.

[10] A form of advocacy in support of a political, organizational, or corporate agenda, designed to give the appearance of a “grassroots” movement. The goal of such campaigns is to disguise the efforts of a political or commercial entity as an independent public reaction to another political entity—a politician, political group, product, service or event (wikipedia.org).

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