The Political Economics
of
the Persian Gulf War
The
Iraqi Invasion
Hussein’s
Motives
Bush’s
Motives
Cheap
Oil
Or
Expensive Oil
Diplomatic
Evidence
Business Gains From High
Priced Oil
American Hegemony?
What About Recession?
Bush’s Vision?
Resistance is Possible
Resistance is Necessary
What is going on in the Persian Gulf? Why are we at war? Should we back the president, or oppose
his policies? These are not easy questions to answer. They were not easy to answer in the early stages of the
Vietnam War; they were not easy to answer in Central America. Yet we must try, for many lives hang in
the balance. In what follows, I
want to share my present thinking about some of the political economic issues
at play in the current situation. Although
I don’t pretend to have all the answers, what I do see is not pretty and
it suggests to me the need to mobilize against current American policy both at
home and abroad.
The Iraqi Invasion
First, how are we to judge Hussein’s invasion
and takeover of Kuwait? Have his
actions liberated the people of Kuwait from the unjust rule of an illegitimate
feudal Emir? Or have they been
enslaved by an even worse tyrant?
Certainly we cannot take as our basis of judgment the principles of
national sovereignty that the Bush Administration would like to use. Not only have they been ideological
tools dragged out to justify some policies (Bush’s actions in the Gulf)
and quickly forgotten when inconvenient (Bush’s actions in Panama), but
also they ignore the very real differences within countries between the ruled
and their rulers. It is better, it seems to me, to simply ask ourselves whether
most people living in Kuwait are likely to be better or worse off under the
rule of Hussein than they would be under the restored rule of the House of
Sabah with or without a new parliament (which the House of Sabah has promised
to allow).
If the condition of the people living in Iraq versus
those living in Kuwait is any indication, those in Kuwait (including vast
numbers of foreign workers) are very likely to suffer as a result of the
invasion. Even a quick perusal of
Amnesty International or Middle East Watch’s assessments of the human
rights situation in Iraq and Kuwait will suggest to anyone that an average Arab
or foreign worker (as opposed to highly paid Western technicians) would choose
Kuwait as the lesser of two evils. The past rule of the Kuwaiti Emirs has
perhaps been less barbaric than that of some other dictatorships in the area it
was hardly enlightened, especially for the non-citizens who make up the vast
bulk of the citizenry. Nor does it
seem likely that it would be much better under a reconstituted Kuwaiti
parliament elected by only a tiny minority of the population. Despite these
considerations, expectations based on Saddam Hussein’s rule in Iraq as
well as news of his army’s conduct in Kuwait since the invasion can only
be bleaker. The torture-murder-disappearance of literally thousands of Iraqi
citizens, the poison gassing and forced relocation of thousands of Kurds, and
the systematic military imposition of what can only be called fascist rule
bodes nothing but ill for subjugated Kuwaitis and all other workers caught by
Hussein’s invasion. There is nothing to celebrate in his actions and
everything to oppose.
Saddam Hussein’s Motives?
Saddam Hussein’s political economic motives for
taking over Kuwait are relatively transparent. Hussein needed money. He needed money to rebuild after the
long war with Iran while maintaining his army to cope with continuing internal
resistance to his rule from the Kurds (whom he has repressed and slaughtered),
from the millions of foreign workers employed in Iraq (whom he has ruthlessly
exploited), from Communists and Islamic fundamentalists (whom he has executed
as quickly as he could identify and round them up) and from almost everyone
else not part of his highly centralized political and military machine. He needed money to spread his
Ba’athist ideology of Pan-Arabism and to build his own influence and
power throughout the Arab world. He would unite the Arab world —under his
own hand and subject to his own whims.
Prior to the invasion Hussein had threatened force to
end the Kuwaiti (and United Arab Emirates) practice of producing and selling
more crude oil than their OPEC quota allowed, an action which increased supply
and lowered oil prices, reducing Iraqi income from its own oil exports. Those threats achieved an OPEC
capitulation on July 27 and agreement to cutbacks that would raise prices, but
only about $3 a barrel. Hussein
had also demanded some $30 billion in aid from the government of Kuwait and the
other oil producers of the Gulf.
The rulers of Kuwait were less than forthcoming. They reminded Hussein of their previous
support during the war with Iran, of his outstanding debts to them and offered
little more money. Kuwaiti refusal to comply with his demands created an
obstacle to the realization of Hussein’s goals. He sent in his army to
remove the obstacle.
On the basis of Hussein’s past performance in
Iraq, of his motives in taking over Kuwait and of his actions since the
invasion I see no alternative to publicly condemning his actions and supporting
the struggles of both Iraqis and Kuwaitis against him. We must begin to discuss not only
alternatives to war (which will only liberate Kuwaitis from his grip while
restoring that of the Emir), but also how to support opposition to him inside
Iraq.
George Bush’s Motives?
But if Saddam Hussein’s motives are clear
enough, and condemnable, what of George Bush’s. Why did he order American
troops into the Gulf? We can
reject out of hand the explanation currently stressed by the White House
—to resist aggression— as simply unbelievable in the light of the
Contra war, Panama, Grenada and the Bush Administration’s silence on
Israel's occupation of the West Bank and the Syrian takeover of Lebanon. However, we must still take seriously
the alternative, economic explanations that have been offered by the White
House.
First, of course, is the argument, made originally by
Bush himself, that the troops were sent to defend “our way of
life,” i.e., cheap oil, cheap gasoline, gas guzzling cars and boats.
Second, suggested at the same time and reinforced later by Baker, was the
argument that defending cheap oil supplies also defends “jobs”
—helps stave off recession and rising unemployment, such as that which
followed the first “oil shock” in 1973-1974. Such arguments have
some credibility because they have had some truth in the past or might have some
in the future. But should we
believe them today?
Cheap Oil?
It is easy to show that American policy toward the
oil producing nations of the Gulf, and elsewhere, has at times been designed to
guarantee steady supplies of cheap oil. Certainly this was the
case in the post-World War II period and explains, among other things, the CIA
overthrow of the Mossedegh government in Iran in 1953 which was seen as
endangering Western control over Iranian oil. In those days cheap oil fueled post-war reconstruction in
Western Europe and economic growth in the U.S. There are also reasons to think that U.S. policy makers
wanted a reduction in the price of oil in the early 1980s. The attack on the
price of oil can be seen as part of a more general anti-inflationary policy
that was really an anti-wage policy.
That time policy makers achieved their ends less with direct force
(unless you include the bombing of Libya) and more with global recession
induced by tight money and high interest rates —a recession which
dramatically reduced the demand for oil and thus its price. Such policies have
always lent great credence to traditional charges of imperialism, of the
shaping of foreign policy for the profits of American business.
Or Expensive Oil?
But at other times, American foreign policy has
favored not cheap but expensive oil,
as in the early 1970s when American negotiators let it be understood by OPEC
that the U.S. was not opposed to
an increase in the price of crude oil.
In those days high priced oil achieved a variety of ends. It helped the
Gulf countries cope with internal instability by providing them with more
resources. It undercut European competitiveness because it hurt Europe more
than the United States. In the
U.S. (and around the world), it undercut real wages which had been rising faster
than productivity (and thus hurting profits) by causing inflation while
simultaneously making vast amounts of money available to Western business as
the OPEC countries deposited their trade surpluses in Western commercial banks. As recently as April of 1986, then Vice
President Bush hurried to the Persian Gulf to pressure Saudi Arabia and other
Gulf states to cut production and raise prices —pleading “national
security” and the economic needs of oil men and their bankers in the U.S.
So, which is the case today? What does the Bush administration hope
to gain? Cheap oil or high priced
oil? Certainly, in the short term
its military actions and the blockade of Iraqi and Kuwaiti oil have driven up
the price of oil dramatically (from about $18 dollars a barrel to over $40,
dropping since to about $30).
Although OPEC production has surged and already made up for blockaded
Iraqi and Kuwaiti exports, prices remain high based on fears of future conflict
and future shortages. The persistence of conflict keeps prices high. So far Hussein's troops have only been
able to inflict very minor damage on Saudi production and shipping facilities
but any substantial destruction in the oil fields could reduce oil supplies and
further drive up prices.
If Bush’s policy advisors do want cheap oil,
only in the long term can current actions be argued to be consistent with such
an objective —assuming that preventing Hussein from controlling Iraqi and
Kuwaiti oil would help hold down prices in the long run. Against the argument that
Hussein’s control over the combined oil exports would result in higher
oil prices we must set what we know about the workings of the international
crude oil market and the behavior of its major suppliers. As OPEC was beginning to discover, even
before the global recession brought on by the Reagan Administration in 1982,
persistent high oil prices lead to increased conservation, the development of
alternative energy sources and new supplies, all of which tend to bring down
the price and reduce OPEC’s share of the market. Any country with very large oil
reserves, such as Saudi Arabia, has a vested interest in keeping prices at a
level below that which would bring about such problems. A Saddam Hussein able to control the
flow of oil from both Iraqi and Kuwaiti oil fields into world petroleum markets
would be such a country. It is
hard to see why he would act against his own long-term interests by raising the
price much above that favored by the Saudis.
What about the possibility that what the Administration
has wanted, and will want for the foreseeable future, however the war is
terminated, is really a high priced oil policy while claiming to want cheap oil
—the kind of thing that was done in the early 1970s? There is some evidence of this, partly
to be deduced from the actions of the Administration, partly from that of its
allies in the Gulf, especially the Saudis.
Diplomatic Evidence
According to press reports, last January a former
U.S. ambassador, “still used by the Bush Administration for foreign
policy missions,” told one of Hussein’s closest associates that
Iraq should engineer higher oil prices to get it out of its difficult economic
situation. Moreover, leaked tapes of conversations between U.S. ambassador
April Glaspie and Hussein shortly before the invasion suggest American
agreement with Hussein’s desire for higher prices (as well as a more
widely discussed “neutralism” with respect to inter-Arab disputes
whose articulation is widely interpreted as having left Hussein with the
impression, apparently mistaken, that he could take over Kuwait with impunity).
Furthermore, before the invasion the Iraqi pressure for OPEC cutbacks and price
hikes had been supported by the Saudis who apparently had threatened not only
Kuwait but also the United Arab Emirates with no military protection because
they were exceeding their OPEC quotas.
Thus, the White House’s closest ally, the Saudis, took a position
similar to that of Hussein, at least with respect to oil prices. In the midst of this intra-OPEC feud,
the White House backed up Iraq by opposing Congressional economic sanctions
against that country.
It is also of interest that the petroleum industry,
in whose interests the Bush Administration has acted repeatedly, seemed quite
content with Saddam Hussein’s new role as a forceful policeman of
OPEC. In the wake of the July 27th
OPEC agreement in which Kuwait and the UAE capitulated to pressure to cut back
production, the Petroleum Intelligence Weekly, for example, saw a future of high, but not too high,
and much more stable oil prices. Since then, Businessweek has commented on the satisfaction felt by the oil
companies with prices stabilizing around $20-25 a barrel.
Business Gains from High-Priced Oil
What does the Bush Administration, and the business
interests it represents, gain from high oil prices? To start with, they gain some, but not all, of the same
advantages they did in the mid-1970s:
1. Oil producers and those tied to them would have more resources to cope with internal stability —a serious problem in the wake of the debt crisis and domestic protests in countries such as Jordan, Iraq, Iran, Nigeria, Trinidad and Venezuela.
2. Generalized inflation would cut real wages everywhere, again transferring wealth from workers to business via international banks. The Saudis alone may have a $20-$30 billion current account surplus available next year to invest in the West.
3. Because of increased efficiency abroad, stronger economies and a declining dollar, increased oil prices would have less of a recessionary impact on Western Europe and Japan than on the U.S., but real oil shortages would hit them more than the U.S. which imports far less of its energy needs.
Added
to these old advantages are some new ones:
4.
The militarization of the Gulf is a devastating blow to workers in that area,
both local and foreign “guest” workers. The repression of foreign workers (including Palestinians)
in Kuwait (who have fled by the thousands across the border into Jordan), the
expulsion of hundreds of thousands more from Saudia Arabia into Yemen and the
dramatic drop in repatriated wages have wrought havoc among workers of the
whole area. Such violence
undercuts these workers’ struggles to share the oil wealth of the area
and strikes back against the kind of upheaval mentioned in point #1 above.
5. The Gulf conflict and associated oil price increases are providing the White House and its friends in the energy industry with an excuse to set aside environmental controls in the name of “national security.” Reversing previous support for some limitations on offshore drilling, the Administration is now pushing hard for drilling off the coast of California and in the Alaskan Wilderness (which has so far been resisted by Congress). There is a parallel effort to use the crisis to help revive the defeated nuclear industry.
6.
High oil prices will help Bush’s new “partner” Mikhail
Gorbachev attract foreign investment to the stagnating Russian oil fields,
obtain the resources (from payment for oil exports) to carry out perestroika and avoid a destabilizing break-up of the USSR.
7. At the same time high oil prices will help impose even stiffer austerity on the peoples of Eastern Europe making them more pliable to integration into the global economy as a new source of cheap labor —especially since the USSR followed up last summer’s cuts in deliveries by charging hard currency for its oil exports since January 1991.
8. The Gulf War provides the military industrial complex the reasons it has lacked for continued heavy defense expenditure for the rest of the century. The end of the cold war spelled crisis for that complex and the possibility of new “peace dividends” for others. Bush has already begun to use the Gulf War as a model (following Panama and Grenada), to argue for vast sums of new money —to replace destroyed equipment and to prepare for future actions.
9. Simultaneously, the “need” for sustained military expenditures provide Bush with an excuse for continuing the attack on social services, entitlements, student loans and subsidies for low income housing, in other words, a continuation of the social repression of the last ten years.
10. Last, but perhaps not least for oil man Bush, increased oil prices have raised the profits of American oil producers and are encouraging more production —which hit a 26 year low in 1989. They would also raise the value of oil real estate and the viability of many loans, especially in the Southwest, whose falling values have contributed to the current financial crisis in both the Savings & Loan and banking industries.
Beyond these specific advantages, there is the more
general question of the American search for control over the oil supplies and
oil producing labor force that is of so fundamental importance in the world
capitalist economy.
American Hegemony?
For decades, the White House has sought a manageable
distribution of power in the Gulf region. Prior to the Iranian revolution in
1978 and rise of a Fundamentalist Islamic regime in that country, the Shah of
Iran was armed and supported as a sub-imperial center pole of American
influence in the region (a Northern pole as opposed to the Israeli Southern
pole). Unable to deal effectively
with a Fundamentalist Iran (one or two arms-for-hostages deals
notwithstanding), the White House “tilted” toward Iraq during the
Iraq-Iran war and began to lay its money on Saddam Hussein. Hussein, it obviously felt, could serve
to keep both Khomeini in the East and Assad in the West in check. Since the rise of OPEC, the meaning of
“U.S. hegemony” in the region has been, first and foremost, an
arrangement of power in which local rulers would and could continue to keep
both local and imported workers pumping oil at wages and prices profitable to
both oil exporters and oil importers.
In other words, hegemony in the Persian Gulf has meant keeping the local
economy functioning within the global order supplying one of its most
fundamental energy sources.
As long as political and military competition among
the major powers of the region (armed by American, West European and Soviet
military-industrial complexes) kept them occupied, the U.S. could largely rely
on each country to regulate its own labor force and on Saudia Arabia to
regulate OPEC output and price levels.
If it is true, as it seems to be, that the U.S. was collaborating in a
strategy to raise oil prices by forcing Kuwait and the United Arab Emirates to
cut back their production and that the U.S. essentially gave Hussein the
“green light” to pressure the House of Sabah, then Bush’s
opposition to his invasion would seem to derive more from disagreement over
methods than from disagreement over ends. “Pressure” in the
Administration's mind did not, apparently, include such a major rearrangement
of national boundaries and of the distribution of control over oil reserves and
the oil producing labor force.
Hussein either misunderstood Washington’s attitude or simply
decided he could get away with taking over Kuwait. Bush’s immediate and massive
military response shows that in either case, the consensus in the White House
was that Hussein’s move was unacceptable. What is unclear is whether the White House will be satisfied
with “disciplining” Hussein by forcing him to withdraw from Kuwait
or has now decided that Hussein is such an unreliable ally that he must be
“taken out.” In either
case war will have the effect of militarizing the region and giving whichever
set of local rulers are left after the crisis much greater power to manage the
local and imported labor force on which so much of the rest of world capitalism
depends.
What About Recession?
Against this list of advantages we can examine the
apparent disadvantages of high priced oil. The most obvious of these would seem to be the way higher
energy costs and military expenditures will tend to accentuate both trade and
federal budget deficits and add to recessionary pressures that were
accumulating even before the invasion and produced an actual downturn in the
fourth quarter of 1990. Did the Administration
want recession? It never said so,
of course, no American policy maker ever does, even when desired —at most
euphemisms such as “cooling off the economy” are used. Remember: Reaganomics was touted as
producing cost free growth at the very moment its continuation of
Carter’s tight money policy precipitated the sharpest depression since
the 1930s.
Last year’s behavior on the part of the Federal
Reserve, which refused to loosen up on the money supply as recession
loomed, showed that it was willing
to contribute to a downturn. The Fed’s five-year plan to reduce inflation
to zero echoed the same rhetoric and policy objectives that characterized the
earlier Reagan-Bush period, albeit with less publicity. Even before Hussein took over Iraq the business
press was bemoaning rising inflation due to wage increases exceeding
productivity gains. After the
invasion, “the fact that the central bank chose not to push interest
rates lower in the early stages of the Persian Gulf crisis,” wrote The
New York Times, “may prove to
be the deciding factor in hastening an economic downturn” —which it
probably was, along with reduced consumption expenditure due to public
uncertainty in the shadow of the growing Gulf conflict.
In the Reagan-Bush period of the early 1980s
anti-inflationary depression brought a drop in oil prices at the same time it
cut employment and wages. Today
the uncertainties of war, and the Administration’s refusal to sell off
any substantial amount of the US strategic stockpile, have kept oil prices high
despite the downturn. There was only a brief restriction of oil supplies
followed by a glut due to increased output and user stockpiling. Therefore, despite recession, oil
prices rose sharply, fell somewhat, but still remain high. Since the fall, the Fed has loosened
the monetary strings slightly but hardly enough to counter increasing
uncertainty, falling sales and production accentuated by the Gulf War.
Such recessionary aspects of the Bush
Administration's Gulf policy will eventually be partially or totally offset by
the expansion of military expenditure and a renewal of our familiar Keynesian
permanent arms economy. As
mentioned in Advantage #8 above, the military-industrial complex delights in
current policies. Post-Great
Depression American history has provided ample testimony to the efficacy of
expanded military expenditure in stimulating general economic expansion. World War II, the Korean War, the
Vietnam War, and the Reagan arms buildup all contributed, to a greater or
lesser degree, to economic expansion.
A renewal of such policies can be expected to have similar effects.
Bush’s Vision?
But suppose such stimulation does produce growth;
what kind of growth will be produced by vast military expenditures and slashed
human services, reduced real wages and accentuated exploitation of the
environment? It can only be a
continuation of the kind of growth we have seen in the last part of the 1980s:
one of a military industrial complex that expands rapidly at the expense of
production to meet people’s needs.
What is Bush’s vision?
Has he decided to cede the international competitive race in civilian
high tech production and consumption to Europe and Japan in favor of an
American economy based on low wages, a permanent underclass and the production
of the arms necessary for the US to police world capitalism? Is Bush’s vision that of a
post-industrial America whose place and power in the world is narrowly
redefined as Global Cop?
It is hard not to be appalled by such a prospect,
whether the result of a vision or the lack of vision. The only legitimacy that capitalism has ever been able to
claim has been its “ability to deliver the goods,” i.e., to raise
standards of living. Yet now we
are being presented with a set of political economic policies that promise only
increased militarization and decreased standards of living both at home and
abroad for the vast majority of people.
What we seem to be faced with at the end of the Twentieth Century is a
morally, socially and politically bankrupt business leadership, totally unable
to address itself to the meeting of people’s needs.
Resistance is Possible
Of course, all these policies may fail —not
only in the long run, but even in the short run. The danger of the crisis for the Administration and its
business allies —as well as the opportunity for those who oppose
them— is that instead of producing submission and willingness to accept
sacrifice, a great many people have already begun to respond militantly and to
demand dramatic changes in policy.
The danger of using the Gulf War as an excuse to strike out in all
directions, to tip the balance against many foes, at home and abroad, is that
those foes will recognize their common enemy and unite against the White House
and its patrons.
The last time American policy makers sought to make
use of OPEC actions and high oil prices to undermine wages in the West and to
stabilize the Middle East —1973-1974— resistance was
widespread. In Egypt, when Sadat
gave in to banker pressures to impose austerity on his people in 1976 by
cutting subsidies and raising the price of basic foodstuffs, they rose up
instead and forced him to reverse the price increases. While the oil price increases gave more
money to America’s primary ally in the Persian Gulf (the Shah of Iran),
he was forced to concede growing amounts of it to popular demands. Despite such
concessions, the victims of his bloody rule soon overthrew him in 1978. In many countries of the Third World,
the refusal of people to accept dramatic cuts in real income through increased
imported oil prices forced their governments to support them with increasing
amounts of recycled petrodollar debt. In the United States and Western Europe
workers fought to defend their real wages by forcing money wages up as fast as
inflation, even as unemployment rose, thus adding a new word to the
economists’ vocabulary: stagflation.
That the threat of war, and war itself, can be used
to achieve political economic ends by other means is a lesson those of us in
the United States learned the hard way.
Vietnam taught us to recognize such methods and we learned how to resist
them.
When President Jimmy Carter used rhetoric about the
energy crisis being the moral equivalent of war to try to gain support for
“collective sacrifice”, i.e., wage cuts, Americans refused to go
along. Not long after that Carter,
his generals and the Committee on the Present Danger tried to use the specter
of limited nuclear war to achieve acquiescence to their political and economic
policies in the U.S. and Western Europe.
Instead they got the biggest peace movement in history.
Ronald Reagan and Alexander Haig sought a real war in
Central America, but a reborn anti-war movement mobilized in response to the
reinstitution of draft registration and prevented direct American military invasion. We then had to fight support for the
Contras and must continue to oppose aid to the torturers and murderers of El
Salvador and Guatemala —but we have prevented direct military
intervention. Only in Grenada and
Panama have we failed to prevent the direct use of the White House’s
mailed fist. Now Saddam Hussein
has given George Bush a new opportunity to test the limits to the American
people’s resistance to the use of military force for covert goals. The Congress failed that test by voting
to support war. It is up to the
rest of us, once again, to counteract that failure.
Resistance is Necessary
War in the Persian Gulf hurts us all. The longer the war goes on, the more
the consequences will be devastating, both for the people in the area (soldiers
and civilians) who are suffering growing casualties and spreading destruction,
and for the rest of us who are experiencing higher priced oil, lower wages and
a White House campaign to achieve all the goals mentioned above. The only ones to profit are the rulers
and businesses who will remain on top when the flow of blood stops and only
those of oil and dollars remain.
We have failed to prevent the war.
The best we can do now is to try to bring it to an end as quickly as
possible while also moving to counter the Administration on every other front
as well (e.g., offshore drilling, social programs, military spending and so
on). The threat of war provoked popular mobilization against it, all around the
world. The onset of war has
accelerated that mobilization in America despite the inevitable outpouring of
mindless patriotism and racism, renewed COINTELPRO operations and the FBI
intimidation of the Arab-American community. When the current air war becomes a ground war and [if] the
press overcomes government efforts to hide the return flow of thousands of body
bags, the anti-war movement will expand rapidly and attract ever more diverse
groups of people.
So far, anti-war organization has shown, quite
vividly, that the “Vietnam Syndrome” is far from over. However much
our efforts contribute to ending the war, we must also prepare to counter the
inevitable arguments that peace was achieved only through the use of arms and
that military expenditures must be kept high to deal with future threats to the
“new world order.” A
quick settlement will minimize the ability of the White House and OPEC to
prolong the maintenance of high prices and maximize everyone’s ability
(around the world) to fight for higher wages, a real “peace
dividend” of improved social services and sensible energy and
environmental policies. At the
same time, the oil-producing workers of the Gulf will be in better shape to
influence and then deal with the outcome of any settlement. Moreover, if in the course of the
struggle against the war, we link our critique of American policy in the Gulf
to a wider critique of American policies elsewhere in the Middle East, e.g.,
the Palestinian question, we will improve the chances for using the resolution
of the Gulf Crisis to the achieve other goals elsewhere.
In the light of all these considerations, it seems to
me, our current political agenda ought to look like this: first, having
succeeded in building an anti-war movement, we must press for a cease-fire and
negotiated end to the conflict; second, to achieve this we must mobilize every
group whose interests are threatened by Bush’s bellicose high oil
policies; third, in the process of that mobilization we must encourage the
elaboration of positive demands for change (e.g., improved energy policies and
improved social services) in preparation for the post-War period.
January
1991
Austin,
Texas