Global Accumulation and the New Middle East Wars

Bichler, Shimshon; Nitzan, Jonathan Preprint Global Accumulation and the New Middle East Wars Provided in Cooperation with: The Bichler & Nitzan Archives Suggested Citation: Bichler, Shimshon; Nitzan, Jonathan (2002) : Global Accumulation and the New Middle East Wars, The Bichler and Nitzan Archives, Toronto, http://bnarchives.yorku.ca/84/ This Version is available at: https://hdl.handle.net/10419/157819 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by-nc-nd/4.0/ G Gl lo ob ba al l A Ac cc cu um mu ul la at ti io on n a an nd d t th he e N Ne ew w M Mi id dd dl le e- -E Ea as st t W Wa ar rs s Shimshon Bichler and Jonathan Nitzan (July 2002) The unravelling of the Middle-East peace process continues to baffle the pundits. The early optimism of the Oslo peace accord has now turned into despair. Prime minister Rabin was assassinated by a Jewish extremist. The Palestinians have embarked on a new Intifada. And Israel has reoccupied much of the West Bank. What brought this reversal? How deep are the fractures? Can they be healed? F FR RO OM M ‘ ‘W WA AR R P PR RO OF FI IT TS S’ ’ T TO O ‘ ‘P PE EA AC CE E D DI IV VI ID DE EN ND DS S’ ’ On the surface, these are matters of ‘foreign policy.’ But there is an additional and often ignored layer here, related to fundamental shifts in the nature of capital accumulation, ownership and intra-capitalist conflict. In order to understand this broader picture, we need to go back a bit in history. In the mid 1960s, Michal Kalecki, one of the more brilliant political economists of the 20th century, wrote two articles in which he argued that the growing involvement of the United States in Vietnam was grounded in a major realignment within the U.S. ruling class.1 According to Kalecki, this realignment involved a widening rift between the ‘old’ civilian industries located in East Coast, and the ‘new’ business groups, primarily armament producers in the West Coast and oil interests based in Texas. The rise in military budgets, he predicted, would effect a redistribution of income from former to the latter. The ‘angry elements’ within the U.S. ruling class would be significantly strengthened, pushing for a more aggressive foreign policy and propagating further what others would later call the ‘permanent war economy.’ Most of those writing on the issue reiterate the language of Huntington’s ‘clash of civilisations.’ What we see in the Middle East, they tell us, is just another manifestation of ‘Jihad vs. McDonald’s.’ It is the same old story of ‘religious fundamentalism’ against ‘the market,’ of ‘xenophobic nationalism’ against ‘neoliberalism,’ of the ‘third world’ against the ‘first world.’ And there is perhaps some truth to these generalisations. The idea of a third-world ‘backlash’ against neoliberal globalisation is certainly easy to understand. For most people in the so-called ‘South’ – including the Palestinians – the last decade has brought greater insecurity, deprivation and hopelessness, so their resentfulness could hardly be surprising. This resentfulness, we are told, is harnessed by various religious and ethnic groups who feel threatened by capitalism, and resort to ‘global terrorism’ as a way of retaining their hegemony. And indeed, during the 1970s and early 1980s, the politics of global accumulation have become increasingly dominated by rising military budgets, arms exports and heightened conflict in the periphery, particularly the Middle East. What seems less clear is the sudden bellicosity of ‘Northern’ governments, particularly those of the U.S. and the U.K. Over the past decade, these governments have tirelessly glorified the ‘global village.’ What the world needed, they said, was open borders, free trade and capital mobility. So why the sudden shift to ‘with-us-or-against-us’ patriotism? Do they really expect ‘war on terrorism’ to bring global security? Is rising military budgets and cascading attacks against less developed countries the best way to turn the poor and hungry from ‘religious fanatics’ into ‘free marketers’? If the purpose is peace and stability, why not force Israel to comply with UN resolutions and let the Palestinians finally have their state? Is letting Ariel Sharon smash his way back into West Bank a better recipe – or perhaps peace and stability aren’t really the goals in this saga? What type of world order do Bush, Blair and Sharon have in mind, and who stand to gain from this ‘order’? Central to this process was the formation of an uneasy ‘Weapondollar-Petrodollar Coalition,’ made up of large oil companies, armament contractors and OPEC, and backed by the U.S. and several European governments who supplied arms and encouraged high oil prices. The accumulation ‘mechanism’ of this coalition was based on the ongoing cycle of Middle-East ‘energy conflicts’ and ‘oil crises.’ The logic of the process was relatively simple. Rising petroleum prices brought massive profits for the oil companies. They also generated huge petrodollar revenues for local OPEC governments, who were only too eager to spend 1 Michal Kalecki, “The Fascism of Our Times” and “Vietnam and U.S. Big Business,” reprinted in The Last Phase in the Transformation of Capitalism (New York and London: Modern Reader, 1972). GLOBAL ACCUMULATION AND THE NEW MIDDLE-EAST WARS them on expensive weaponry in preparation for the next war. As a result, the Middle East became the world’s largest market for imported arms, absorbing over 1/3rd of the total. The big arms contractors of course loved this arrangement, and the various U.S. administrations – from Nixon’s to Bush Sr.’s – supported it with equal zeal. Indeed, what better way to fight communism, divide and rule the Middle East, and enrich your corporate friends – all in one stroke and without investing a penny? The consequences of this process were nothing short of dramatic. Rising oil prices threw much of the world into a deep ‘stagflationary’ crisis (stagnation combined with inflation), conflict bloomed everywhere, and there was even the occasional flirt with nuclear exchange. The WeapondollarPetrodollar Coalition, however, thrived. As Figure 1 shows, oil and armament companies became the world’s most profitable firms, seeing their earnings rise to 19% of the world total after the 1973 Arab-Israeli War, and to 21% after the 1980 onset of the Iran-Iraq War. ‘War profits’ were clearly the way to go. All of this changed in the 1990s. The cold war ended, the world opened up for business, and the Weapondollar-Petrodollar Coalition disintegrated. In its place, a different ‘TechnodollarMergerdollar Alliance,’ based on civilian high-tech and corporate takeover rose to prominence. Instead of ‘war profits,’ nationalism and conflict, it marshalled a new rhetoric of ‘peace dividends,’ foreign investment and emerging markets. Capital controls gave way to deregulation, protectionism to privatisation, and bloody wars to peace deals. And indeed, by end of 2000, the Technodollar-Mergerdollar Alliance seemed victorious. As Figure 1 illustrates, its global profit share soared to 15%, while that of the oil and armament companies sank to a meagre 3%. I IS SR RA AE EL LI I C CA AP PI IT TA AL LI IS SM M G GO OE ES S G GL LO OB BA AL L Israel’s U-turn of the 1990s, from a welfare-warfare state to liberalism and regional reconciliation, is part of this global shift. Until the late 1980s, private business and national security went hand in hand. Israel served the Weapondollar-Petrodollar coalition by engaging in seasonal wars and various clandestine operations – this in return for massive U.S. military assistance, a tacit acceptance of Israel’s nuclear build-up, and a licence to run a closed war economy. During the mid-1970s, Israel’s military expenditure soared to 33% of GDP – with roughly 15% imported from U.S. and the remaining 18% spent locally. The large local firms lunched at the military procurement table, while benefiting handsomely from the resulting inflation which ravaged much of the economy, but fuelled the stock market which they helped rig. The social cohesion necessary for sustaining this war economy was cemented by welfare spending, Zionist nationalism and frequent armed conflict. The Palestinians provided the cheap labour force in this equation, and were pacified by a combination of relatively higher standards of living and a large dose of force. By the early 1990s, though, the arithmetic changed. Following George Bush’s announcement of a ‘new world order,’ Israeli military spending came under the axe, falling to 10% of GDP by the mid-1990s; weapon exports went into a tailspin; and pressures to open up the domestic economy mounted. To complicate things further the Palestinians revolted, and the mounting cost of squelching their Intifada now seemed huge compared with rapidly vanishing war profits. It was clearly time to shift gears. The loss-making welfarewarfare state was ceremonially dumped, replaced by the new and more lucrative alternative of transnational neoliberalism. 0 5 10 15 20 25 1970 1975 1980 1985 1990 1995 2000 2005 The Weapondollar-Petrodollar Coalition* The Technodollar-Mergerdollar Alliance** * Integrated oil and defence corporations. ** Information technology hardware, telecom hardware, and computer software and services corporations. NOTE: Series denote monthly data smoothed as 12-month moving averages. SOURCE: Thomson Financial Datastream. 1. Share of Global Net Corporate Profit (%) The political front window of the process was of course the Oslo Peace Accord, but there was more here than meet the eyes. Normalising relations with the Palestinians paved the way to peace agreements with other Arab countries; these agreements brought an end to the Arab boycott; and with conflict quickly receding, Israel was able to remove capital controls – the main barrier to globalisation. During the earlier period of strife, capital controls were necessary to prevent capital from flying out of the country en masse. When conflict receded, these controls could be removed, the currency floated, and the globalisation of ownership begin in earnest. Within a few years the local business elite has shifted its attention outside the country, increasingly aligning itself with, and integrating into an emerging transnational business class. The evidence of this integration is overwhelm2 BICHLER AND NITZAN ing. Foreign institutional investors now own 10-15% of the Tel-Aviv stock market. Many of the country’s largest corporations have been taken over by non-resident ‘Israelis’ – such as the Arison family of Carnival Cruise who bought the leading Bank Hapoalim, and the Bronfman family of Vivendi-Seagram which controls the conglomerate Koor. Most of Israel’s leading high-tech firms, such as Comverse, Check Point, Amdocs and Teva, are Israeli mostly by name, having their shares listed in New York and much of their activity carried outside the country. The vast majority of the country’s start-up companies have been driven by ‘inverted cannibalism,’ desperately looking for a global giant to take them over. Indeed, the whole outlook of the Israeli business sector is pointing overseas. Until the late 1980s this trend was mostly reflected in rising exports which have recently reached 1/3 of GDP, but since the early 1990s capital too has began moving out, with outflowing investment accounting for roughly 12% of GDP, and growing. The result of this transnationalisation are evident in Figure 2, which charts the increasing correlation between the Tel-Aviv stock market and the Nasdaq. Over the past five years this correlation has reached 0.8, up from a negative 0.3 in the early 1980s, suggesting that 80% of ‘Israeli’ accumulation depend not on what happens locally, but in the global high-tech market. Israeli capitalists have finally realised their American dream of a ‘New Middle East’: local by denomination, global by accumulation. A AB BA AN ND DO ON NI IN NG G T TH HE E D DO OM ME ES ST TI IC C P PO OP PU UL LA AT TI IO ON N And, yet this transition wasn’t as easy as the elite assumed it would be. With the capitalist elite increasingly focused on the Nasdaq, the high-tech business and markets in the rest of the world, domestic and regional ‘details’ were seen as less and less important. Somehow, these details were expected to take care of themselves; and if they didn’t – well, that was no longer a matter of great concern. After all, accumulation was now global, not local. As it turned out, however, the details hardly ‘fixed themselves,’ and were certainly far from unimportant. To begin with, the Israeli elite seemed to have confused corporate peace dividends with real peace. Its intention was to replicate the apartheid arrangement by making Arafat head of a ‘Palustan,’ a semi-autonomous entity with only half its original territories, no army, no fiscal and monetary sovereignty, limited access to water, and complete dependence on Israeli infrastructure. Most importantly, it left the Jewish settlements intact, making the resulting Palestinian entity look like Swiss cheese with holes full of ethnic and religious time-bombs. If there was a recipe for another Intifada, this was clearly it. More broadly, despite its peace treaties with Egypt and Jordan, and normalised relations with other neighbours, Israel remained regionally isolated – only a negligible proportion of its trade and investment flows were with surrounding countries, and beyond diplomacy there was really little cultural and intellectual interchange. In the absence of such secular ties, religious hostility toward Israel continued to build up pretty much unopposed. -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1975 1980 1985 1990 1995 2000 2005 -0.3 Tel Aviv Stock Exchange vs. the NASDAQ 5-year moving correlation between the annual rate of change of the two market indices 0.8 2.Converging Accumulation SOURCE: The Tel-Aviv Index is based on splicing of IMF data (till Dec. 1976), the General Index (Jan. 1977Mar. 1993) and the Mishtanim Index (Apr. 1993 onward). Both indices are expressed in US$. Data are from the IMF International Financial Statistics, Tel-Aviv Stock Exchange and DRI. Corporate peace dividends have also aggravated domestic disparities. Over the past decade, Israel has become one of the less egalitarian countries in the industrial world. Its hightech boom only smiled on a minority, causing the income ratio between the top and bottom 20% of the population to rise to 21.3, compared to 10.6 in the U.S. 2 With unemployment surpassing 10% and rising, it was clear that peace had failed to bring prosperity for most Israelis. Perhaps the most important detail, however, is the demographic basis of Zionism, which the Israeli elite allowed, almost haphazardly, to erode beyond reversal. Out of a total population of 6 million, 15% are now Muslims, 4% Christian and Druze Arabs, 15% are immigrants who arrived during the 1990s from the former Soviet Union (some with only remote 2 Note that during the early 1950s, ‘socialist’ Israel was still one of the most egalitarian countries in the world, with the top 20% of the population earning only 3.3 times the income of the bottom 20%. This achievement was certainly impressive, particularly relative to the ‘free market’ countries such as the United States, where the comparable ratio was a high as 9.5. But Israel learnt fast, and after two generations of ‘Americanisation’ already outperformed its tutor. 3 GLOBAL ACCUMULATION AND THE NEW MIDDLE-EAST WARS connection to Judaism and most with little Zionist socialisation), and 4-6% are foreign workers imported in recent years to replace the Palestinians. Roughly 40% of the population therefore have either limited or no affinity to the Zionist project. The remaining 60% are also split by two deep cleavages – an ethnic one between Ashkenazi (European) and Sepharadi (Middle-Eastern) Jews, and a religious one between orthodox and secular Jews. The orthodox population is commonly poorer, and although supportive of a hawkish stance against the Arabs, many of its members do not serve in the army. The secular segment is often more conciliatory, although its increasingly individualistic outlook limits its willingness to kill and be killed for anachronistic nationalist goals. The increasing individualism of this majority, however, undermines its group cohesion, thus making it more difficult to act in unison against the xenophobic minority. And so just as Israel’s business elite become transnational, it also lost the domestic stability on which to base itself. At the same time the elite lacked any clear ideas on what to do about it. Globalised business ties required peace, yet globalisation itself was contributing to the conditions that undermined the prospects for such peace. T TO OW WA AR RD D A AN NO OT TH HE ER R W WA AR R? ? When the second Palestinian Intifada broke out in October 2000, prime-minister Barak, representing an elite torn between its Zionist allegiances and transnational aspiration, seemed unsure as to what to do. Alarmed by the Palestinians loss of fear, anxious that his army may be unable to win a guerrilla war (let alone a fully-fledged one), and aware that conflict will shatter the hard-won business confidence, he hesitated, tending to respond rather than initiate. At the same time, his apprehension about disintegrating ‘Jewish’ cohesion made it impossible for him to accept a democratic, non-ethnic solution to the conflict. His successor in the job, though, had no such hesitations. Once in power, Ariel Sharon immediately escalated both the rhetoric and military pressure, eventually all but re-conquering the West Bank. Many have attributed this shift to personality and ideology. Sharon never wanted peace, they pointed out. On the contrary, his plan was always to kick out the Palestinians in order to establish a ‘Greater Israel’ west of the River Jordan, and now was his last chance to do it. Perhaps. But, again, there is a far bigger picture that needs to be considered here. When Sharon came to power, the neoliberal high-tech order was already on its last leg. The first signs of trouble appeared several years earlier in the global periphery, with excess production triggering a series of crises which spread from Asia in 1997, to Russia, South Africa, Brazil, Argentina and the rest of the developing world. Then, the price of oil shot up, soaring from $10 in 1999 to $30 in 2000, and throwing a monkey wrench into the longest post-war economic expansion. The Nasdaq and other high-tech markets, having already reached valuation extremes, were punctured, going into a nose-dive, and in early 2001, a hawkish administration with deep ties to oil and armament interests literally took over the White House. In short, everything seemed ready for a reversal of fortunes. Fittingly, as the new century took off, high-tech profits dropped like a stone, while the earnings of oil and armament companies soared (Figure 1). Seen from this broader perspective, the escalating conflict in the Middle East – much like ‘September 11’ and the attack on Afghanistan – may well be part of yet another global shift in accumulation. Central to this process is the renewed struggle between the two massive business formations. The WeapondollarPetrodollar Coalition, having been in decline for more than a decade, is now once more trying to stir up conflict and stagflation; and so far, the political backwind is clearly on its side. But the jury on this contest is still out. The Technodollar-Mergerdollar Alliance, whose fortune rest with open-border neoliberalism, high-tech growth and crossborder mergers, stands to loose big time from such developments. And having recovered from the initial shock of September 11, its representatives, both in Europe and the U.S., are beginning to voice their objection to further escalation, including Washington’s support for Sharon and its plan to attack Iraq. As Kalecki put it more than thirty years ago, ‘It is a sad world indeed where the fate of all mankind depends upon the fight between two competing groups within American big business. This, however, is not quite new: many far-reaching upheavals in human history started from a cleavage at the top of the ruling class.’ Shimshon Bichler teaches political economy at Israeli universities ([email protected]). Jonathan Nitzan teaches political economy at York University, Canada ([email protected]). Their book, The Global Political Economy of Israel (2002) is published by Pluto Press. 4