Dollars and Nonsense

It's the Post-War Economy, Stupid!

Among the questions about a war against Iraq is the effect it would have on the world economy. Some things we already know, and many of them aren't good:

• The Japanese economy is in shaky shape. Japan imports all its energy supplies. Oil accounts for more than half of those supplies, and more than 80 percent comes from the Middle East. On Monday, the Japanese stock indexes continued their downward spiral to new lows, on news of North Korea's firing a missile and on speculation over the approaching war. The price of oil is already at about $37 a barrel, and as the price increases, the Japanese will go deeper into debt.

• The world economy is not run from the UN or the U.S. Treasury Department or the City of London. If there is a central HQ, it would most likely be the International Monetary Fund in Washington. The IMF functions as a sort of central bank for the capitalist world. Defense Secretary Donald Rumsfeld may talk disparagingly of the passing of France and Germany and other fixtures of the old Europe, but the old Europe is very much alive and well at the IMF. There are 184 members of the IMF, but its executive board includes five members that pretty much run the show—the U.S., United Kingdom, Japan, France, and Germany (the latter is a heavyweight permanent member, unlike on the UN Security Council). The managing director, Horst Köhler, is a German. At the IMF, Europeans hold considerable sway.

• The U.S. dollar, as the world's currency, may be endangered. There are 3 trillion of them floating around the world, and their management has allowed the U.S. to run up its big deficit. Two-thirds of the official reserves of central banks are in dollars. This becomes important because the U.S. dollar in recent months has been losing strength against the euro, and there has been a move to switch oil payments from dollars to euros. Iraq already has done so, which has increased the value of the UN's oil-for-food fund. Iran and Russia have discussed adopting the euro for oil sales, and Jordan has done a bilateral deal with Iraq completely in euros. In the world oil business, Rumsfeld's "Old Europe" imports most of its oil from the Middle East and amounts to the biggest eurozone in the world. It's hard to believe that Britain won't sooner or later throw in with the euro. If the European currency prevails, and the Middle Eastern oil countries switch en masse from dollars to euros, this could cause a sea change in the international economy, leading to a dramatic decline in U.S. hegemony on the world stage.

• The U.S. economy is in rickety shape. Wall Street may have settled into a permanent bear market. The government, which was in surplus, is suddenly in deep deficit, which will grow as Bush spends money for the Iraq war. And perhaps most importantly, our 2002 trade deficit soared to a record high of $435.2 billion, up 21.5 percent from 2001.

The Iraq war itself will be costly, and experts differ on whether Iraq's oil income can pay for the invasion and occupation government as well. It certainly cannot pay for even the most minimal improvements in the Iraqi oil infrastructure, which was badly damaged in the Iraq-Iran war and Desert Storm. According to press reports, the European and Asian oil companies that had wanted to invest in rebuilding the oil industry under Saddam Hussein are to be blacklisted by the U.S.-run occupation regime because they come from countries, such as France and Russia, that have not been helpful to the U.S. in the UN. But, to put it politely, our allies in "the new Europe," such nations as Bulgaria and Romania, are not in position to pick up the tab. As powerful as ExxonMobil may be, it's pretty doubtful that Standard Oil's great-grandchild will want to pay for the entire reconstruction of Iraq's oil business. That leaves the U.S. taxpayer to pick up the tab.

The U.S. position could get even worse. We have shifted much of our manufacturing industries abroad. That not only removes our ability to sustain ourselves at home, but it has led to a growing service industry—private armies and logistics companies, such as Halliburton's (read: Cheney's) subsidiary Brown & Root—to mind our empire. We may not think of ourselves as an empire, but we have no choice but to be an empire abroad to maintain our industrial colonies. Thus, we must fight in Ecuador and Colombia for oil, support corporate armies in Nigeria (again for oil), build bases in such places as the Malacca Strait to protect oil and gas shipments, worry about the Chechen rebels blowing up pipelines, and intervene in the Philippines and Indonesia to protect timber and other natural resources.

 
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