War Threat Rises As Economy Declines
By Paul Craig Roberts
|Paul Craig Roberts,
Keynote Address to the Annual Conference of the Financial West
Group, New Orleans, May 7, 2015
May 11, 2015 "Information
Clearing House" - The defining events of our time are
the collapse of the Soviet Union, 9/11, jobs offshoring, and financial
deregulation. In these events we find the basis of our foreign policy problems
and our economic problems.
The United States has always had a good opinion of itself, but
with the Soviet collapse self-satisfaction reached new heights. We became the
exceptional people, the indispensable people, the country chosen by history to
exercise hegemony over the world. This neoconservative doctrine releases the US
government from constraints of international law and allows Washington to use
coercion against sovereign states in order to remake the world in its own image.
To protect Washington’s unique Uni-power status that resulted
from the Soviet collapse, Paul Wolfowitz in 1992 penned what is known as the
Wolfowitz Doctrine. This doctrine is the basis for Washington’s foreign policy.
The doctrine states:
“Our first objective is to prevent the re-emergence of a
new rival, either on the territory of the former Soviet Union or elsewhere, that
poses a threat on the order of that posed formerly by the Soviet Union. This is
a dominant consideration underlying the new regional defense strategy and
requires that we endeavor to prevent any hostile power from dominating a region
whose resources would, under consolidated control, be sufficient to generate
In March of this year the Council on Foreign Relations
extended this doctrine to China.
Washington is now committed to blocking the rise of two large
nuclear-armed countries. This commitment is the reason for the crisis that
Washington has created in Ukraine and for its use as anti-Russian propaganda.
China is now confronted with the Pivot to Asia and the construction of new US
naval and air bases to ensure Washington’s control of the South China Sea, now
defined as an area of American National Interests.
9/11 served to launch the neoconservatives’ war for hegemony
in the Middle East. 9/11 also served to launch the domestic police state. While
civil liberties have shriveled at home, the US has been at war for almost the
entirety of the 21st century, wars that have cost us, according to Joseph
Stiglitz and Linda Bilmes, at least $6 trillion dollars. These wars have gone
very badly. They have destabilized governments in an important energy producing
area. And the wars have vastly multiplied the “terrorists,” the quelling of
which was the official reason for the wars.
Just as the Soviet collapse unleashed US hegemony, it gave
rise to jobs offshoring. The Soviet collapse convinced China and India to open
their massive underutilized labor markets to US capital. US corporations, with
any reluctant ones pushed by large retailers and Wall Street’s threat of
financing takeovers, moved manufacturing, industrial, and tradable professional
service jobs, such as software engineering, abroad.
This decimated the American middle class and removed ladders
of upward mobility. US GDP and tax base moved with the jobs to China and India.
US real median family incomes ceased to grow and declined. Without income growth
to drive the economy, Alan Greenspan resorted to an expansion of consumer debt,
which has run its course. Currently there is nothing to drive the economy.
When the goods and services produced by offshored jobs are
brought to the US to be sold, they enter as imports, thus worsening the trade
balance. Foreigners use their trade surpluses to acquire US bonds, equities,
companies, and real estate. Consequently, interests, dividends, capital gains,
and rents are redirected from Americans to foreigners. This worsens the current
In order to protect the dollar’s exchange value in the face of
large current account deficits and money creation in support of the balance
sheets of “banks too big to fail,” Washington has the Japanese and European
central banks printing money hand over fist. The printing of yen and euros
offsets the printing of dollars and thus protects the dollar’s exchange value.
The Glass-Steagall Act that separated commercial and
investment banking had been somewhat eroded prior to the total repeal during the
second term of the Clinton regime. This repeal, together with the failure to
regulate over the counter derivatives, the removal of position limits on
speculators, and the enormous financial concentration that resulted from the
dead letter status of anti-trust laws, produced not free market utopia but a
serious and ongoing financial crisis. The liquidity issued in behalf of this
crisis has resulted in stock and bond market bubbles.
Implications, consequences, solutions:
When Russia blocked the Obama regime’s planned invasion of
Syria and intended bombing of Iran, the neoconservatives realized that while
they had been preoccupied with their wars in the Middle East and Africa for a
decade, Putin had restored the Russian economy and military.
The first objective of the Wolfowitz doctrine–to prevent the
re-emergence of a new rival–had been breached. Here was Russia telling the US
“No.” The British Parliament joined in by vetoing UK participation in a US
invasion of Syria. The Uni-Power status was shaken.
This redirected the attention of the neoconservatives from the
Middle East to Russia. Over the previous decade Washington had invested $5
billion in financing up-and-coming politicians in Ukraine and non-governmental
organizations that could be sent into the streets in protests.
When the president of Ukraine did a cost-benefit analysis of
the proposed association of Ukraine with the EU, he saw that it didn’t pay and
rejected it. At that point Washington called the NGOs into the streets. The
neo-nazis added the violence and the government unprepared for violence
Victoria Nuland and Geoffrey Pyatt chose the new Ukrainian
government and established a vassal regime in Ukraine.
Washington hoped to use the coup to evict Russia from its
Black Sea naval base, Russia’s only warm water port. However, Crimea, for
centuries a part of Russia, elected to return to Russia. Washington was
frustrated, but recovered from disappointment and described Crimean
self-determination as Russian invasion and annexation. Washington used this
propaganda to break up Europe’s economic and political relationships with Russia
by pressuring Europe into sanctions against Russia.
The sanctions have had adverse impacts on Europe.
Additionally, Europeans are concerned with Washington’s growing belligerence.
Europe has nothing to gain from conflict with Russia and fears being pushed into
war. There are indications that some European governments are considering a
foreign policy independent of Washington’s.
The virulent anti-Russian propaganda and demonization of Putin
has destroyed Russian confidence in the West. With the NATO commander Breedlove
demanding more money, more troops, more bases on Russia’s borders, the situation
is dangerous. In a direct military challenge to Moscow, Washington is seeking to
incorporate both Ukraine and Georgia, two former Russian provinces, into NATO.
On the economic scene the dollar as reserve currency is a
problem for the entire world. Sanctions and other forms of American financial
imperialism are causing countries, including very large ones, to leave the
dollar payments system. As foreign trade is increasingly conducted without
recourse to the US dollar, the demand for dollars drops, but the supply has been
greatly expanded as a result of Quantitative Easing. Because of offshored
production and US dependence on imports, a drop in the dollar’s exchange value
would result in domestic inflation, further lowering US living standards and
threatening the rigged, stock, bond, and precious metal markets.
The real reason for Quantitative Easing is to support the
banks’ balance sheets. However, the official reason is to stimulate the economy
and sustain economic recovery. The only sign of recovery is real GDP which shows
up as positive only because the deflator is understated.
The evidence is clear that there has been no economic
recovery. With the first quarter GDP negative and the second quarter likely to
be negative as well, the second-leg of the long downturn could begin this
Moreover, the current high unemployment (23 percent) is
different from previous unemployment. In the postwar 20th century, the Federal
Reserve dealt with inflation by cooling down the economy. Sales would decline,
inventories would build up, and layoffs would occur. As unemployment rose, the
Fed would reverse course and workers would be called back to their jobs. Today
the jobs are no longer there. They have been moved offshore. The factories are
gone. There are no jobs to which to call workers back.
To restore the economy requires that offshoring be reversed
and the jobs brought back to the US. This could be done by changing the way
corporations are taxed. The tax rate on corporate profit could be determined by
the geographic location at which corporations add value to the products that
they market in the US. If the goods and services are produced offshore, the tax
rate would be high. If the goods and services are produced domestically, the tax
rate could be low. The tax rates could be set to offset the lower costs of
Considering the lobbying power of transnational corporations
and Wall Street, this is an unlikely reform. My conclusion is that the US
economy will continue its decline.
On the foreign policy front, the hubris and arrogance of
America’s self-image as the “exceptional, indispensable” country with hegemonic
rights over other countries means that the world is primed for war. Neither
Russia nor China will accept the vassalage status accepted by the UK, Germany,
France and the rest of Europe, Canada, Japan and Australia. The Wolfowitz
Doctrine makes it clear that the price of world peace is the world’s acceptance
of Washington’s hegemony.
Therefore, unless the dollar and with it US power collapses or
Europe finds the courage to break with Washington and to pursue an independent
foreign policy, saying good-bye to NATO, nuclear war is our likely future.
Washington’s aggression and blatant propaganda have convinced
Russia and China that Washington intends war, and this realization has drawn the
two countries into a strategic alliance. Russia’s May 9 Victory Day celebration
of the defeat of Hitler is a historical turning point. Western governments
boycotted the celebration, and the Chinese were there in their place. For the
first time Chinese soldiers marched in the parade with Russian soldiers, and the
president of China sat next to the president of Russia.
The Saker’s report on the Moscow celebration is interesting.
Especially note the chart of World War II casualties. Russian casualties
compared to the combined casualties of the US, UK, and France make it completely
clear that it was Russia that defeated Hitler. In the Orwellian West, the latest
rewriting of history leaves out of the story the Red Army’s destruction of the
Wehrmacht. In line with the rewritten history, Obama’s remarks on the 70th
anniversary of Germany’s surrender mentioned only US forces. In contrast Putin
expressed gratitude to “the peoples of Great Britain, France and the United
States of America for their contribution to the victory.”
For many years now the President of Russia has made the point
publicly that the West does not listen to Russia. Washington and its vassal
states in Europe, Canada, Australia, and Japan do not hear when Russia says
“don’t push us this hard, we are not your enemy. We want to be your partners.”
As the years have passed without Washington hearing, Russia
and China have finally realized that their choice is vassalage or war. Had there
been any intelligent, qualified people in the National Security Council, the
State Department, or the Pentagon, Washington would have been warned away from
the neocon policy of sowing distrust. But with only neocon hubris present in the
government, Washington made the mistake that could be fateful for humanity.
Dr. Paul Craig Roberts was
Assistant Secretary of the Treasury for Economic Policy and associate editor of
the Wall Street Journal. He was columnist for Business Week, Scripps Howard News
Service, and Creators Syndicate. He has had many university appointments. His
internet columns have attracted a worldwide following. Roberts' latest books are
The Failure of Laissez Faire Capitalism
and Economic Dissolution of the West
How America Was Lost.