Libya, Tunisia, Egypt – One of These Is Not Like The Other

Lately I’ve been puzzled about why NATO and the U.S. have intervened militarily in Libya, but stayed out of popular rebellions in Tunisia, Egypt, Yemen, Bahrain, and other middle east countries.  Human rights concerns doesn’t seem to fully explain it.  After all governments in Yemen and Bahrain in particular have violated human rights without so much as peep from the U.S.  Yes, there’s the oil explanation, but Libya doesn’t have that much oil (less than 2% of world exports) and besides Western firms (BP and Marathon) were involved in the production anyway.

Now comes a very interesting piece from Ellen Brown at Web Of Debt.  It’s the kind of thing that makes you go “hmmmm”:

If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and health care continue to be free.

Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank – this before they even had a government. Robert Wenzel wrote in the Economic Policy Journal:

I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.

Alex Newman wrote in the New American:

In a statement released last week, the rebels reported on the results of a meeting held on March 19. Among other things, the supposed rag-tag revolutionaries announced the “[d]esignation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”

Newman quoted CNBC senior editor John Carney, who asked, “Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era.”

Libya’s national central bank is not only not part of the BIS, the Bank of International Settlements in Switzerland, that regulates and coordinates international banking, but Gaddafi’s government has been actively promoting an alternative international currency and banking structure for African and Arab nations. The alternative currency and banking structure would greatly weaken the power of large, private international banks (largely U.S, British, and European) and facilitate popular policies in those countries.  Libya’s status as a non-member of the BIS is a status it shares with Iraq, Iran, Somalia, Sudan, and Syria.  Again, it just makes you go “hmmmm”.  I recommend following the link and reading the entire article here. 

U.S. Is Not Broke: Obama Launches Jobs at Libyans

Of course neither Obama nor the Congress nor the news media think of this past weekend’s launch of hostilities with Libya in these terms. But it’s what’s happening. Three weeks ago we were being told by Obama, the Democrats, the Republicans, and lord knows Fox News, that the “U.S. is broke”.  We “must cut spending and cut the deficit”.  It was all nonsense then and it’s nonsense now.  All the talk about needs to cut the deficit were nothing but political posturing to cover for the truth which is that they don’t want to help ordinary Americans and they don’t care about jobs. The “they” is the elected folks from both parties.

Now a chance to get involved in a war over oil and the story is different.  On Saturday in the first few hours alone, the U.S. launched over 119 cruise missiles.  Cruise missiles don’t come back. Launching one is the same as burning money.  Actually it’s worse. Money can be easily replaced by the government – just click and create the new bank reserves. A cruise missile represents lost real goods and resources.  Goods and resources that could have been used for productive purposes and strengthened the economy.  Instead, they simply go boom.  Oftentimes taking human life with them. A cruise missile costs $1,066,465 each. 119 cruise missiles is $119 million gone in an hour or two. Those missiles could have been spent on job-creation and stimulus producing jobs, teaching children, and feeding families. But instead, in a few hours on Saturday, March 19 the U.S. launched  a lot of jobs over Libya.

Lest you think this is just the crank ramblings of a left-over 70’s anti-war commenter (which it may well be), let me quote one of the greatest generals of the 20th century.  Dwight Eisenhower described the opportunity costs of military escapades and equipment as:

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter with a half-million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. . . . This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”

Mark Thoma summarized the whole situation quite succinctly.  His entire post:

Revealed Preference

We have enough money to pay for military action in Libya, but not for job creation?


Do Markets Like Totalitarian Governments?

Food for thought.  We’ve been bombarded with messages for at least 20 years about how markets and democracy have triumphed. Central planning is dead.  Further we’re constantly told that democracy is “on the march” and totalitarian governments can’t survive.  The intellectual descendants of Milton Friedman and Hayek like to assert that markets promote freedom and democracy.  But do they really?  From Washington’s Blog here’s some stunning comments:

Head of World’s Largest Asset Manager: “Markets Like Totalitarian Governments”

Blackrock is the world’s largest investment manager.

As Wikipedia notes:

BlackRock is the largest g”lobal investment management firm headquartered in New York City. It is one of the most prominent financial institutions in the US. The company acquired Barclays Global Investors in December 2009 under the BlackRock name, making it the largest money manager in the world.

But BlackRock isn’t just the largest money manager … it is also the larges asset manager in the world.

As Wikipeda notes:

As of December 31, 2010, BlackRock’s assets under management total $3.56 trillion across equity, fixed income, alternative investments, real estate, risk management, and advisory strategies. Through BlackRock Solutions, it offers risk management, strategic advisory, and enterprise investment system services to a broad base of clients with portfolios totaling approximately $9 trillion.

And see this and this.

So it is stunning that Blackrock’s Chairman and CEO – Larry Fink – said on Bloomberg TV:

“Markets like totalitarian governments.”  (see here to watch the video)

Investors can determine whether a nation prospers or starves.

Investors can determine the course of nations, including who gets elected and who gets the boot.

No wonder there are so many totalitarian governments in the Middle East, North Africa and around the world.

No wonder totalitarianism has been creeping into America’s politics and economics. See this and this.

Because big investors (or at least big asset managers) like totalitarian governments. If they instead preferred democracy, democracy would flourish.

“Markets like totalitarian governments”.  It makes sense if by “markets” we really mean the collection of mega-wealthy managers and banks that control much of the world’s finance and money and then trade these paper obligations in the casinos and semi-rigged markets called “stock exchanges”, “funds”, and “banks”.  The things that the media refer to when they say “the markets did such and such today”.  It makes sense because such “investors” really crave certainty about the future and they abhor risk. Risk means uncertainty. In this sense totalitarian governments are a boon for such investors.  Totalitarian governments are more predictable, more amenable to whatever the mega-investors desire, and more controlling.  They’re about reducing future uncertainty.

Now the neo-classical/neo-liberal economic response will typically be that, no, markets are only about profit-maximization, not political control.  But there’s a hidden assumption in neo-liberal/neo-classical mainstream economics, an assumption for which we lack any evidence that it applies to the real world.  They assume that all profit-maximizing efforts are directed towards the profitable sale of more goods and services.  For most of us regular folks, getting richer means producing more and more valuable goods and services for the market. But the reality is that for the very elite, very wealthy, it’s not really about how to produce more. First, wealth is relative.  They already have most everything they can want in terms of goods and services. It’s now about status and ego. For that, absolute wealth is not important. Relative wealth is.  And there’s two ways to increase your relative wealth: make yourself richer, or ensure that others get poorer.  The other major objective of these very wealthy is protection of what they’ve got (see here for a description).  Either way, whether it’s ensuring a bigger piece of the existing pie or it’s protecting your existing assets, it’s more convenient to have pliable, very powerful government at your beck and call.  So, maybe “markets”, if you can call them that, do like totalitarian governments.

Of course, totalitarian governments in real-life tend to be very predictable for long stretches, but the end  is always unexpected and unpredicted. Witness recent events in Tunisia, Eqypt, and Libya.