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Part 3
Controlling the Global
Economy
Bilderberg, the Trilateral Commission and the Federal
Reserve
August 3, 2009
The Bilderberg Group
and the European Union Project
In 1954,
the Bilderberg Group was founded in
the Netherlands, which was a secretive meeting held once a year,
drawing roughly 130 of the
political-financial-military-academic-media elites from North
America and Western Europe as,
“an informal network of influential
people who could consult each other privately and
confidentially.”[1]
Regular participants include the CEOs or
Chairman of some of the largest corporations in the world, oil
companies such as Royal Dutch Shell, British Petroleum, and Total
SA, as well as various European monarchs, international bankers such
as David Rockefeller, major politicians, presidents, prime
ministers, and central bankers of the world.[2]
Joseph Retinger, the founder of the Bilderberg Group,
was also one of the original architects of the European Common
Market and a leading intellectual champion of European integration.
In 1946, he told the Royal Institute of International Affairs (the
British counterpart and sister organization of the Council on
Foreign Relations), that Europe needed to create a federal union and
for European countries to “relinquish part of their sovereignty.”
Retinger was a founder of the European
Movement (EM), a lobbying organization dedicated to creating a
federal Europe.
Retinger secured financial support for the European
Movement from powerful US financial interests such as the Council on
Foreign Relations and the Rockefellers.[3] However, it is
hard to distinguish between the CFR and the Rockefellers, as,
especially following World War II, the CFR’s main finances came from
the Carnegie Corporation, Ford Foundation and most especially, the
Rockefeller Foundation.[4]
The Bilderberg Group acts as a,
“secretive global think-tank,” with
an original intent to “to link governments and economies in
Europe and North America amid the Cold War.”[5]
One of the Bilderberg Group’s main goals
was unifying Europe into a European Union.
Apart from Retinger, the founder of the
Bilderberg Group and the European Movement, another ideological
founder of European integration was Jean Monnet, who founded
the Action Committee for a United States of Europe, an organization
dedicated to promoting European integration, and he was also the
major promoter and first president of the European Coal and Steel
Community (ECSC), the precursor to the European Common Market.[6]
Declassified documents (released in 2001) showed that,
“the US intelligence community ran a
campaign in the Fifties and Sixties to build momentum for a
united Europe. It funded and directed the European federalist
movement.”[7]
The documents revealed that,
“America was working aggressively
behind the scenes to push Britain into a European state. One
memorandum, dated July 26, 1950, gives instructions for a
campaign to promote a fully-fledged European parliament. It is
signed by Gen William J Donovan, head of the American wartime
Office of Strategic Services, precursor of the CIA.”
Further, “Washington's main tool for
shaping the European agenda was the American Committee for a
United Europe, created in 1948. The chairman was Donovan,
ostensibly a private lawyer by then,” and “The vice-chairman was
Allen Dulles, the CIA director in the Fifties. The board
included Walter Bedell Smith, the CIA's first director, and a
roster of ex-OSS figures and officials who moved in and out of
the CIA. The documents show that ACUE financed the European
Movement, the most important federalist organization in the
post-war years.”
Interestingly, “The leaders of the
European Movement - Retinger, the visionary Robert Schuman and
the former Belgian prime minister Paul-Henri Spaak - were all
treated as hired hands by their American sponsors. The US role
was handled as a covert operation. ACUE's funding came from the
Ford and Rockefeller foundations as well as business groups with
close ties to the US government.”[8]
The
European Coal and Steel Community
was formed in 1951, and signed by France, West Germany, Italy,
Belgium, Luxembourg and the Netherlands.
Newly released documents from the
1955 Bilderberg meeting show that a main topic of discussion was
“European Unity,” and that,
“The discussion affirmed complete
support for the idea of integration and unification from the
representatives of all the six nations of the Coal and Steel
Community present at the conference.”
Further, “A European speaker
expressed concern about the need to achieve a common currency,
and indicated that in his view this necessarily implied the
creation of a central political authority.”
Interestingly, “A United States
participant confirmed that the United States had not weakened in
its enthusiastic support for the idea of integration, although
there was considerable diffidence in America as to how this
enthusiasm should be manifested. Another United States
participant urged his European friends to go ahead with the
unification of Europe with less emphasis upon ideological
considerations and, above all, to be practical and work fast.”[9]
Thus, at the 1955 Bilderberg Group
meeting, they set as a primary agenda, the creation of a European
common market.[10]
In 1957, two years later, the Treaty of Rome was signed, which
created the European Economic Community (EEC), also known as the
European Community. Over the decades, various other treaties were
signed, and more countries joined the European Community.
In 1992, the Maastricht Treaty was
signed, which created the European Union and led to the creation of
the Euro. The European Monetary Institute was created in 1994, the
European Central Bank was founded in 1998, and the Euro was launched
in 1999.
Etienne Davignon, Chairman of the
Bilderberg Group and former EU Commissioner, revealed in March of
2009 that the Euro was debated and planned at Bilderberg
conferences.[11] This was an example of regionalism, of
integrating an entire region of the world, a whole continent, into a
large supranational structure.
This was one of the primary functions of
the Bilderberg Group, which would also come to play a major part in
other international issues.
Interdependence Theory
The theoretical justifications for integration and regionalism
arrived in the 1960s with what is known as “interdependence theory.”
One of its primary proponents was a man named Richard N. Cooper.
Two other major proponents of
interdependence theory are Robert Keohane and Joseph Nye.
Interdependence theory and theorists largely expand upon the notions
raised by Keynes.
Richard Cooper wrote that, during the 1960s,
“there has been a strong trend
toward economic interdependence among the industrial countries.
This growing interdependence makes the successful pursuit of
national economic objectives much more difficult.”
He also identified that “the
objective of greater economic integration involves international
agreements which reduce the number of policy instruments
available to national authorities for pursuit of their economic
objectives.”[12]
Further, “Cooper argues that new
policies are needed to address the unprecedented conditions of
international interdependence.”[13]
Cooper also opposed a return to
mercantilist pursuits in order for nations to secure economic
objectives, arguing that, “economic nationalism invited policy
competition that is doomed to fail,” and thus concludes,
“that international policy
coordination is virtually the only means to achieve national
economic goals in an interdependent world.”[14]
Keohane and Nye go into further analysis
of interdependence, specifically focusing on how interdependence
transforms international politics. They tend to frame their concepts
in ideological opposition to international relations realists, who
view the world, like mercantilists, as inherently anarchic. Keohane
and Nye construct what is known as “complex interdependence,” in
which they critique realism.
They analyze realism as consisting of
two primary facets: that states are the main actors in the
international arena, and that military force is central in
international power.
They argue that,
“global economic interdependence has
cast doubt on these assumptions. Transnational corporations and
organizations born of economic integration now vie with states
for global influence.”[15]
Keohane and Nye also discuss the
relevance and importance of international regimes in the politics of
interdependence, defining regimes as “networks of rules, norms, and
procedures that regularize behavior.”
They argue that,
“Regimes are affected by the
distribution of power among states, but regimes, in turn, may
critically influence the bargaining process among states.”[16]
Again, this contests the realist and
mercantilist notions of the international sphere being one of chaos,
as a regime can produce and maintain order within the international
arena.
Interdependence theorists tend to argue that interdependence has
altered the world order in that it has become based upon cooperation
and mutual interests, largely championing the liberal economic
notion of a non-chaotic and cooperative international order in which
all nations seek and gain a mutual benefit.
Ultimately, it justifies the continued
process of global economic integration, while realist and
mercantilist theorists, who interdependence theorists contest and
debate, justify the use of force in the international arena in terms
of describing it as inherently chaotic. In theory, the notions of
mercantilism and liberalism are inimical to one another however,
they are not mutually exclusive and are, in fact, mutually
reinforcing.
Events throughout the 1970s are a clear
example of this mutually reinforcing nature of mercantilist behavior
on the part of states, and the “interdependence” of the liberal
economic order.
As early mercantilist theorist Frederick List wrote in regards to
integration and union,
“All examples which history can show
are those in which the political union has led the way, and the
commercial union has followed. Not a single instance can be
adduced in which the latter has taken the lead, and the former
has grown up from it.”[17]
It would appear that the elites have
chosen the road less traveled in the 20th century, with the
Bilderberg Group pursuing integration and union in Europe by
starting with commercial union and having political union follow.
This concept is also evident in the
notions of interdependence theory, which focuses on global economic
integration as changing the realist/mercantilist notions of a
chaotic international order, as states and other actors become more
cooperative through such economic ties.
Trilateralism
In the late 1960s, Western European economies (in particular West
Germany) and Japan were rapidly developing and expanding.
Their currencies rose against the US
dollar, which was pegged to the price of gold as a result of the
Bretton Woods System, which, through the IMF, set up an
international monetary system based upon the US dollar, which was
pegged to gold.
However, with the growth of West Germany
and Japan,
“by the late 1960s the system could
no longer be expected to perform its previous function as a
medium for international exchange, and as a surrogate for gold.”
On top of this, to maintain its vast
empire, the US had developed a large balance-of-payments deficit.[18]
Richard Nixon took decisive, and what many referred to as
“protectionist” measures, and in 1971, ended the dollar’s link to
gold, which,
“resulted in a devaluation of the
dollar as it began to float against other currencies,” and “was
meant to restore the competitiveness of the US economy,”[19]
as with devaluation, “U.S.-made goods would cost less to
foreigners and foreign-made goods would be less competitive on
the U.S. market.”
The second major action taken by Nixon
was when he “slapped a ten percent surcharge on most imports into
the United States,” which was to benefit U.S. manufacturing firms
over foreign ones in competition for the U.S. market.
The result was that less imports from
Asia were coming into the US, more US goods were sold in their
markets at more competitive prices, forcing Japan and the
European Economic Community (EEC) to relax their trade barriers
to US products.[20]
An article in Foreign Affairs, the journal of the Council on
Foreign Relations, referred to Nixon’s New Economic Policy as,
“protectionist,” encouraging a
“disastrous isolationist trend,”[21] and that Nixon
shattered “the linchpin of the entire international monetary
system— on whose smooth functioning the world economy depends.”[22]
Another article in Foreign Affairs
explained that the Atlanticist, or internationalist faction of the
US elite were in particular, upset with Nixon’s New Economic Policy,
however, they,
“agreed on the diagnosis: the
relative balance of economic strengths had so changed that the
United States could no longer play the role of economic leader.
But they also argued that further American unilateralism would
fuel a spiral of defensive reactions that would leave all the
Western economies worse off. Their suggested remedy, instead,
was much more far-reaching coordination among all the trilateral
[North American, European and Japanese] governments.”[23]
There was a consensus within the
American ruling class that the Bretton Woods System was in
need of a change, but there were divisions among members in how to
go about changing it.
The more powerful (and wealthy)
international wing feared how US policies may isolate and alienate
Western Europe and Japan, and they advocated that,
“The world economic roles of America
must be reconciled with the growth to power of Europe and Japan.
There must be fundamental reform of the international monetary
system. There must be renewed efforts to reduce world trade
barriers. The underlying U.S. balance of payments has
deteriorated.”
However, Nixon “went much too far” as he
alienated Western Europe and Japan.
In 1970,
David Rockefeller became
Chairman of the Council on Foreign Relations, while also
being Chairman and CEO of Chase Manhattan. In 1970, an academic who
joined the Council on Foreign Relations in 1965 wrote a book called
Between Two Ages - America's
Role in the Technetronic Era.
The author,
Zbigniew Brzezinski, called for
the formation of “A Community of the Developed Nations,” consisting
of Western Europe, the United States and Japan.
Brzezinski wrote about how,
“the traditional sovereignty of
nation states is becoming increasingly unglued as transnational
forces such as multinational corporations, banks, and
international organizations play a larger and larger role in
shaping global politics.”
David Rockefeller had taken note of
Brzezinski’s writings, and was “getting worried about the
deteriorating relations between the U.S., Europe, and Japan,” as a
result of Nixon’s economic shocks.
In 1972, David Rockefeller and
Brzezinski “presented the idea of a trilateral grouping at the
annual Bilderberg meeting.”
In July of 1972, seventeen powerful
people met at David Rockefeller’s estate in New York to plan for the
creation of the Commission. Also at the meeting was Brzezinski,
McGeorge Bundy, the President of the Ford Foundation, (brother of
William Bundy, editor of Foreign Affairs) and Bayless Manning,
President of the Council on Foreign Relations.[24]
So, in 1973,
the Trilateral Commission was
formed to address these issues.
A 1976 article in Foreign Affairs explained that,
“Trilateralism as a linguistic
expression—and the Trilateral Commission—arose in the early
1970s from the reaction of the more Atlanticist part of the
American foreign policy community to the belligerent and
defensive unilateralism that characterized the foreign economic
policy of the Nixon Administration.”[25]
The Commission’s major concerns were to
preserve for the “industrialized societies,” in other words, seek
mutual gain for the Trilateral nations, and to construct “a common
approach to the needs and demands of the poorer nations.”
However, this should be read as,
“constructing a common approach to [dealing with] poorer nations.”
As well as this, the Commission would
undertake,
“the coordination of defense
policies and of policies toward such highly politicized issues
as nuclear proliferation, terrorism, and aerial hijacking, and
such highly politicized geographic areas as the Middle East or
Southern Africa.”[26]
Interestingly, interdependence theorist
Joseph Nye is a member of the Trilateral Commission, as is Richard
N. Cooper.[27] Today, Joseph Nye is a member of the Board
of Directors of the Council on Foreign Relations,[28] and
Richard N. Cooper was a Director of the Council on Foreign Relations
from 1993-1994.[29]
The end of the link of the dollar to gold meant that,
“the US was no longer subject to the
discipline of having to try to maintain a fixed par value of the
dollar against gold or anything else: it could let the dollar
move as the US Treasury [and ultimately, the Federal Reserve]
wished and pointed towards the removal of gold from
international monetary affairs.”
This created a dollar standard, as
opposed to a gold standard, which,
“places the direction of the world
monetary policy in the hands of a single country,” which was
“not acceptable to Western Europe or Japan.”[30]
Addressing this issue was among the
reasoning behind the creation of the Trilateral Commission.
The Oil Crisis
The May 1973 meeting of the Bilderberg Group occurred five months
prior to the extensive oil price rises brought about by the Yom
Kippur War.
However, according to leaked minutes
from the meeting, a 400% increase in the price of oil was discussed,
and meeting participants were creating a “plan [on] how to manage
the about-to-be-created flood of oil dollars.”[31]
Oil is no issue foreign to the interests
of the Bilderberg Group, as among the 1973 participants were the
CEOs of Royal Dutch Shell, British Petroleum (BP), Total S.A., ENI,
Exxon, as well as significant banking interests and individuals such
as Baron Edmond de Rothschild and David Rockefeller, and the US
Secretary of State at the time, Henry Kissinger.[32]
In 1955, Henry Kissinger, a young scholar at the time, was brought
into the Council on Foreign Relations, where he distinguished
himself as a prominent Council member and became a protégé to Nelson
Rockefeller, one of David Rockefeller’s brothers. In 1969, Kissinger
became Richard Nixon’s National Security Adviser.[33]
This Bilderberg meeting was taking place
during a time of great international instability, particularly in
the Middle East. Kissinger, as National Security Adviser, was in a
power struggle with Secretary of State William Rogers over foreign
policy.
Nixon even referred to the continual
power struggle between Kissinger as National Security Advisor and
Secretary of State William Rogers, saying that,
“Henry's personality problem is just
too goddamn difficult for us to deal [with],” and that
Kissinger’s “psychopathic about trying to screw [Secretary of
State William] Rogers.”
Nixon even said that if Kissinger wins
the struggle against Rogers, Kissinger would “be a dictator.” Nixon
told his Chief of Staff, Haldeman, that Kissinger feels “he must be
present every time I see anybody important.”[34]
At the time of the Yom Kippur War, Nixon was in the middle of major
domestic issues, as the Watergate scandal was breaking, leading to
an increase in the power and influence of Kissinger, as,
“The president was deeply
preoccupied, and at times incapacitated by self-pity or
alcohol.”[35]
By 1970, Kissinger had Rogers,
“frozen out of policy-making on
Southeast Asia,” during the Vietnam War, so Rogers “concentrated
on the Middle East.”
Eventually, Nixon had Rogers resign, and
then Henry Kissinger took the position as both National Security
Advisor and Secretary of State.[36]
As Kissinger later said in a speech marking the 25th anniversary of
the Trilateral Commission,
“In 1973, when I served as Secretary
of State, David Rockefeller showed up in my office one day to
tell me that he thought I needed a little help,” and that,
“David’s function in our society is to recognize great tasks, to
overcome the obstacles, to help find and inspire the people to
carry them out, and to do it with remarkable delicacy.”
Kissinger finished his speech by saying,
“David, I respect you and admire you
for what you have done with the Trilateral Commission. You and
your family have represented what goes for an aristocracy in our
country—a sense of obligation not only to make it materially
possible, but to participate yourself in what you have made
possible and to infuse it with the enthusiasm, the innocence,
and the faith that I identify with you and, if I may say so,
with your family.”[37]
Kissinger sabotaged Rogers’ peace
negotiations with Egyptian President Anwar Sadat, who, at the
time, was trying to rally other Arab leaders against Israel. In
1972, King Faisal of Saudi Arabia had “insisted that oil should not
be used as a political weapon.”
However,
“in 1973, Faisal announced that he
was changing his mind about an oil embargo.”
Faisal held a meeting with western oil
executives, warning them. Sadat told Faisal of the plan to attack
Israel, and Faisal agreed to help both financially and with the “oil
weapon.”
Days later, the Saudi oil minister,
Sheik Ahmed Yamani,
“began dropping hints to the oil
companies about a cutback in production that would affect the
United States.”
Yamani said Henry Kissinger had
been “misleading President Nixon about the seriousness of Faisal’s
intentions.”[38]
On October 4, the US National Security Agency (NSA),
“knew beyond a shadow of a doubt
that an attack on Israel would take place on the afternoon of
October 6.”
However, the Nixon White House,
“ordered the NSA to sit on the
information,” until the US warned Israel a few hours before the
attack, even though “Nixon’s staff had at least two days’
advance warning that an attack was coming on October 6.”[39]
Hours before the attack on Israel by
Syria and Egypt, the U.S. warned its Israeli counterparts, however,
“the White House insisted that the
Israelis do nothing: no preemptive strikes, no firing the first
shot. If Israel wanted American support, Kissinger warned, it
could not even begin to mobilize until the Arabs invaded.”
Israeli Prime Minister Golda Meir
stood Israeli defenses down, citing “Kissinger’s threats as the
major reason.”
Interestingly, Kissinger himself was
absent from his office on the day of the attack, and he knew days
before when it was set to take place, yet, still went to the Waldorf
Astoria in New York. Further, he waited three days before convening
a U.N. Security Council meeting.[40] The attack needed to
go forward, as directed by the backdoor diplomacy of Kissinger.
With the outbreak of the Yom Kippur War on October 6, 1973,
Kissinger “centered control of the crisis in his own hands.” After
the Israelis informed the White House that the attack on them had
taken place, Kissinger did not consult Nixon or even inform him on
anything for three hours, who was at his retreat in Florida.
After talking to Nixon hours later,
Kissinger told him that,
“we are on top of it here,” and “the
president left matters in Kissinger's hands.”
Alexander Haig, Kissinger’s former
second in command in the National Security Council, then Chief of
Staff to Nixon, was with the President on that morning. Haig told
Kissinger,
“that Nixon was considering
returning to Washington, [but] Kissinger discouraged it—part of
a recurring pattern to keep Nixon out of the process.”
For three days, it was Kissinger who,
“oversaw the diplomatic exchanges
with the Israelis and Soviets about the war. Israeli prime
minister Golda Meir's requests for military supplies, which were
beginning to run low, came not to Nixon but to Kissinger.”
On October 11, the British Prime
Minister called asking to speak to Nixon, to which Kissinger
responded,
“Can we tell them no? When I talked
to the President he was loaded,” but the British were told, “the
prime minister could speak to Kissinger.”[41]
On October 12, the major American oil
companies sent a letter to Nixon suggesting the Arab countries
“should receive some price increase,” and Nixon, following
Kissinger’s advice, sent arms to Israel, which precipitated the Arab
OPEC countries to announce a 70% increase in the price of oil on
October 16th, and announce an oil embargo against the US on the
17th.[42]
The Bilderberg meeting five months prior involved participants
planning “how to manage the about-to-be-created flood of oil
dollars.” At the meeting, an OPEC Middle East oil revenue rise of
over 400% was predicted.
A Bilderberg document from the meeting
stated that,
“The task of improving relations
between energy importing countries should begin with
consultations between Europe, the US and Japan. These three
regions, which represented about 60 per cent of world energy
consumption, accounted for an even greater proportion of world
trade in energy products, as they absorbed 80 per cent of world
energy exports.”
The same document also stated that,
“an energy crisis or an increase in
energy costs could irremediably jeopardize the economic
expansion of developing countries which had no resources of
their own,” and the “misuse or inadequate control of the
financial resources of the oil producing countries could
completely disorganize and undermine the world monetary system.”[43]
As economist F. William Engdahl
noted in his book, A Century of War,
“One enormous consequence of the
ensuing 400 per cent rise in OPEC oil prices was that
investments of hundreds of millions of dollars by British
Petroleum, Royal Dutch Shell [both present at Bilderberg] and
other Anglo-American petroleum concerns in the risky North Sea
could produce oil at a profit,” as “the profitability of these
new North Sea oilfields was not at all secure until after the
OPEC price rises.”[44]
In 2001, the former Saudi representative
to OPEC, Sheik Ahmed Yamani, said,
“'I am 100 per cent sure that the
Americans were behind the increase in the price of oil. The oil
companies were in real trouble at that time, they had borrowed a
lot of money and they needed a high oil price to save them.”
When he was sent by King Faisal to the
Shah of Iran in 1974, the Shah said that it was Henry Kissinger who
wanted a higher price for oil.[45]
An article in Foreign Policy, the journal published by the Carnegie
Endowment for International Peace, concluded from exhaustive
research, that,
“Since 1971, the United States has
encouraged Middle East oil-producing states to raise the price
of oil and keep it up.”
This conclusion was based upon State
Department documents, congressional testimony and interviews with
former policy-makers.[46]
At the Eighth Petroleum Congress of the
League of Arab States (Arab League) in 1972, James Akins,
head of the fuel and energy section of the State Department, gave a
speech in which he said that oil prices were,
“expected to go up sharply due to
lack of short-term alternatives to Arab oil,” and that this was,
“an unavoidable trend.”
A Western observer at the meeting said
Akins’ speech was essentially,
“advocating that Arabs raise the
price of oil to $5 per barrel.”
The oil industry itself was also
becoming more unified in their position. The National Petroleum
Council (NPC),
“a government advisory body
representing oil industry interests, waited until Nixon was
safely re-elected before publishing a voluminous series of
studies calling for a doubling of U.S. oil and gas prices.”[47]
The summer before the Yom Kippur War, in
1973, James Akins was made U.S. Ambassador to Saudi Arabia. He also
happened to be a member of the Council on Foreign Relations.[48]
Saudi Arabian minister for petroleum and
representative to OPEC, Sheik Ahmed Yamani, stated in February of
1973, that,
“it is in the interests of the oil
companies that prices be raised,” as “their profits are
collected from the production stage.”
It was also in the interests of the US,
as OPEC will have a massive increase in revenues to be invested,
likely in the US, itself.[49]
The oil companies themselves were also fearful of having their
business facilities in OPEC countries nationalized, so they,
“were anxious to engage OPEC
countries in the oil business in the United States, in order to
give them an interest in maintaining the status quo.”
Weeks before war broke out, the National
Security Council, headed by Kissinger, issued a statement saying
that military intervention in the event of a war in the Middle East
was “ruled out of order.”[50]
U.S. Ambassador to Saudi Arabia, James Akins, later testified in
congress on the fact that when, in 1975, the Saudis went to Iran to
try to get the Shah to roll back the price of oil, they were told
that Kissinger told the Iranians that, “the United States understood
Iran’s desire for higher oil prices.”[51]
Akins was removed from Saudi Arabia in
1975,
“following policy disputes with
Secretary of State Henry Kissinger.”[52]
The OPEC oil price increases resulted in
the,
“removal of some withholding taxes
on foreign investment” in the United States, “unchecked arms
sales, which cannot be handled without U.S. support personnel,
to Iran and Saudi Arabia,” as well as an “attempt to suppress
publication of data on volume of OPEC funds on deposit with U.S.
banks.”[53]
Ultimately, the price increases,
“would be of competitive advantage
to the United States because the economic damage would be
greater to Europe and Japan.”
Interestingly, “Programs for sopping
up petrodollars have themselves become justifications for the
continued flow of U.S. and foreign funds to pay for higher
priced oil. In fact, a lobby of investors, businessmen, and
exporters [was] growing in the United States to favor giving the
OPEC countries their way.”
Outside the United States, it is “widely
believed” that the high-priced oil policy was aimed at hurting
Europe, Japan, and the developing world.[54]
There was also,
“input from the oil industry” which
went “into the formulation of U.S. international oil policy.”[55]
In 1974, when a White House official
suggested to the Treasury to force OPEC to lower the price of oil,
his idea was swept under, and he later stated that,
“It was the banking leaders who
swept aside this advice and pressed for a ‘recycling’ program to
accommodate to higher oil prices.”
In 1975, a Wall Street investment banker
was sent to Saudi Arabia to be the main investment adviser to the
Saudi Arabian Monetary Agency (SAMA), and,
“he was to guide the Saudi
petrodollar investments to the correct banks, naturally in
London and New York.”[56]
In 1974, another OPEC oil price increase
of more than 100 percent was undertaken, following a meeting in
Tehran, Iran.
This initiative was undertaken by the
Shah of Iran, who just months before was opposed to the earlier
price increases.
Sheikh Yamani, the Saudi oil minister,
was sent to meet with the Shah of Iran following his surprise
decision to raise prices, as Yamani was sent by Saudi King Faisal,
who was worried that higher prices would alienate the US, to which
the Shah said to Yamani,
“Why are you against the increase in
the price of oil? That is what they want? Ask Henry Kissinger -
he is the one who wants a higher price.”[57]
As Peter Gowan stated in The
Globalization Gamble,
“the oil price rises were the result
of US influence on the oil states and they were arranged in part
as an exercise in economic statecraft directed against America’s
‘allies’ in Western Europe and Japan. And another dimension of
the Nixon administration’s policy on oil price rises was to give
a new role, through them, to the US private banks in
international financial relations.”
He explained that the Nixon
administration was pursuing a higher oil price policy two years
before the Yom Kippur War, and,
“as early as 1972 the Nixon
administration planned for the US private banks to recycle the
petrodollars when OPEC finally did take US advice and jack up
oil prices.”[58]
Ultimately, the price rises had
devastating impacts on Western Europe and Japan, which were quickly
growing economies, but which were heavily dependent upon Middle
eastern oil. This is an example of how the US, while championing a
liberal international economic order, acted in a mercantilist
fashion, depriving competitors through improving its own power and
influence.
In 1973, David Rockefeller set up the Trilateral Commission to
promote coordination and cooperation among Japan, Western Europe,
and North America (namely, the US), yet, in the same year, his good
friend and close confidante, Henry Kissinger, played a key role in
promoting and orchestrating the oil price rises that had a damaging
impact upon Japan and Western Europe.
Also it should be noted, David
Rockefeller’s Chase Manhattan Bank, of which he was CEO at the time,
profited immensely off of the petrodollar recycling system promoted
by Henry Kissinger, where the OPEC countries would reinvest their
new excess capital into the American economy through London and New
York banks.
How does one account for these seemingly diametrically opposed
initiatives? Perhaps the oil crisis, having a negative effect on
Japan and Western European economies, could have spurred the
necessity for cooperation among the trilateral countries, forcing
them to come together and coordinate future policies.
It is of vital importance to understand the global conditions in
which the price rises and its solutions arose, particularly in
relation to the Third World. Africa, since the late 1800s, had been
under European colonial control. It was from the 1950s to the 1960s
that almost all African countries were granted independence from
their European metropoles.
Africa is a very significant case to
look at, as it is extremely rich in many resources, from agriculture
to oil, minerals, and a huge variety of other resources used all
around the world. If African nations were able to develop their own
economies, use their own resources, and create their own industries
and businesses, they could become self-sufficient at first, and then
may become a force of great competition for the established
industries and elites around the world.
After all, Europe does not have much to
offer in terms of resources, as the continent’s wealth has largely
come from plundering the resources of regions like Africa, and in
becoming captains of monetary manipulation.
A revitalized, vibrant, economically
independent and successful Africa could spell the end of Western
financial dominance.
“Between 1960 and 1975 African
industry grew at the annual rate of 7.5 per cent. This compared
favorably with the 7.2 per cent for Latin America and 7.5 per
cent for South-East Asia.”[59]
In Africa,
“the 1960-73 period witnessed some
important first steps in the process of industrialization,”
however, “[t]he dramatic decline in rates of industrialization
began to show after the first ‘oil crisis’. Between 1973 and
1984, the rate of growth” rapidly declined.[60]
So, by manipulating the price of oil,
you can manipulate the development of the Third World, which was
beginning to look as if it could grow into significant competition,
as it was experiencing exponential growth. There were two oil shocks
in the 1970s; one in 1973 and another in 1979. Following the price
rises, there was a need for the developing countries of the world to
borrow money to finance development.
The banks that were getting massive amounts of petrodollars
deposited into them from the oil producing countries needed to
“recycle” the dollars by investing them somewhere, in order to make
a profit.
Luckily for the banks,
“[d]eveloping countries were
desperate for funds to help them industrialize their economies.
In some cases, developing countries were oil consumers and
required loans to help pay for rising oil prices. In other
cases, a decision had been made to follow a strategy of indebted
industrialization.
This meant that states borrowed
money to invest in industrialization and would pay off the loans
from the profits of their new industries. Loans were an
attractive option because they did not come with the influence
of foreign transnational corporations that accompanied foreign
direct investment and most states had few funds of their own to
invest.”[61]
The oil price rises “changed the face of
world finance,” as:
“In the new era of costly energy,
scores of countries, not all of them in the Third World, were
too strapped to pay their imported-oil bills. At the same time,
Western banks suddenly received a rush of deposits from
oil-producing nations. It seemed only logical, even humane, that
the banks should recycle petrodollars.”
This is where the true face of
Trilateralism began to show:
“It became an everyday event for one
or two lead banks in the U.S. or Western Europe to round up
dozens of partners by telephone to put together so-called jumbo
syndicates for loans to developing countries. Some bankers were
so afraid of missing out that during lunch hours they even
empowered their secretaries to promise $5 million or $10 million
as part of any billion-dollar loan package for Brazil or
Mexico.”
Interestingly, these banks argued,
“that their foreign loans were
encouraged by officials at the U.S. Treasury and Federal Reserve
Board. They feared that developing countries would become
economically and politically unstable if credit was denied. In
1976 Arthur Burns, chairman of the Federal Reserve, began
cautioning bankers that they might be lending too much overseas,
but he did nothing to curb the loans. For the most part, they
ignored the warning. Financiers were confident that countries
like Mexico, with its oil reserves, and Brazil, with abundant
mineral resources, were good credit risks.”[62]
According to a report produced by the
Federal Reserve, prior to the 1973 oil crisis,
“the private Japanese financial
system remained largely isolated from the rest of the world. The
system was highly regulated,” and, “various types of banking
firms and other financial service firms were legally and
administratively confined to a specified range of activities
assigned to each.”
However, the “OPEC oil shock in 1973
signaled a turning point in the operation of the Japanese
financial system.”[63]
As part of this turning point, the Bank
of Japan (the central bank of Japan), relaxed,
“monetary control by lending more
generously to the major banks. The result was a growing budget
deficit and a rapid rise in inflation.”[64]
The deregulation of Japanese banking
access to foreign markets went hand-in-hand with the deregulation of
domestic markets.
It was a two-way street; as Japanese
industry and banks gained access to foreign markets, foreign
industry and banks gained access to the Japanese market. This led to
the growth of Japanese banks internationally, of which today many
are among the largest banks in the world.
This was a result of the Trilateral
Commission’s efforts. Also evident of the Trilateral partnership was
that western banks,
“made loans so that poor countries
could purchase goods made in Western Europe and North America.”[65]
Of great significance was that,
“the new international monetary
arrangements gave the United States government far more
influence over the international monetary and financial
relations of the world than it had enjoyed under the Bretton
Woods system. It could freely decide the price of the dollar.
And states would become increasingly dependent upon developments
in Anglo-American financial markets for managing their
international monetary relations.
And trends in these financial
markets could be shifted by the actions (and words) of the US
public authorities, in the Treasury Department and the Federal
Reserve Board (the US Central Bank).”[66]
This new system is referred to as the
Dollar-Wall Street Regime (DWSR), as it is dependent upon the US
dollar and the key actors on Wall Street.
The Federal Reserve’s response to the initial 1973-74 oil price
shock was to keep interest rates low, which led to inflation and a
devalued dollar. It’s also what allowed and encouraged banks to lend
massive amounts to developing countries, often lending more than
their net worth.
However, in 1979, with the second oil
shock, the Federal Reserve changed policy, and the true nature of
the original oil crisis, petrodollar recycling and loans became
apparent.
The Rise of
Neo-Liberalism
In the early 1970s, the government of
Chile was led by a leftist socialist-leaning politician named
Salvador Allende, who was considering undertaking a program of
nationalization of industries, which would significantly affect US
business interests in the country.
David Rockefeller expressed his view on
the issue in his book, Memoirs, when he said that actions taken by
Chile’s new government,
“severely restricted the operations
of foreign corporations,” and he continued, saying, “I was so
concerned about the situation that I met with Secretary of State
William P. Rogers and National Security Advisor Henry
Kissinger.”[67]
As author Peter Dale Scott
analyzed in his book, The Road to 9/11, David Rockefeller
played a pivotal role in the events in Chile. After a failed attempt
at trying to solve the ‘situation’ by sending David’s brother Nelson
Rockefeller, the Governor of New York, down to Latin America, David
Rockefeller attempted a larger operation.
David Rockefeller told the story
of how his friend Agustin (Doonie) Edwards, the
publisher of El Mercurio, had warned David that if Allende
won the election, Chile would “become another Cuba, a satellite of
the Soviet Union.”
David then put Doonie “in touch with
Henry Kissinger.”[68]
In the same month that Kissinger met with Edwards, the National
Security Council (of which Kissinger held the top post) authorized
CIA “spoiling operations” to prevent the election of Allende. David
Rockefeller had known Doonie Edwards from the Business Group for
Latin America (BGLA), which was founded by Rockefeller in 1963,
later to be named the Council of the Americas.
Rockefeller founded it initially, in
cooperation with the US government, “as cover for [CIA’s] Latin
American operations.”
The US Assistant Secretary of State for
Latin American Affairs at the time was Charles Meyer, formerly with
Rockefeller’s BGLA, who said that he was chosen for his position at
the State Department “by David Rockefeller.”
When Allende was elected on September 4,
1970, Doonie Edwards left Chile for the US, where Rockefeller helped
him “get established” and the CEO of PepsiCo, Donald Kendall, gave
him a job as a Vice President. Ten days later, Donald Kendall met
with Richard Nixon, and the next day, Nixon, Kissinger, Kendall and
Edwards had breakfast together.
Later that day, Kissinger arranged a
meeting between Edwards and CIA director, Richard Helms. Helms met
with both Edwards and Kendall, who asked the CIA to intervene.
Later that day, Nixon told Helms and
Kissinger to “move against Allende.” [69]
However, before Edwards met with the CIA director, Henry Kissinger
had met privately with,
“David Rockefeller, chairman of the
Chase Manhattan Bank, which had interests in Chile that were
more extensive than even Pepsi-Cola’s.” Rockefeller even allowed
the CIA to use his bank for “anti-Allende Chilean operations.”
[70]
After Allende came to power,
“commercial banks, including Chase
Manhattan, Chemical, First National City, Manufacturers Hanover,
and Morgan Guaranty, cancelled credits to Chile,” and the “World
Bank, Inter-American Development Bank, Agency for International
Development, and the Export-Import Bank either cut programs in
Chile or cancelled credits.”
However, “military aid to Chile,
which has always been substantial, doubled in the 1970-1974
period as compared to the previous four years.”[71]
On September 11, 1973, General Augusto
Pinochet orchestrated a coup d’état, with the aid and participation
of the CIA, against the Allende government of Chile, overthrowing it
and installing Pinochet as dictator. The next day, an economic plan
for the country was on the desks of “the General Officers of the
Armed Forces who performed government duties.”
The plan entailed,
“privatization, deregulation and
cuts to social spending,” written up by “U.S.-trained
economists.”[72]
These were the essential concepts in
neoliberal thought, which, through the oil crises of the 1970s,
would be forced upon the developing world through the World Bank and
IMF.
In essence, Chile was the neo-liberal Petri-dish experiment. This
was to expand drastically and become the very substance of the
international economic order.
Globalization
- A Liberal-Mercantilist Economic Order?
Neo-Liberals Take the Forefront
In 1971, Jimmy Carter, a somewhat obscure governor from Georgia had
started to have meetings with David Rockefeller. They became
connected due to Carter’s support from the Atlanta corporate elite,
who had extensive ties to the Rockefellers.
So in 1973, when
David Rockefeller and
Zbigniew Brzezinski were picking
people to join the
Trilateral Commission, Carter
was selected for membership. Carter thus attended every meeting, and
even paid for his trip to the 1976 meeting in Japan with his
campaign funds, as he was running for president at the time.
Brzezinski was Carter’s closest adviser, writing Carter’s major
campaign speeches.[73]
When Jimmy Carter became President, he appointed over
two-dozen members of the Trilateral Commission to key positions in
his cabinet, among them,
-
Zbigniew Brzezinski, who became
National Security Adviser
-
Samuel P. Huntington,
Coordinator of National Security and Deputy to Brzezinski
-
Harold Brown, Secretary of
Defense
-
Warren Christopher, Deputy
Secretary of State
-
Walter Mondale, Vice President
-
Cyrus Vance, Secretary of State
-
in 1979, he appointed David
Rockefeller’s friend, Paul Volcker, as Chairman of the
Federal Reserve Board.[74]
In 1979, the Iranian Revolution spurred
another massive increase in the price of oil. The Western nations,
particularly the United States, had put a freeze on Iranian assets,
“effectively restricting the access
of Iran to the global oil market, the Iranian assets freeze
became a major factor in the huge oil price increases of 1979
and 1981.”[75]
Added to this, in 1979, British
Petroleum cancelled major oil contracts for oil supply, which along
with cancellations taken by Royal Dutch Shell, drove the price of
oil up higher.[76]
However, in 1979, the Federal Reserve, now the lynch-pin of the
international monetary system, which was awash in petro-dollars (US
dollars) as a result of the 1973 oil crisis, decided to take a
different action from the one it had taken earlier.
In August of 1979,
“on the advice of David Rockefeller
and other influential voices of the Wall Street banking
establishment, President Carter appointed Paul A. Volcker,
the man who, back in August 1971, had been a key architect of
the policy of taking the dollar off the gold standard, to head
the Federal Reserve.”[77]
Volcker got his start as a staff
economist at the New York Federal Reserve Bank in the early 50s.
After five years there,
“David Rockefeller’s Chase Bank
lured him away.”[78]
So in 1957, Volcker went to work at
Chase, where Rockefeller,
“recruited him as his special
assistant on a congressional commission on money and credit in
America and for help, later, on an advisory commission to the
Treasury Department.”[79]
In the early 60s, Volcker went to work
in the Treasury Department, and returned to Chase in 1965 “as an
aide to Rockefeller, this time as vice president dealing with
international business.”
With Nixon entering the White House,
Volcker got the third highest job in the Treasury Department. This
put him at the center of the decision making process behind the
dissolution of the Bretton Woods agreement.[80] In 1973,
Volcker became a member of Rockefeller’s Trilateral Commission. In
1975, he got the job as President of the New York Federal Reserve
Bank, the most powerful of the 12 branches of the Fed.
In 1979, Carter gave the job of Treasury Secretary to Arthur
Miller, who had been Chairman of the Fed. This left an opening
at the Fed, which was initially offered by Carter to David
Rockefeller, who declined, and then to A.W. Clausen, Chairman of
Bank of America, who also declined. Carter repeatedly tried to get
Rockefeller to accept, and ultimately Rockefeller recommended
Volcker for the job.[81]
Volcker became Chairman of the Federal
Reserve System, and immediately took drastic action to fight
inflation by radically increasing interest rates.
The world was taken by shock. This was not a policy that would only
be felt in the US with a recession, but was to send shock waves
around the world, devastating the Third World debtor nations. This
was likely the ultimate aim of the 1970s oil shocks and the 1979
Federal Reserve shock therapy. With the raising of interest rates,
the cost of international money also rose.
Thus, the interest rates on
international loans made throughout the 1970s rose from 2% in the
1970s to 18% in the 1980s, dramatically increasing the interest
charges on loans to developing countries.[82]
In the developing world, states that had to import oil faced
enormous bills to cover their debts, and even oil producing
countries, such as Mexico, faced huge problems as they had borrowed
heavily in order to industrialize, and then suffered when oil prices
fell again as the recession occurring in the developed states
reduced demand.
Thus, in 1982, Mexico declared that it
could no longer pay its debt, meaning that,
“they could no longer cover the cost
of interest payments, much less hope to repay the debt.”
The result was the bursting of the debt
bubble.
Banks then halted their loans to Mexico,
and
“Before long it was evident that
states such as Brazil, Venezuela, Argentina, and many
sub-Saharan African countries were in equally difficult
financial positions.”[83]
The IMF and
World Bank entered the scene newly
refurnished with a whole new outlook and policy program designed
just in time for the arrival of the debt crisis.
The IMF,
“negotiated standby loans with
debtors offering temporary assistance to states in need. In
return for the loans states agreed to undertake structural
adjustment programs (SAPs). These programs entailed the
liberalization of economies to trade and foreign investment as
well as the reduction of state subsidies and bureaucracies to
balance national budgets.”[84]
Thus, the neoliberal project of 1973 in
Chile was expanded into the very functioning of the International
Financial Institutions (IFIs).
Neoliberalism is,
“a particular organization of
capitalism, which has evolved to protect capital(ism) and to
reduce the power of labour. This is achieved by means of social,
economic and political transformations imposed by internal
forces as well as external pressure,” and it entails the
“shameless use of foreign aid, debt relief and balance of
payments support to promote the neoliberal program, and
diplomatic pressure, political unrest and military intervention
when necessary.”[85]
Further,
“neoliberalism is part of a
hegemonic project concentrating power and wealth in elite groups
around the world, benefiting especially the financial interests
within each country, and US capital internationally. Therefore,
globalization and imperialism cannot be analysed separately from
neoliberalism.”[86]
Joseph Stiglitz, former Chief
Economist of the World Bank, wrote in his book, Globalization
and its Discontents,
“In the 1980s, the Bank went beyond
just lending for projects (like roads and dams) to providing
broad-based support, in the form of structural adjustment loans;
but it did this only when the IMF gave its approval – and with
that approval came IMF-imposed conditions on the country.”[87]
As economist Michel Chossudovsky
wrote,
“Because countries were indebted,
the Bretton Woods institutions were able to oblige them through
the so-called ‘conditionalities’ attached to the loan agreements
to appropriately redirect their macro-economic policy in
accordance with the interests of the official and commercial
creditors.”[88]
The nature of SAPs is such that the
conditions imposed upon countries that sign onto these agreements
include: lowering budget deficits, devaluing the currency, limiting
government borrowing from the central bank, liberalizing foreign
trade, reducing public sector wages, price liberalization,
deregulation and altering interest rates.[89]
For reducing budget deficits,
“precise ‘ceilings’ are placed on
all categories of expenditure; the state is no longer permitted
to mobilize its own resources for the building of public
infrastructure, roads, or hospitals, etc.”[90]
Joseph Stiglitz wrote that,
“the IMF staff monitored progress,
not just on the relevant indicators for sound macro-management –
inflation, growth, and unemployment – but on intermediate
variables, such as the money supply,” and that “In some cases
the agreements stipulated what laws the country’s Parliament
would have to pass to meet IMF requirements or ‘targets’ – and
by when.”[91]
Further, “The conditions went beyond
economics into areas that properly belong in the realm of
politics,” and that “the way conditionality was imposed made the
conditions politically unsustainable; when a new government came
into power, they would be abandoned. Such conditions were seen
as the intrusion by the new colonial power on the country’s own
sovereignty.”[92]
“The phrase ‘Washington Consensus’ was coined to capture the
agreement upon economic policy that was shared between the two
major international financial institutions in Washington (IMF
and World Bank) and the US government itself. This consensus
stipulated that the best path to economic development was
through financial and trade liberalization and that
international institutions should persuade countries to adopt
such measures as quickly as possible.”[93]
The debt crisis provided the perfect
opportunity to quickly impose these conditions upon countries that
were not in a position to negotiate and with no time to spare,
desperately in need of loans.
Without the debt crisis, such policies
may have been subject to greater scrutiny, and with a case-by-case
analysis of countries adopting SAPs, the world would become quickly
aware of their dangerous implications. The debt crisis was
absolutely necessary in implementing the SAPs on an international
scale in a short amount of time.
The effect became quite clear, as the result,
“of these policies on the population
of developing countries was devastating. The 1980s is known as
the ‘lost decade’ of development. Many developing countries’
economies were smaller and poorer in 1990 than in 1980. Over the
1980s and 1990s, debt in many developing countries was so great
that governments had few resources to spend on social services
and development.”[94]
With the debt crisis, countries in the
developing world were,
“[s]tarved of international finance,
[and] states had little choice but to open their economies to
foreign investors and trade.”[95]
The “Third World” was recaptured in the
cold grasp of economic colonialism under the auspices of neo-liberal
economic theory.
A Return to Statist Theory
Since the 1970s, mercantilist thought had re-emerged in mainstream
political-economic theory.
Under various names such as
neo-mercantilism, economic nationalism or statism, they hold as
vital the centrality of the state in the global political economy.
Much “Globalization” literature puts an emphasis on the “decline of
the state” in the face of an integrated international economic
order, where borders are made illusory.
However, statist theory at least helps
us understand that the state is still a vital factor within the
global political economy, even in the midst of a neo-liberal
economic order.
Within the neo-liberal economic order, it was the powerful western
(primarily US and Western European) states that imposed
neo-mercantilist or statist policies in order to protect and promote
their interests within the global political economy. Some of these
methods were revolved around policy tools such as export subsidies,
imposed to lower the price of goods, which would make them more
attractive to importers, giving that particular nation an advantage
over the competition.
For example, the US has enormous agriculture export subsidies, which
make US agriculture and grain an easily affordable, attractive and
accessible commodity for importing nations. Countries of the global
south (the Lesser-Developed Countries, LDCs), subject to neo-liberal
policies imposed upon them by the World Bank and IMF were forced to
open their economies up to foreign capital.
The World Bank would bring in heavily
subsidized US grain to these poor nations under the guise of “food
aid,” which would have the affect of destabilizing the nation’s
agriculture market, as the heavily subsidized US grains would be
cheaper than local produce, putting farmers out of business. Most
LDCs are predominantly rural based, so when the farming sector is
devastated, so too is the entire nation.
They plunge into economic crisis and
even famine.
With the statist approach, theorists examine how the state is still
relevant in shaping economic outcomes and still remains a powerful
entity in the international arena. One theorist who is prominent
within the statist school is Robert Gilpin. Gilpin, a
professor at the Woodrow Wilson School of Public and International
Affairs at Princeton, is also a member of the Council on Foreign
Relations.
In his book, Global Political Economy,
Gilpin postulated that multinational corporations were an invention
of the United States, and indeed an “American phenomenon” upon which
European and Asian states responded by internationalizing their own
firms. In this sense, his theory postulated to a return to the
competitive nature of mercantilist economic theory, in which one
state gains at the expense of another.
He also addresses the nature of the
international economy, in that both historically and presently,
there was a single state acting as the main enforcer and manager of
the global economy. Historically, it was Britain, and presently, it
was the United States.
One cannot deny the significance of the state in the global
political economy, as it has been, and still remains very relevant.
The events of 1973 are exemplary of this, however, more must be
examined in order to better understand the situation. Though states
are still prominent actors, it is vital to address in whose interest
they act.
Mercantilist and statist theorists tend
to focus on the concept that states act in their own selfish
interest, for the benefit of the state, both politically and
economically. However, this is somewhat linear and diversionary, as
it does not address the precise structure of the state economy,
specifically in terms of its monetary and central banking system.
States, most especially the large hegemonic ones, such as the United
States and Great Britain, are controlled by the international
central banking system, working through secret agreements at the
Bank for International Settlements
(BIS), and operating through national central banks (such as the
Bank of England and the Federal Reserve).
The state is thus owned by an
international banking cartel, and though the state acts in such a
way that proves its continual relevance in the global economy, it
acts so not in terms of self-interest for the state itself, but for
the powerful interests that control that state. The same
international banking cartel that controls the United States today
previously controlled Great Britain and held it up as the
international hegemony.
When the British order faded, and was
replaced by the United States, the US ran the global economy.
However, the same interests are served. States will be used and
discarded at will by the international banking cartel; they are
simply tools.
In this sense, interdependence theory, which presumes the decline of
the state in international affairs, fails to acknowledge the role of
the state in promoting and undertaking the process of
interdependence.
The decline of the nation-state is a
state-driven process, and is a process that leads to a rise of the
continental state and the global state. States, are still very
relevant, but both liberal and mercantilist theorists, while helpful
in understanding the concepts behind the global economy, lay the
theoretical groundwork for a political economic agenda being
undertaken by powerful interests.
Like Robert Cox said,
“Theory is always for someone and
for some purpose.”
Hegemonic-Stability Theory
In his book, Global
Political Economy, Gilpin explained that,
“In time, if unchecked, the
integration of an economy into the world economy, the
intensifying pressures of foreign competition, and the necessity
to be efficient in order to survive economically could undermine
the independence of a society and force it to adopt new values
and forms of social organization. Fear that economic
globalization and the integration of national markets are
destroying or could destroy the political, economic, and
cultural autonomy of national societies has become widespread.”[96]
However, Gilpin explains that the,
“Creation of effective international
regimes and solutions to the compliance problem require both
strong international leadership and an effective international
governance structure.”
Yet, he explains, “Regimes in
themselves cannot provide governance structure because they lack
the most critical component of governance – the power to enforce
compliance. Regimes must rest instead on a political base
established through leadership and cooperation.”[97]
This is where we see the emergence of
Hegemonic Stability Theory.
Gilpin explains that,
“The theory of hegemonic stability
posits that the leader or hegemony facilitates international
cooperation and prevents defection from the rules of the regime
through use of side payments (bribes), sanctions, and/or other
means, but can seldom, if ever, coerce reluctant states to obey
the rules of a liberal international economic order.”
As he explained, “The American
hegemony did indeed play a crucial role in establishing and
managing the world economy following World War II.”[98]
The roots of Hegemonic Stability
Theory (HST) lie within both liberal and statist theory, as it
is representative of a crossover theory that cannot be so easily
placed in either category.
The main concept champions the liberal
notion of the open international economic system, guided by liberal
principles of open-markets and free trade, while bringing in the
statist concept of a single hegemonic state representing the
concentration of political and economic power, as it is the enforcer
of the liberal international economy.
The more liberal-leaning theorists of HST argue that a liberal
economic order requires a strong, hegemonic state to maintain the
smooth functioning of the international economy.
One thing this state must do is maintain
the international monetary system, as Britain did under the gold
standard and the United States did under the Dollar-Wall Street
Regime, following the end of the Bretton-Woods dollar-gold link.
Regime Theory
Regime Theory is another crossover theory between liberal and
mercantilist theorists.
Its rise was primarily in reaction to
the emergence of Hegemonic Stability Theory, in order to
address the concern of a perceived decline in the power of the US.
This was due to the rise of new economic powers in the 1970s, and
another major purveyor of this theory was Robert Keohane.
They needed to address how the
international order could be maintained as the hegemonic power
declined. The answer was in the building of international
organizations to manage the international regime.
In this sense, Regime Theory has identified an important aspect of
the global political economy, in that though states have upheld the
international order in the past, never before has there been such an
undertaking to institutionalize the authority over the international
order through international organizations.
These organizations, such as the World
Bank, IMF, UN, and WTO, though still controlled and influenced by
states, predominantly the international hegemony, the United States,
represent a changing direction of internationalization and
transnationalism.
Regime Theorists tend to justify the
formation of a more transnational apparatus of power, beyond just a
single hegemonic state, into a more internationalized structure of
authority.
Notes
[1] CBC, Informal forum or global
conspiracy? CBC News Online: June 13, 2006: http://www.cbc.ca/news/background/bilderberg-group/
[2] Holly Sklar, ed., Trilateralism: The Trilateral Commission
and Elite Planning for World Management. (South End Press:
1980), 161-171
[3] Holly Sklar, ed., Trilateralism: The Trilateral Commission
and Elite Planning for World Management. (South End Press:
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