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Archive for the month “June, 2016”

No More Trade Wars Please

The real story of the Great Depression trade war starts with America’s mistakes as an emerging world power, our adolescence as a world power, starting with the Philippines and World War I.  Because the Naval Secretary was gone, under secretary Teddy Roosevelt was able to order the US fleet into Manila Bay leading to war in the Philippines and the February 1899 invasion of the Philippines.  This was later to force Japan in World War II to attack the US.  In World War I, US entry came just in time to prevent a German victory.  With fresh troops from the Russian front after Russia pulls out of the war, Germany was on the offensive until the US troops arrived.  This broke the pattern of history where the number one economic power in Europe was denied the victory in the hegemonic war that they normally would have won.  The number three power in Europe, France, then was able to impose retribution not just for the current war, but also for the indignity of the Franco-Prussian War of 1870-71.  John Maynard Keynes, the greatest economist of the twentieth century, was a young man on the British negotiating team at Versailles, and later wrote a book about how these reparations payments demanded of the Germans would lead to another war.  He was right.

Reparations

Forcing Germany to pay reparations after an exhausting war, led to the US financing those reparations as the new number one economic power in the world.  But this put US farmers at a disadvantage leading to great farmer suffering in the twenties.  Since about 85% of all revenues for US government in the nineteenth century came from tariffs on foreign imports, the first step was a tariff in 1921.  As an emerging power in the nineteenth century, tariffs helped protect the infant American manufacturing industry in the North from the British manufacturers.  That galled prosperous Southerners with their slavery plantations and was the number two reason for the Civil War after the more obvious slavery.

So the roaring twenties started with the post war depression 1919-1921, then led to Spindletop oil and Ford Model T’s combined for 48% growth in five years from 1922-1926.  That was it, that lone five year period was the roaring twenties.  Then the economy stalled, as the top 20% of American families all had their Model T, so sales stalled.

Electing Hoover

The 1927-28 two year flat economy led to the Hoover election of 1928.  He promised a tariff to protect the long suffering farmers of America as the balance of trade was still suffering from the German reparations financed by American banks.  Hoover’s mistake was not to recognize that Europe was unprepared to put up with America continuing to act like a small emerging power when they were now the largest economy in the world, the equal of Europe as a whole.  Hoover took office and the economy grew 6.6% in 1929.  Still, promises are promises, and the main campaign pledge of Hoover began with a special session of Congress in September 1929.  The process had begun on the Smoot Hawley Tariff.  The stock market and economists could see the impending disaster, so the stock market shuddered twice in September, and crashed four days after the bill came out of committee on October 28, 1929.  But the economy was still doing fine growing even for the first five months of 1930.  1000 economists begged the president not to sign the bill, but he did anyway, on June 11, 1930.  Only then did the economy begin collapsing, -9.9% in 1930, -7.3% in 1931.  Then the Germans stopped paying reparations.  Hoover’s blue ribbon business panel, the Hump Commission recommended spending money.  Instead, Hoover doubled down trying to balance the budget and the economy went -14.8% more into the hole in 1932 and Roosevelt was elected.  The economy stabilized in 1933 with a -1.9% drop for a total drop of 30.2% and a rise of unemployment to 25%.  Meanwhile trade dropped from 7% of the economy down to 2%.  Trade multipliers are high, estimated 8 to 10 in the seventies.  This 5% trade drop with a multiplier of six would explain the drop in the Great Depression.  Further proof that trade war was the main problem in the Great Depression comes from the fact that America and France, the agricultural powers, suffered the most in the agricultural trade war.  The more manufacturing oriented Britain and Germany did not lose share of the world economy in the thirties like America and France did.  France had it worse than America.  This supports the notion that the Smoot Hawley agricultural and mineral tariffs were the main trigger of the Great Depression trade war.

Recovery

The economy grew 86% in the eight prewar years from 1933 to 1941 as Keynes advised Roosevelt to spend money and he ran a combined 31% deficit in those years.  That’s an average growth rate of almost 11% per year with a mostly jobs program deficit of 4% per year.  The unemployment rate dropped from 25% in 1933 to 10% in 1941.  Happy days were here again.  Note how the New Deal got triple the growth rate from their deficits.  The war did fully employ people again, with an average unemployment rate of about 2%.  Note that both periods, New Deal and war, reduced unemployment about 2% per year.  But look how inefficient the deficit was with military deficits.  The four war years grew 26% on 155% deficits.  That’s 6.5% growth on 39% deficits on average.  So the multiplier under New Deal programs was 2.75 and under the war was 0.17.  That makes the peacetime deficit multiplier 16 times more effective that the war time deficit multiplier.  Giving all the credit to the war for ending the Depression is to mistake an accident of historical timing for cause and effect.  Military spending is an extremely inefficient way to stimulate the economy.

Today

When Trump threatens to heavily tax products from factories moved overseas, he is essentially trying to duplicate the capital flow controls of a country like Sweden.  We all know it is a mistake to confuse democracy with capitalism.  Likewise, it is a mistake to confuse product free trade with free capital flows.  It does not impinge on free trade to prevent factories from moving overseas.  Germany has been able to keep their manufacturing economy in the new world of globalization and trade treaties.  Germany has the advantage of labor being able to appoint half the directors of a company, hence when they build a factory overseas, it is a healthy expansion, not a way to undercut domestic labor.  We don’t need to end trade treaties; we just need to control the flow of factories overseas.  Besides, free trade is not free trade; it is negotiated trade, still negotiated between two countries but in a larger overall treaty framework.  Note also that lost research and capital resources are still critical.  Restoring military capital and research to manufacturing in the late nineties grew manufacturing in America despite the 1993 NAFTA and WTO treaties.  Withdrawing military capital and research from manufacturing in the two years after September 11 cost 1.8 million manufacturing jobs.  The trade treaties cost another 1 million manufacturing jobs just before that military buildup.  So reducing the military budget and controlling capital flows overseas are the keys to restoring manufacturing and middle class job growth.

For a complete hundred year war and peace economy history of America since 1910:

https://www.academia.edu/4044532/HISTORY_Presidents_Military_Economy_1910-2009

For more detail on the Depression and Roosevelt War Periods:

https://www.academia.edu/4044531/ROOSEVELT_Depression_War_Unpacking_Myths_1p.

 

Dr. Robert Reuschlein, Dr. Peace,

contact:  bobreuschlein@gmail.com

message: 608-230-6640

info: www.realeconomy.com

Deep Politics of Iraq War

The C-SPAN panel at Georgetown October 23, 2002 was an impressive event.  Stephen Zunes was full of insight and specifics, including the only member of the panel to mention Scott Ritter, the US Marine on the inspection team in Iraq in 1998, when they pulled out.  Going last Mark Lance was left with generalities to make, including those of empire and the claim America is no longer a democracy.  That Democracy claim may have been premature but it signaled the actual trend.  Bush v Gore had to raise the issue, but Citizens United was eight years later in 2010 followed by Jimmy Carter and the Princeton study confirming the notion of oligarchy replacing democracy in the United States.  Then in 2011 Occupy Wall Street and the Congressional Research Office confirmed the quadrupling of the income gap between the 1% and the 99% in the thirty years from 1979 to 2007.  Nevertheless, a big part of the story was left out.

The Rise of Saddam Hussein

In exile in Egypt, Saddam Hussein was given by the CIA a list of 635 names of enemies he could purge when he took power in 1965 in Iraq.  Then when Iran took the 50 American hostages in the Iran embassy in 1979, Saddam was eager to help out by attacking Iran in the Iran Iraq War that lasted from September 1980 to August 1988 and cost over 600,000 Iraqi lives.  Iran Contra was a lingering aspect of the 1980 deal in France called the “October Surprise” of Casey and Bush senior that helped elect Ronald Reagan over Carter.  About that same time in 1987, Donald Rumsfeld was posing for pictures with Saddam Hussein and the CIA was provided intelligence for the Saddam Hussein chemical attack that killed thousands of civilian Kurds in Halabja in 1988.

The Cold War Ends

When that war ended months later, Saddam Hussein was in desperate economic straights.  With the end of the Cold War, the pentagon was in similar desperate economic straights.  Bob Woodward’s book “The Commanders” recounts the panic in the pentagon in April 1990, as the military industrial complex is furious looking around for replacement enemy to keep the military business alive and well and strong.  Help was on the way.  Just get the Kuwaiti’s to slant drill across the border into Iraq stealing Saddam Hussein’s precious oil.  Then have the Iraqi ambassador April Glaspie say “We have no opinion on your Arab-Arab conflicts, such as your dispute with Kuwait.  Secretary Baker has directed me to emphasize the instruction, first given to Iraq in the 1960s, that the Kuwait issue is not associated with America.”  Then when US friend and ally Saddam Hussein takes this as a green light to invade Kuwait with nothing more than hot air from the United States, the mouse has taken the bait.  Then when the tanks are all sitting in Kuwait City, the US will lie to Saudi Arabia that the tanks are massing on his border now.  This was proven by the St. Petersburg Gazette when they obtained satellite photos proving the US lie to the Saudis.  So the US gained approval to send troops to the Holy Land of the Muslims to stage a counter attack to retake Kuwait and restore the importance of the US military in the eyes of the American public.  This sacrilege to the Muslim Holy Land is later cited by Osama Bin Laden as justification to attack the US.

Moving the Goal Posts

When Saddam Hussein finally offered to pull his troops out of Kuwait, it was too late.  The offensive went forward as 4000 tanks were destroyed with depleted uranium rounds that were later to drive leukemia cancer rates in Iraq to 37 times normal.  Enough tanks were allowed to escape the pincer attack to give Iraq some ability to defend itself against Iran.  Even though George Bush the senior had encouraged the Iraqi people to rise up and overthrow Saddam Hussein, he didn’t mean it, and he allowed the Iraqi army to use their helicopters to destroy the uprising.  Nevertheless, the allies and the UN kept changing the terms of the UN resolution to justify the continued air campaign against Iraq in the name of the no fly zone.  Eventually over a half million Iraqi children died under the sanctions regime put in place on Iraq and inspectors slowly eliminated 95% or better of the weapons of mass destruction, including 100% of the nuclear operation.  That half million Iraqi children were from a report about half way through the 13 year sanctions period.  Then, in danger of proving that all weapons of mass destruction had been eliminated, Operation Desert Fox was launched in December 1998.  When Saddam retaliated by kicking the inspectors out of Iraq, the US preserved the illusion that maybe some weapons of mass destruction remained, hence Hussein was kept in his box of sanctions.

Fraud in the Iraq War of 2003

Doug Feith set up a separate intelligence operation under Donald Rumsfeld and Dick Cheney to manufacture evidence against Iraq.  They were engaged in extensive cherry picking and grasping at straws, when a captured Iraqi code named “Curveball” was water-boarded by Egypt to get him to confess about the Iraqi weapons of mass destruction.  Since people will say anything to stop the drowning sensation, most of the lies used in Colin Powell’s presentation to the UN were mainly from this one bogus source.  The actual CIA intelligence report released in the Fall of 2002 was nuanced and skeptical about the issue.  When ambassador Wilson, Scott Ritter, and others pointed out some of the fraud, they were hooted down.  The propaganda effort was so strong that in 2004, one year after the invasion, 90% of US troops in Iraq believed that Saddam Hussein was involved in the 9-11 attack.

The War Resolution of October 2002

The war resolution requires the president to certify two things before launching a war.  One was their was a threat of weapons of mass destruction, and two that their was a connection to the attacks on September 11, 2001.  Those violations of their own war resolution were the main reasons I wrote and had adopted by the Democratic Party of Wisconsin the second in the nation state party to call for the impeachment of George Bush, Dick Cheney, and Donald Rumsfeld on June 10, 2005.  I later organized an impeachment parade on the third anniversary of the Downing Street Memos, July 23, 2005.  Many   Democratic Senators were fooled, citing that they were giving the authority to George Bush under the belief that he would act responsibly, as he repeatedly assured them he wanted  peace, and only invade if those conditions in the war resolution were met.  When we in Madison Wisconsin occupied the offices of our Senator Kohl, his statement to us after he voted against our wishes, was just that.  He sincerely believed this was necessary to get the inspectors back in Iraq and get UN approval, this threat of force.  George Bush kept saying he wanted peace, over and over again.  The Downing Street Memos prove all this was one big deception.  The memos show than Tony Blair and George Bush agreed to invade Iraq in April 2002.  Bombing doubled the rate in May 2002.  In August, Cheney started talking about nuclear weapons, the one thing inspectors agreed had been 100% eliminated in 1998.  When the inspectors went back in December 2002 and for three months came up with nothing, it was pretty clear to the British that there were no weapons of mass destruction.

Going to War

Since the British had signed the agreement creating the International Criminal Court, they knew a war of aggression could put them in jail in the Hague, Netherlands.  So Tony Blair and his deputies were sweating bullets.  One even resigned over the issue.  But Blair followed the lead of Bush.  Bush was afraid postponing the invasion would force action in the terribly hot summer, a bad time for the troops.  He was also determined to depose Saddam Hussein regardless, as the weapons of mass destruction ruse was only the most saleable way to go about it.  Hillary Clinton believed in a strong executive and unfortunately trusted Bush to act responsibly, not in violation of international law.  She, Kerry, and others were duped by the shenanigans of the Bush regime.  Later tell all books told how the very first cabinet meeting in January 2001 was all about how to take over Iraq.  Rachel Maddow has documented how oil men in Houston met early on in 2001 about how to take over Iraq.  George Bush campaigned for president claiming he did not want the US to be the world’s police-people.  Yet the Project for a New American Century, which consisted largely of future administration people, stated how they needed a Pearl Harbor like situation to “Rebuild America’s Defenses.”  That September 2000 report told of the plan to install democracies in the Middle East by military force if necessary.  Leo Strauss, who died in 1973, spawned the neoconservative movement with the belief that elites must decide what is best for America and then lie to the public to attain their goals.  Bush was a follower of Leo Strauss.

Democracy in Iraq

Bremer and the neocons were determined to try out right wing ideas in Iraq, not just let the people decide what’s best for them.  Fallujah elected a new sheriff and mayor after the Saddam Hussein regime disappeared from the scene.  But the Bremer’s of the world would not allow them their choice.  Because everyone in Iraq was rationed food under the sanctions, there was a ready made voter roll based on that, which could have been used to begin democracy in Iraq quickly, they didn’t have to wait years.  But that wasn’t the neo-con plan.  Not reconstituting the army provided a trained military opposition that lasted all the way into ISIS today.  Many of the top military people of ISIS came from the ranks of Saddam Hussein’s army.  And pappy Bush was right not to create an ally of Iran out of Iraqi democracy with a 60% Shia population.  And Joe Biden was right to anticipate Iraq dividing into three parts, Shia South, Kurd North, and Sunni West.  But what a way to torture a people and ultimately dividing and torturing the whole Middle East Muslim world.  So Colin Powell was right, you break it, you own it.

For my power point about how empire has emerged in America:

https://www.academia.edu/5415354/STAGES_of_EMPIRE_Twelve._15_ppt.

Dr. Robert Reuschlein, Dr. Peace,

contact:  bobreuschlein@gmail.com

message: 608-230-6640

info: www.realeconomy.com

 

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