“Liberalism is the only thing that can save civilization from chaos – from a flood of ultra-radicalism that will swamp the world…” These are the words of Woodrow Wilson aboard the SS George Washington in December 1918, reflecting on the tasks confronted by the United States and her allies after their victory in the First World War. It is also the fundamental thesis of Adam Tooze’s The Deluge, the long-awaited followup to his brilliant discussion of the political economy of Nazi Germany (for a discussion of which, see here and following). Applying his profound talent for combining political economy with international relations, Tooze’s central subject is the aftermath of World War I and the challenge of creating a new world order amidst the ruins of the old European powers. This challenge, as he presents it, was a dual one. On the one hand it involved the recognition by all European powers, victors or vanquished, that the United States was now the pre-eminent economic power in the world, with the potential of translating this tremendous advantage into equivalent military and political power on the world stage; and on the other hand it involved the attempts by Woodrow Wilson as American President to effect this transformation of the world balance of powers while simultaneously disentangling the United States from a war alliance that he had never wanted in the first place, and which threatened to perpetually constrain the freedom of action the Americans needed to make this potential a reality.
Category: Int’l Trade
On the Present War in Afghanistan
The multinational, NATO-led invasion and occupation of Afghanistan, undertaken in response to the terrorist attack by the islamist organization Al-Qaeda who were said to have been harbored in Afghanistan by the Taliban government, has developed into a disastrous quagmire. Not only has it proven impossible for the imperialist powers of NATO to actually control events in Afghanistan and prevent continuous attacks on their soldiers as well as on the institutions of the newly planted government of Hamid Karzai, but the presence of NATO forces has greatly strengthened both the force and popularity of the Taliban.
The Taliban itself was mostly a Pakistan-based Pashtun organization, appealing to religious sentiment to form a coherent force, which drove out the extortionist warlords of Gulbuddin Hekmatyar, Burhanuddin Rabbani and others from the Afghan lands. However, their religious and anti-modernist inventions of tradition with regard to the demands of islam in Afghanistan itself quickly made them not only a byword for deepest obscurantism and religious fanaticism internationally, but also made them intolerable for the Afghan population themselves. Various warlords continued to combat them, while the Afghan people were waiting for an opportunity to rid themselves of all the different forces attempting to subjugate them altogether. However, all experience has shown that all peoples prefer the devil they know to any foreign invader, even if the latter operates under the flag of supposed liberation of the people involved, and Afghanistan also proves this rule true. The Taliban are now stronger than ever, since the devastation wrought by the imperialist forces has caused many an Afghan villager to join the forces of religious illusion, which at least provides the benefits of suggesting a kind of heavenly justice where no earthly order or control can be found. It has also strongly repudiated the foreign occupation of the country, unlike the few imported Afghan liberals which mostly appear as collaborators to a harrassed population seeking peace. The Taliban moreover have a reputation for resisting corruption, as many islamist movements do, and Karzai’s government has been nothing if not corrupt.
What then is the purpose of occupation? Richard Holbrooke, the American envoy in Afghanistan and Pakistan himself has stated the following: “First of all, the victory, as defined in purely military terms, is not achievable, and I cannot stress that too highly. (…) What we’re looking for is the definition of our vital national security interests”.1 Holbrooke recognizes the impossibility of victory even as thousands more soldiers are sent into the country, many pulled out of the other failed American adventure in ‘nation-building’, Iraq. But what then are these national security interests Holbrooke speaks of? Indeed the American government feels aggrieved because the spectacle of the terrorist attacks on New York City itself, heart of the empire of capital, was according to them planned and undertaken from the borderlands of Afghanistan and Pakistan, one of the least developed areas on earth, where old feudal ties and religious barbarism are still strong. The weakest of all attacking the strongest of all in their own base is an example to the world of a kind that the American empire cannot afford.
Yet that is not all. For although enthousiastic American military press articles would have us believe that the fight against their shadowy enemy of Al-Qaeda has achieved major victories with the elimination of some of their top leaders, this is of itself a sideshow. Indeed, the US shows little interest in even bothering with finding Osama Bin Laden, despite this renegade son of the Saudi elite having been depicted as the veritable puppetmaster of ‘international terror’ and the anti-Christ of Western morality for years; by which is meant that prolongation of his very existence after his attack on New York City would be a continuous loss of prestige on the part of the United States and the wealthy nations in general. If they are willing to accept that loss now, what then keeps them in these barren lands?
There are several considerations. The first here is the fact that Afghanistan is the primary producer in the world of opium. That addictive soporific that British imperialism used to destroy the Chinese empire has now turned against its manipulators: the highly addictive drug heroin is produced by means of opium, and heroin is considered a serious blight and instability problem in the Western nations, where great wealth allowing purchase of exotic drugs goes together with great despair and alienation making that purchase desirable. The Taliban, who do not desire any illusions other than their own brand of religious fanaticism, had actually succesfully wiped out much of the opium production in 2001.2 The newly installed pro-Western government in Afghanistan however has not been so successful, since the warfare in Afghanistan has destroyed most opportunities for growing regular crops – indeed, Afghanistan now again produces 92% of the world’s opium, representing half the annual product of the country.3 The Taliban of course have recognized this situation, and are now supporting the opium growers, whom they ‘tax’, providing their main source of income for warfare against the occupiers. Since they no longer attempt to repress the only viable crop in the drought and war-ridden countryside of Afghanistan, this has greatly increased the fervor for islamism on the part of the Afghan farmers. Of course, the effects of opium on Afghanistan’s own institutions can be foreseen: if mighty China’s celestial bureaucracy, the oldest and strongest on earth, could be torn apart by the corruption due to opium within the span of a few decades, what resistance then could former warlords, now government officials, offer to the bribery of the drug trade? The imperialists’ weapon of old is now undermining their very efforts at providing a modern and capital-friendly structure to Afghanistan’s institutions. Yet they dare not give up on it, not just because of the great amount of government and police officials in the United States who are parasitic upon the drug trade and depend on its continued yet ever-failing ‘war on drugs’, but also because if they cannot even determine what crops Afghan farmers shall sow, then this is truly an admission of total defeat in the effort to control Afghanistan’s economy. Indeed, the various invading powers have even had to resort to the ignominious weapon of counter-bribery, but this has mostly failed. This should come as no surprise since local production prices come to about thirty-three dollars from an acre of wheat, and between five hundred and seven hundred dollars from an acre of poppies.3
Karzai’s weakness has also left Afghanistan as wracked by class and ethnic differences as it ever was, meaning that any attempt at ‘nation-building’ by the NATO forces is going to be an exercise in futility, comparable to the game of whack-a-mole. The corruption inherent in the newly installed government has mostly benefited the local landlords, who exploit the share-cropping opium farmers and at the same time take bribes for normal government functions. Many of these landlords are the same people who operated as warlords in the pre-Taliban phase of recent Afghan history. Moreover, the forces from the north, many of ethnic Uzbek and Tajik descent, are angry about the weakness of the resistance against the Pashtun Taliban, who are their old enemies in the struggle over Afghanistan’s agricultural land as well as smuggling routes. Karzai himself is a Pashtun, but few of his ethnicity support him, and it is likely that the old Northern Alliance will reform – an alliance of northern forces that combated the Taliban in the days of their reign. This alliance will challenge Karzai, whose loyalty to their interests they doubt. This year new elections for the presidency of Afghanistan are to be held, and if the northern candidate wins, this means the internal strife in Afghanistan will come even closer to a boiling point, which neither bodes well for the peace of the area and its supposed defenders nor for the Afghan people.
Then there are as ever the considerations of the ‘cash nexus’. Under the Taliban, Afghanistan had a very differentiated and high import tariff system, which used high valuations of the currency to determine its quantity in a given case. The Taliban’s hold over the country was not strong enough to fully enforce this, and indeed effective tariff rates were significantly lower. Nonetheless this formed a significant source of non-drug income, in particular since many smugglers used Afghanistan to import goods which were subsequently re-exported illegally to Pakistan, a country which also has significant protectionist measures and is very reliant on income from its foreign trade.4 Under the current regime, these tariffs have been significantly lowered, accession to the World Trade Organization is pursued, and further attempts are planned at reducing transport costs and indirect taxes on exporters, mainly in the hope of attracting foreign investment. The importance of export from a poor country like Afghanistan is easy to underestimate: the warlord Achmad Shah Massoud, who led the Northern Alliance against the Taliban, received his main income from taxing the production and export of gems from the mines of the Panjsher Valley in northern Afghanistan, which produce among other things valuables such as lapis lazuli and emeralds.5 Massoud was killed by the Taliban shortly before the attack on New York City of September 11, 2001.
Also of importance concerning trade is the strategic location of Afghanistan: oil and gas-rich countries of Central Asia suffer from poor location and lack of connections to world ports, and Pakistan in particular has aimed at causing a pipeline to be created through Afghanistan, which would connect the Central Asian states with its own ports in Beluchistan by means of Herat. Both the Pakistani and American government as well as such companies as UNOCAL had in fact been negotiating this pipeline just before the events following the Taliban occupation and the Al-Qaeda attacks disrupted the plans. At the same time, the Pakistan-supported Taliban had greatly reduced the costs of transport and security in Afghanistan, which enhanced trade, particularly the above-mentioned smuggling into Pakistan itself. This undermining of Pakistan’s own financial basis, as mentioned very dependent on its transit location, is an activity of Pakistan’s own security forces, which consider their own government to be pro-imperialist and wish to replace it by a religiously inspired resistance regime.5 In the case of both Afghanistan and Pakistan, such neo-Mahdist regimes garner much legitimacy from the lack of legitimacy of the alternatives, in particular the existing and prior state bureaucracies, which have mostly been predators on the extremely poor peasant populations of both countries. The removal of the Taliban by the Western forces has destroyed the safety of the roads that prevailed in most of Afghanistan, which in turn drives local farmers even more towards opium production. Marketing of wheat on the international market legally is now much more difficult than marketing of opium is illegally, even if little of the market price in the West of heroin is captured by the Afghan farmer. Foreign capital, including Chinese mining interests, has however certainly expressed interest in developing Afghanistan’s own gas fields as well as the significant resources of iron ore and coal the country possesses. The USSR had spent hundreds of millions on exploration of these resources when they occupied the country, and if only safety could be guaranteed for capital movements in and out of Afghanistan, it is quite likely that American and other foreign companies shall endeavour to absorb Afghanistan into the world market as well.6
A deal with the Taliban, therefore, seems the most beneficial option for the Western interests. If the Taliban can be appeased and counted on to provide, or at least not disturb, the ‘security’ needed for foreign investment, and in turn the Taliban do not hinder the development of capitalism in that country, then imperialism shall have cleared the way once again for capital’s adventures in foreign shores. The degree of foreign capital’s vulnerability to extortion by the many local landowners, warlords and so forth does not make this likely, however. More likely, the NATO forces shall be forced to withdraw sooner or later after having to deal with the Taliban on the latter’s terms, and much shall be as it was before in Afghanistan. The tens of thousands of dead Afghans and the loss of men and prestige on the part of the Western empires will be the only ‘result’ of the Afghan expedition.
1.Associated Press article, Feb. 18, 2009.->
2.“Opioids in Afghanistan”. http://www.opioids.com/afghanistan/index.html. ->
3.Anderson, J.L. “The Taliban’s Opium War”. The New Yorker (July 9, 2007).->
4.“Afghanistan: Trade Policy and Integration”. World Bank report. http://go.worldbank.org/ORI5Y663A0. ->
5.Rubin, B. The Political Economy of War and Peace in Afghanistan. Council on Foreign Relations, 1999.->
6.Daly, J.C.K. “Analysis: Afghanistan’s untapped energy riches”. UPI article, Oct. 24, 2008. Also: “Ahadi: Afghanistan’s Economic Fortunes”, interview by Greg Bruno. Council on Foreign Relations, Apr. 15, 2008.->
On the Living Costs in the Third World
It is considered an intuitively self-evident idea among most people in the developed nations, whether they are intellectuals or otherwise, that the difference in income between those nations and the underdeveloped ones can be explained away by noting that the costs of living in the Third World are lower than in the First. This is generally seen as a truism, supported by the experiences of many a tourist from the developed world when visiting popular destinations in the underdeveloped parts, such as Egypt and Mexico, and then noting the extraordinarily low prices for basic products in these countries. Surely then with such low prices, the lower incomes must have been compensated for, so that the common people in such nations are not in terms of living standards that much poorer, according to the norms they are used to?
Yet this idea is wholly false, as can be demonstrated by some simple calculations. Indeed of course the relative costs of living vary much by nation and also within nations, and incomes vary much as well; yet it is possible to give some examples that will indicate how strong in fact the difference in incomes also translates into differences in living standards, because the living costs in the underdeveloped world are in fact higher than in the developed world.
The price of bread in Ghana is 0.6 Cedi (this is the minimum price guaranteed by the state), which is $0.46. The American price of bread is $1.28 (given as average price in an article in the Boston Globe, dated 09-03-2008.). The average daily wage in Ghana is $1. The minimum hourly wage in the United States is $6.55 (federal minimum); assuming eight hours of work, we get $52.40.
Now all you need to do is calculate how many local loaves of bread one local day of work is worth, to compare. We see that one day of work buys the American minimum income worker $52.40/$1.28 = almost 41 loaves of bread (40.94). One day of work for a Ghanaian average worker buys him $1/$0.46 = a little over 2 loaves of bread (2.17). Therefore, the cost of living (expressed in bread) is much higher in Ghana than in the US.
But, it will be objected, there is more to living costs than merely food prices. Bread may in the parts of the world where this is the common staple food serve as an acceptable proxy for the costs of food, but another major expense is the costs of housing. What of this? It must first off be noted that in terms of housing comparisons are much more difficult to fairly make. Bread is bread everywhere and everywhere essentially the same, but housing costs vary enormously. Not just because of the differences in amenities common in the housing units, but also because of the differences in land prices, due to the influence of land rent. This in turn is affected by a great many variables, from effects of crime to proximity to work and urban areas, as well as environmental factors and so on.
Yet we need not despair for our analysis entirely. The LA Times fortunately has some information in their article of 26-03-2007 on the slum living of illegal immigrants near Los Angeles. They give the example of a family which earns $10.000 a year and pays $360 a month in rent. I’m not sure if this is household income, but I think so. Rent then is 43.2% of their income, monthly and yearly, for the equivalent of an illegal hovel. From Kenya we have info on slum living, assuming the source is accurate, from a Pambazuka News article of 03-07-2007 by Humphrey Sipalla. The cost of rent is here given as KES 2,693 monthly, which is at current exchange rates $34.26 (this just to give an idea). According to the article, this represents 22% of their income, I assume also applies to households. If this is accurate then, the housing cost in a Kenya slum is just under half of what it is for illegal immigrants in California (22% versus 43%). But it would have to be 1/20th, i.e. ten times as cheap, to remove the difference in living costs altogether. Of course rents account for differences in costs as mentioned, but comparing Nairobi to the Los Angeles area seems to me not so unfair as to undo that entirely.
We may conclude then from this example, comparing the expenses in major cities in the United States (for average people and poor people respectively) with the living costs in food and housing in Ghana and Kenya respectively, that the common idea of the living costs being much lower in the underdeveloped world is wholly false. Indeed it makes that appearance because the prices, when valuta are calculated according to exchange values on the market, are indeed significantly lower in the Third World – the bread in Ghana costs one-third of what it does in Boston. However, our naive friends in the developed world forget that the incomes in the underdeveloped world are so much lower than theirs, that 1/3rd of the price is for them over 20 times the relative cost.
On a final scientific note, it must be taken into account that there is good evidence that the currencies of underdeveloped nations are undervalued by exchange rates in comparison to their value in terms of purchasing power. The nominal exchange rate of 16-01-2009, which is the one that I have used, is likely (as any nominal exchange rate) to undervalue the currencies of underdeveloped nations compared to their purchasing power. This has no particular implications for the living cost comparison I have undertaken, but it does affect international trade between, say, Ghana and the United States, because it means Ghanaian wages as well as prices are undervalued compared to American ones in the exchange rate, causing the terms of trade to tilt strongly in favor of the United States. Gernot Köhler’s research, described in “The Structure of Global Money and World Tables of Unequal Exchange”, in: Journal of World-Systems Research 4:2 (Fall 1998), p. 145-168, indicates in the appendix that the estimated loss as percentage of GNP (PPP) on the part of Ghana and Kenya is respectively 30% and 35%. If currencies were equalized according to PPP, the relative value of the Cedi would be much greater, increasing the relative price of food in Ghana compared to the United States, but also increasing the relative value of the wage. This would not of itself necessarily alter the proportion between wage and food costs within Ghana (aside from changes in the market caused by changes in international trade in the longer run, which are outside the purview of this article), but it would to a significant degree remove the false impression on the part of citizens of developed nations about the low costs of living, because they would experience the local prices as much higher.