War and Globalization Support American Business
By Michel Chossudovsky, Professor of Economics, University of Ottawa; author of
The Globalization of Poverty, 1998.
On February 16, spurred on by the dot-com implosion and the climactic downfall
of Nortel Networks Corporation, the world's leader in fiber optics, the value of
high tech stocks plummeted on Wall Street in turbulent trading. The NASDAQ
stock index declined by more than five percent to a record low.
But it could have been much worse. Did the bombing of Baghdad pull Wall
Street out of danger? In fact, it did more than that. It put
billions of dollars into the deep pockets of Military contractors and oil
companies?
Warnings from Wall Street
In the days leading up to the February 16 near-meltdown, stock market analysts
had warned of a worst case scenario. High tech stocks were heavily
overvalued.
But that day at 1 pm, a few hours before trading closed on the New York Stock
Exchange, U.S. and British warplanes bombed Baghdad in what the Pentagon
described as "a routine mission of self-defense."
Routine self defense? The U.S. media applauded. And on Wall Street,
brokers did more than applaud; they gasped with relief. For in a cruel
irony, the bombing raids had saved the day. As one British financial
analyst noted with contempt:
"the American market didn't collapse. It didn't plummet.
Indeed, the fall was less than one per cent. This was a routine day -
unless you happened to live in Baghdad."1
Meanwhile, with telecom and computer stocks in the doldrums, financial and
military analysts had been working hard to rebuild "confidence in the stock
market":
"Makers of the nation's warfare technologies along with Wall Street
analysts and industry consultants spent a week bragging about new opportunities
and the likelihood of changes to Pentagon policy that would foster growth after
15 years of strained budgets. What's more, military and aerospace stocks
ended on a high note, climbing amid a broad market slump as 24 U.S. and British
warplanes struck Iraqi military targets using various long-range,
precision-guided weapons."2
In the last hours of trading on the 16th, military stocks spiraled; oil and
energy stocks boomed following news that Iraq's oil industry might be impaired.
The value of Exxon, Chevron and Texaco stocks shot up. Harken Energy
Corporation - in which George W. Bush served as company director and corporate
consultant before entering politics - gained 5.4% by the end of trading.
Harken Energy happens to be a key player in Colombian oil (with a multi-billion
dollar U.S. military aid package under "Plan Colombia" on hand to
protect its investments). Harken Energy CEO Mikel Faulkner is a former
business associate of George W.
Financial Meltdown
The February 16 meltdown was already being predicted at the close of trading on
the 15th. Business analysts on the evening news said that a major
"correction" in the value of high tech stocks was
"inevitable". The financial press had previously hinted that the
U.S. military industry could also take a beating if the new Bush Administration
were to curtail military procurement.
A few days earlier, Lockheed Martin - America's largest military contractor -
had announced major cuts in its satellite division due to "flat
demand" in the commercial satellite market. A company spokesman had
reassured Wall Street that Lockheed "was moving in the right
direction" by shifting financial resources out of its troubled commercial
(that is, civilian) undertakings into the lucrative production of advanced
weapon systems.
For weeks, military contractors had been actively lobbying the new
Administration. On February 12, President Bush promised to hike military
spending based on "a comprehensive review of the military." According
to The New York Times (February 12, 2001), George W. Bush said:
"he planned to break with Pentagon orthodoxy and create 'a new architecture
for the defense of America and our allies,' investing in new technologies and
weapons systems rather than making 'marginal improvements' for systems in which
America's arms industry has invested billions of dollars."
On the 14, he confirmed "a $2.6 billion increase in the Pentagon's budget
as a 'down payment' on new-weapons research and development."3
And two days later, Baghdad was bombed by the U.S. Air Force.
The raids were a signal to Wall Street that Bush's promise "to revitalize
the nation's defense" should be taken seriously. Had the Bush
administration decided otherwise, Lockheed Martin's listing on the New York
Stock exchange might well have experienced the same fate as that of Nortel.
In fact, while (civilian) high tech stocks (quoted on the NASDAQ) had plummeted,
Lockheed Martin stocks ended the day up a comfortable 1.6%.
Meanwhile, the F-22 Raptor high tech fighter jet was already scheduled - pending
the Administration's final approval - to be assembled (at an estimated cost of
$60 billion) at Lockheed Martin Marietta's plant in Georgia:
"Defense Secretary Donald Rumsfeld was an F-22 advocate before joining the
Bush administration, and Lockheed officials said Thursday [February 15, one day
before the raids on Baghdad] they are confident Rumsfeld will support the
technologically advanced plane."4
The message to financial markets was crystal clear: the bear market was hitting
"civilian" high tech stocks including Nortel, Dell Computers and
Hewlett Packard; but military industry listings - including Boeing, General
Dynamics, Lockheed Martin, Northrop-Grumman and Raytheon (the "Big
Five" military contractors) - remained "safe" and
"promising." (i.e. "a good place to put your money").
Wall Street analysts had concluded - without batting an eyelid - that "with
the Bush administration's focus on defense, there is optimism the industry is on
target to outperform the market again this year."5
The new buzz phrase on Wall Street is that - despite the slow-down of the U.S.
economy - military stocks constitute "a safe-haven shelter from the dot-com
implosion." More generally, the assumptions underlying Bush's new
military budget are considered "good for business." No wonder
pension funds and institutional investors are busy changing the structure of
their portfolios!
New World 'Order'
War and globalization go hand in hand. Militarisation is an integral part
of the neoliberal agenda. The build-up of the military budget contributes
to beefing up the "Big Five" U.S. military contractors, while denying
financial resources to civilian programs including health, education and social
welfare not to mention the rebuilding of America's deteriorating urban
infrastructure. Whereas military production has spiraled, recession has
hit the sectors of the U.S. economy which produce "civilian" consumer
goods and services. The U.S. domestic economy increasingly hinges on the
military industrial complex and the sale of luxury goods (travel, leisure,
luxury cars, etc.). And this satisfies the financial establishment
irrespective of the needs of ordinary people.
The bombing raids on Baghdad were certainly intended to intimidate countries
committed to ending the sanctions on Iraq. But more generally,
"missile diplomacy" is applied to enforce American political and
economic domination under the guise of what is euphemistically called "the
free market."
"The hidden hand of the market will never work without a hidden fist
McDonald's cannot flourish without McDonnell Douglas, the designer of the
F-15."6
And America's war machine is used to support the conquest of new economic
frontiers. In the Middle East, the Balkans and Central Asia, the U.S.
military is positioning itself directly and through NATO not only to support the
interests of the Anglo-American oil conglomerates - which are working
hand-in-glove with military contractors in lucrative joint ventures - but to
further colonize the former Soviet Union and Asian countries. Meanwhile,
spiraling military spending pours wealth into the military industrial complex at
the expense of civilian needs.
Notes:
1. Sunday Mail, London, February 18, 2001.
2. Reuters, February 16, 2001. (About 80 warplanes were involved, of which
24 were strike aircraft. See Financial Times, February, 17, 2001.)
3. "Bush Vows To Modernize Military After Pentagon Review Is
Completed," The Bulletin's Frontrunner, February 14, 2001.
4. Dave Hirschman, "F-22's Fate to be Decided Next Month; Not on hold:
Bush's Defense Review won't delay Judgment on Raptor," The Atlanta Journal
and Constitution, February 16, 2001.
5. The Nightly Business Report, National Public Radio, February 19, 2001.
6. Thomas L. Friedman, "A Manifesto for the Fast World," New York
Times Magazine, March 28, 1999.
Source: February 19, 2001, Emperors clothes web site: <emperors-clothes.com/articles/choss/bombs.htm>