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Builds on the shocking picture of worldwide economic corruption first presented in John Perkins' Confessions of an Economic Hit Man • Features a dozen chapters detailing contemporary examples of how the economic hit man game is played around the globe John Perkins’ controversial and bestselling exposé, Confessions of an Economic Hit Man, revealed for the first time the secret world of economic hit men (EHMs). But Perkins’ Confessions contained only a small piece of this sinister puzzle. The full story is far bigger, deeper, and darker than Perkins’ personal account revealed. Here other EHMs, journalists, and investigators join Perkins to tell their own stories, providing the first probing and expansive look into this pervasive web of systematic corruption. With chapters spotlighting how specific countries around the globe have been subverted, A Game As Old As Empire uncovers the inner workings of the institutions behind these economic manipulations. The contributors detail concrete examples of how the “economic hit man game” is still being played: an officer of an offshore bank hiding hundreds of millions of dollars in stolen money, IMF advisers slashing Ghana’s education and health programs, a mercenary defending a European oil company in Nigeria, a consultant rewriting Iraqi oil law, and executives financing warlords to secure supplies of coltan ore in Congo. Together they show how this system of corruption and plunder operates in real life, and reveal the price that the rest of the world must pay as a result. Most important, A Game As Old As Empire connects the dots, showing how the various pieces of this system come together to create the world’s first truly global empire.
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A Game As Old As EmpireThe Secret World of Economic Hit Men and the Web of Global Corruption
Berrett-Koehler PublishersCopyright © 2006 Steven Hiatt
All right reserved.
Chapter OneGlobal Empire: The Web of Control
A never-ending accumulation of property must be based on a never-ending accumulation of power.-Hannah Arendt
In June 2003, after declaring "Mission accomplished!" in the wake of Operation Iraqi Freedom, George W. Bush told cheering West Point cadets that America has "no territorial ambitions. We don't seek an empire." Meanwhile, neoconservative pundits like Niall Ferguson and Charles Krauthammer were encouraging him to do precisely that: to "make the transition from informal to formal empire," by acknowledging America's actual role in the world and accepting the reality that "political globalization is a fancy word for imperialism." Had the post-postwar world-the new order emerging since the Berlin Wall came down in 1989-come full circle to a new Age of Empire?
The victory of the Allies in 1945, confirming the right of peoples to self-determination in their Atlantic Charter declaration, seemed to signal the end for the world's colonial empires. Colonial peoples in Asia, Africa, and the Middle East had seen the armies of Britain, France, and the Netherlands defeated in 1940-41, and knew that the former imperial powers now had neither the military nor the financial resources to enforce their rule for long. Moreover, the two strongest powers, the U.S. andthe Soviet Union, were formally on the anti-imperialist side. The U.S. had long pursued an "open door" policy advocating formal independence for developing countries. The Soviet Union had denounced imperialism since its birth in 1917, and the communist movement it led had wide appeal in parts of the colonial world as a result.
Nevertheless, the European colonial powers tried to hang on to their possessions as long as they could. Britain did finally "quit India" in 1947, but fought insurgents in Kenya, Cypress, and Malaya before granting those countries independence. France fought losing, divisive wars in Indochina and Algeria to retain its bit of imperial gloire. Still, the tide of history was clearly running in favor of self-determination around the world. The quandary for Western elites was how to manage this process. Would new Third World leaders attempt to strike out on their own, taking control of their countries' resources in order to build their own national industries? Or-worse-would they ally with the Soviet bloc or would nationalist campaigns prepare the way for takeovers by communist parties?
For Western Europeans, loss of access to colonial resources and markets would be an enormous blow: their weakened economies were only slowly recovering from World War II and they planned to force the colonies to help pay for reconstruction. For its part, the U.S. feared that colonial independence would weaken its European allies and might well lead to the expansion of Soviet influence in Europe. And U.S. business leaders were concerned about a postwar return to the depression that had marked the 1930s, so they were eager to preserve access to resources and possible new markets.
Events in Iran, Guatemala, and Egypt in the 1950s marked a new turn in Western policies in what was becoming known as the Third World. In 1951, Iranian prime minister Mohammad Mossadegh nationalized the country's oil industry, which had been run by the Anglo-Iranian Oil Company (since renamed British Petroleum). A democratically elected nationalist, Mossadegh (Time's Man of the Year for 1951) not surprisingly resented the fact that 92 percent of the profits from Iranian oil went to AIOC, a longstanding arrangement reflecting British domination of Persia early in the century. Winston Churchill had recently returned for a second term as prime minister, and he was determined to restore the UK's finances and prestige in the face of this challenge from a newly assertive client state. Churchill ordered a blockade of the Persian Gulf to prevent Iran from exporting oil to other purchasers, and he was joined in a boycott of Iranian trade by the United States. More muscular action was not possible, however: the Korean War absorbed the attention of the U.S. and Britain, and Soviet intervention in support of Iran was a threat. A more subtle approach was needed, and the CIA devised Operation Ajax, directed by Kermit Roosevelt. The first step was to create political turmoil to undermine Mossadegh's political support: a CIA disinformation campaign worked overtime spreading rumors designed to split secular democrats from Islamic nationalists. Finally, the military made its move in August 1953, and Mossadegh was arrested, a new prime minister was appointed, the Shah was restored to power, and the oil industry was denationalized. The US did demand a price for its help, however: British Petroleum now had to share its access to Iranian oilfields with several U.S. companies. U.S. military and foreign policy leaders were cheered by the success of their plan, recovering Iran at a low cost politically, militarily, and financially.
Guatemala was the next test case for this indirect method of policing empire. In May 1952, President Jacobo Arbenz announced a land reform program that would have nationalized unused land belonging to landlords and, especially the holdings of Boston's United Fruit Company, the country's largest landowner. His inspiration was Abraham Lincoln's Homestead Act of 1862, with Arbenz hoping to enable peasants and rural laborers to become independent small farmers. But apparently Lincoln was too radical for the Eisenhower administration, especially with Secretary of State John Foster Dulles and CIA Director Alan Dulles sitting on United Fruit's Board of Directors. Kermit Roosevelt described Alan Dulles's reaction to plans for the CIA's Operation PBSuccess: "He seemed almost alarmingly enthusiastic. His eyes were glistening; he seemed to be purring like a giant cat. Clearly he was not only enjoying what he was hearing, but my instincts told me that he was planning as well." Arbenz was overthrown in a coup in June 1954; some 15,000 of his peasant supporters were killed.
Following the success of covert methods of intervention in Iran and Guatemala, the Suez Crisis of 1956 illustrated the dangers of old-style direct intervention. Egyptian President Gamal Abdel Nasser announced nationalization of the Suez Canal in July 1956; the canal was a key national resource in the hands of European investors, and Nasser hoped to use canal profits to pay for his ambitious Aswan High Dam project. His plans energized several enemies: Britain, the former colonial power, since a British company ran the canal; France, since Nasser supported the Algerian rebels that France had been fighting since 1954; and Israel, which hoped to settle accounts with a pan-Arab nationalist who supported the Palestinians. Israel invaded Egypt on October 29, 1956, and Britain and France quickly occupied the canal region despite Egyptian resistance. This resort to direct military intervention posed a problem for the United States. The Eisenhower administration was dealing with Soviet intervention in Hungary to depose reformer Imre Nagy. The U.S. hoped to use the Hungarian crisis to undermine the appeal of communism, which had already suffered a serious blow to its prestige earlier in the year with Khrushchev's revelation of Stalin's crimes at the Soviet Twentieth Party Congress. Western intervention in the Suez therefore undercut the U.S. position. The U.S. response this time was creative: Britain was pressured to withdraw, and the intervention collapsed-underlining the weakness of the old colonial powers, speeding decolonization, and enhancing the prestige of the United States in the Third World.
From then on, the U.S. would have to compete with the Soviets for influence, as dozens of newly independent countries flooded the halls of the United Nations.
Decolonization vs. Control during the Cold War
For the most part, the newly independent states in Africa and Asia joined Latin America as producers of primary commodities: sugar, coffee, rubber, tin, copper, bananas, cocoa, tea, jute, rice, cotton. Many were plantation crops grown by First World corporations or local landlords, or minerals extracted by First World companies. In either case, the products were sold in markets dominated by European and U.S. companies, usually on exchanges in New York or London, and processed in plants in Europe or North America.
As Third World leaders began to take responsibility for their nations, they emphasized tackling the problem of economic underdevelopment. Their efforts were based on state-led development models, influenced by current thinking in the U.S. and Western Europe. Typically, colonial governments had been heavily involved in economic planning and regulation, and new leaders like Kwame Nkrumah of Ghana, Jawaharlal Nehru of India, and Léopold Senghor of Senegal had been educated in Europe and influenced by socialist and social democratic programs. Moreover, the new states started economic life without their own entrepreneurial class capable of leading economic development.
Not surprisingly, then, many countries concentrated on Big Projects-showpiece government development projects that could be the motor for economic transformation, such as Ghana's Volta River Project, which involved construction of the Akosombo Dam in the early 1960s to form the world's largest artificial lake and building aluminum smelters to take advantage of the country's bauxite resources. And most countries followed policies of import substitution-developing local production capacity to replace expensive imports from Europe and North America. However, these and other industrialization projects all required massive loans, from banks, export credit agencies, or international development institutions such as the World Bank.
Again Western elites faced a problem: how could they preserve their access to Third World resources and markets? Independence offered the West an opportunity to shed the costs of direct rule-responsibility for administration, policing, and development-while maintaining all the benefits of Empire. But independence also carried dangers: Asian, African, and Latin American nations might indeed become masters of their own economies, directing them to maximize their own development. And there were alternative models: Cuba and Vietnam, to name the most prominent. After all, the point was not simply to import oil or coffee from Latin America, or copper or cocoa from Africa, but to import these goods at prices advantageous to the West-in effect, a built-in subsidy from the former colonies to their former rulers. Empire, whether based on direct rule or indirect influence, is not about control for its own sake: it is about exploitation of foreign lands and peoples for the benefit of the metropolis, or at least its ruling circles.
At some point, the alternative that Claudine Martin laid out to John Perkins in 1971, as recounted in Confessions of an Economic Hit Man, must have become an obvious element of the West's strategy. The U.S. and its allies were competing with the Soviet bloc to provide loans for development projects of a myriad kinds. Why not embrace this burden-and use the debts to bring these countries into the West's web of control economically and politically? They could be lured by economic hit men like John Perkins to take on debt to build grandiose projects that promised modernization and prosperity-the debt-led theory of economic development. Moreover, the large sums flooding in could be useful in winning the allegiance of new Third World elites, who were under pressure to deliver prosperity to their political followers, allies, and extended families. The possibilities for corruption were seemingly endless and would provide further opportunities for enmeshing the leaders in relationships with the West while discouraging them from striking out on their own on what could only be a more austere, and much more dangerous, path.
Debt Boom-and Bust: SAPing the Third World
The Yom Kippur War in 1973 and the subsequent Arab oil embargo led to the stagflation crisis of 1974-76 and marked the end of the postwar boom. As one result, leading First World banks were awash in petrodollar deposits stockpiled by OPEC countries. If these billions continued to pile up in bank accounts-some $450 billion from 1973 to 1981-the effect would be to drain the world of liquidity, enhancing the recessionary effects of skyrocketing oil prices. What to do? The international monetary system was facing its worst crisis since the collapse of the 1930s. The solution was to "recycle" the petrodollars as loans to the developing world. Brazil, for example, borrowed $100 billion for a whole catalog of projects-steel mills, giant dams, highways, railroad lines, nuclear power plants.
The boom in lending to the Third World, chronicled by Sam Gwynne in "Selling Money-and Dependency," turned into a bust in August 1982, as first Mexico and then other Third World states were unable to meet their debt payments. What followed was a series of disguised defaults, reschedulings, rolled-over loans, new loans, debt plans, and programs, all with the announced goal of helping the debtor countries get back on their feet. The results of these programs were, however, the reverse of their advertised targets: Third World debt increased from $130 billion in 1973 to $612 billion in 1982 to $2.5 trillion in 2006, as James S. Henry explains in "The Mirage of Debt Relief."
Another result of the crisis of the 1970s was to discredit the reigning economic Orthodoxy-Keynesian government-led or -guided economic development-in favor of a corporate-inspired movement restoring a measure of laissez-faire (a program usually called neoliberalism outside North America). Its standard-bearers were Ronald Reagan in the United States and Margaret Thatcher in Britain, and international enforcement of the neoliberal model was put into the hands of the International Monetary Fund (IMF) and World Bank. Dozens of countries currently operate under IMF "structural adjustment" programs (SAPs), and despite-or because of-such tutelage few ever complete the IMF/World Bank treatment to regain financial health and independence.
The Web of Control
Payments on Third World debt require more than $375 billion a year, twenty times the amount of foreign aid that Third World countries receive. This system has been called a "Marshall Plan in reverse," with the countries of the Global South subsidizing the wealthy North, even as half the world's population lives on less than $2 a day.
How does such a failed system maintain itself ?
Simply put, Third World countries are caught in a web of control-financial, political, and military-that is extremely hard for them to escape, a system that has become ever more extensive, complex, and pervasive since John Perkins devised his first forecasts for MAIN. Chart 1 illustrates the flows of money and power that form this web of control. Capital flows to underdeveloped countries via loans and other financing, but-as John Perkins points out-at a price: a stranglehold of debt that gives First World governments, institutions, and corporations control of Third World economies. The rest of this chapter outlines the program of free-trade, debt-led economic development as preached by the IMF and the World Bank, shows how corruption and exploitation are in fact at the heart of these power relationships, and explores the range of enforcement options used when the dominated decide that they have had enough.
The Market: Subsidies for the Rich, Free Trade for the Poor
If the global empire had a slogan, it would surely be Free Trade. As their price for assistance, the IMF and World Bank insist in their structural adjustment programs that indebted developing countries abandon state-led development policies, including tariffs, export subsidies, currency controls, and import-substitution programs. Their approved model of development instead focuses on export-led economic growth, using loans to develop new export industries-for example, to attract light industry to export-processing zones (firms like Nike have been major beneficiaries of these policies). Membership in the World Trade Organization also requires adherence to the IMF's free trade orthodoxy.
Excerpted from A Game As Old As Empire Copyright © 2006 by Steven Hiatt. Excerpted by permission.
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