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Saturday, September 10, 2005

Plantation Capitalism

A little history on the big picture from Sanders Research Associates
When investing, it is good to try and keep the big picture in mind.
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September 7, 2005

Plantation Capitalism

[a big picture of Bush in front of the White House surrounded by his three military advisors]

"Above all, the idea of democracy and majority rule must be deligitimised....But at the same time, and still more importantly, a positive alternative to monarchy and democracy ─ the idea of a natural order ─ must be delineated and understood."

Hans-Hermann Hoppe (221) Democracy, The God That Failed
New Brunswick (USA), Transaction Publishers, ISBN0-7658-0088-8, pp. 70-71

Hurricane Katrina has torn the last shreds of veil off the militarised state in America. Of all the pictures stage managed by the minders of the White House, that of Bush surrounded by his head of state security, Joint Chiefs chairman and secretary of war is the most revealing. The absence of the civilian leadership of the cabinet says it all. It is the militarists who are in charge.

[a picture of Marine Major General Smedley Butler]

Some seventy years ago, the US narrowly missed a coup attempt, thanks to the unwillingness of the putative caudillo to play the role assigned to him by the right wing backers of the putsch. Retired Marine Major General Smedley Butler, the most decorated soldier in American history with two Medals of Honour, turned down the proposition that he lead 500,000 veterans in a march on Washington. Butler came to the view late in life that war is nothing more than an extension of the rackets, a view that is sorely missed in Washington today.

The US increasingly resembles the banana republics in which Butler forged his military career, where the national budget is controlled by a corporate and military elite supported if not controlled by foreign allies with financial and strategic interests to be served. Its economy runs structural deficits with the rest of the world, thanks to the domination of its politics by interests whose chief concern is quick and certain profits. Their preference is for real estate and stock markets as opposed to the long term payback of heavy industry, for the legislated competitive advantage as opposed to building better products. In a word, they prefer gaming the system as opposed to building one, which is the best reason of all for supposing that the dispossessed of New Orleans remain so, and water-stressed Las Vegas is replaced by casinos on the Gulf with a colonial theme when the developers take over.

This sort of economy is not suited for republican democracy, because no one with a vote other than those who stand to profit would endorse such a program. Since so few do stand to profit, democracy is just a pose, a theme for an advertising campaign. This is coming as a shock to those who are surprised by the government’s insouciance and used to the idea that government for the people and by the people means all the people, and not just a few. But in fact the democratic experiment in North America was always just that, an experiment, and always subject to assault from those who found it convenient only as a way to buy influence. From its beginnings four centuries ago, North America was a colonial project just as were Butler’s banana republics, so the resemblance is neither new nor especially surprising when you think about it. In the intervening centuries industrialisation and the spread of public sanitation and healthcare changed the dynamics of the relation between capital and labour, with the pendulum of power swinging from the former to the latter far enough to scare the hell out of the former. The result by the middle of the 20th century was a historic compromise between the two, leading to the incorporation of labour in the form of unions that collaborated with management. Labour peace was traded for a piece of the action.

This was not just an American phenomenon, but one generalised with national differences across the euphemistically labelled Free World, financed by American credit, policed by the American military, and fuelled by American or American-guaranteed oil. Those were the days alright, and the prosperity that resulted for the survivors of World War Two rebuilding a shattered industrial world has led to tremendous misconceptions as to the nature of that prosperity and its source. Missing from the generally middle class conception of the period as a golden age is a consciousness of what it meant for those who did not enjoy a piece of the action, whether they were non-union workers in the US, American blacks (often the same thing) oppressed by Jim Crow laws, or Vietnamese, Algerians, Africans or Latin Americans fighting for their piece of the action. Hurricane Katrina has changed that.

[a chart starting in 1983 showing constantly increasing federal national security spending which really zooms up starting in 2000 with the notation "It doesn't buy much security, so what does it buy?"]

A more recondite misconception arises in economics, in which the establishment view is that “free” trade is good and “managed” trade is bad. Leaving aside notions of good and bad one is left with no notion at all since the dichotomy of free versus managed trade is a false one in the first place. Modern free traders have no more in common with Adam Smith than with the man in the moon, their real pedigree being from the colonial businessmen of four centuries ago who set out from Amsterdam and London to build empires based on the exploitation of mineral and animal resources and commodified agricultural produce in the form of sugar, tobacco and opium as a means of generating gold and silver with which to trade with Asia. North America being populated with aboriginal peoples whose attitudes made them ill suited to the money economy, a labour problem arose. Since no one in their right minds would leave a fertile and temperate country like England for an uncertain future in the back of beyond months away by sea and then some, the solution to this problem early on was based on coercion. This was political in the case of some of the early religious groups to found colonies and prisoners of war from the English Civil War and penal in the case of civil criminals and others dragooned into indentured service in the colonies. This was never going to be enough in the tropical and semi tropical climates in which tobacco and sugar production thrived, and the African slave trade was born.

So free trade from the start was based on some very unfree foundations. These amounted to international labour arbitrage to acquire the productive capital needed to justify the enormous up-front investment of money capital required to start the ventures in the first place. The economics also only worked in a global context, being ultimately a way to pry out of the world’s wealthiest country, China, its gold and silver reserves.

[a chart starting in 1995 showing continually increasing US balance of trade in goods and services deficits with the notation "Free to trade, free to go broke".]

The US found itself at the end of the Second World War in possession of most of the world’s gold, which it used with abandon to finance the construction of a global political economy that would guarantee American access to raw materials. This lasted twenty five years before the inevitable happened and those reserves of gold ran out, or would have had the US not defaulted on its pledge to redeem dollars at a fixed rate to gold in 1971. With this event, the deal with organised labour was no longer affordable, at least in the United States, and something needed to be done about it. A program to do this was instituted with dispatch. At first this took forms such as the absorption of women into the workplace in the name of feminism, which at first at least was really no more than a wheeze to get more taxable work out of each household. But it was also necessary to break the unions, a task which began in the former slave states of the US by dangling the bait of “right to work” in front of labour and tax holidays for capital. Thus southern non-union workers were pitted against northern unionised workers. This was followed by NAFTA, really no more than the internationalisation of the same program. In the event, the unions were broken alright, and labour is well and truly adrift on makeshift rafts with every man for himself. Not for nothing is Hurricane Katrina the very symbol of workers’ despair.

People are quick to judge, and it is easy from today’s perspective to assume that the losers in this tragedy are the good guys and the winners the bad guys. The real culprit is human nature, and until more of us are honest about this the chances of really doing anything about it are unlikely. What is so interesting about events in New Orleans is the frankness with which America’s governors are going about arranging things to their liking, a frankness which implies either their conviction that they are invulnerable, or their desperation in the face of collapse.

Which do you think it is?

Chris Sanders


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