We have it on highest authority: the recent killing of Taliban leader Mullah Akhtar Muhammad Mansour by a U.S. drone strike in Pakistan marks “an important milestone.” So the president of the United States has declared, with that claim duly echoed and implicitly endorsed by media commentary — the New York Times reporting, for example, that Mansour’s death leaves the Taliban leadership “shocked” and “shaken.”
But a question remains: A milestone toward what exactly?
Toward victory? Peace? Reconciliation? At the very least, toward the prospect of the violence abating? Merely posing the question is to imply that U.S. military efforts in Afghanistan and elsewhere in the Islamic world serve some larger purpose.
Yet for years now that has not been the case. The assassination of Mansour instead joins a long list of previous milestones, turning points, and landmarks briefly heralded as significant achievements only to prove much less than advertised.
One imagines that Obama himself understands this perfectly well. Just shy of five years ago, he was urging Americans to “take comfort in knowing that the tide of war is receding.” In Iraq and Afghanistan, the president insisted, “the light of a secure peace can be seen in the distance.”
“These long wars,” he promised, were finally coming to a “responsible end.” We were, that is, finding a way out of Washington’s dead-end conflicts in the Greater Middle East.
Who can doubt Obama’s sincerity, or question his oft-expressed wish to turn away from war and focus instead on unattended needs here at home? But wishing is the easy part. Reality has remained defiant. Even today, the wars in Iraq and Afghanistan that George W. Bush bequeathed to Obama show no sign of ending.
Like Bush, Obama will bequeath to his successor wars he failed to finish. Less remarked upon, he will also pass along to President Clinton or President Trump new wars that are his own handiwork. In Libya, Somalia, Yemen, and several other violence-wracked African nations, the Obama legacy is one of ever-deepening U.S. military involvement. The almost certain prospect of a further accumulation of briefly celebrated and quickly forgotten “milestones” beckons.
During the Obama era, the tide of war has not receded. Instead, Washington finds itself drawn ever deeper into conflicts that, once begun, become interminable — wars for which the vaunted U.S. military has yet to devise a plausible solution.
The Oldest (Also Latest) Solution: Bombs Away
Once upon a time, during the brief, if heady, interval between the end of the Cold War and 9/11 when the United States ostensibly reigned supreme as the world’s “sole superpower,” Pentagon field manuals credited U.S. forces with the ability to achieve “quick, decisive victory — on and off the battlefield — anywhere in the world and under virtually any conditions.” Bold indeed (if not utterly delusional) would be the staff officer willing to pen such words today.
To be sure, the United States military routinely demonstrates astonishing technical prowess — putting a pair of Hellfire missiles through the roof of the taxi in which Mansour was riding, for example. Yet if winning — that is, ending wars on conditions favorable to our side — offers the measure of merit by which to judge a nation’s military forces, then when put to the test ours have been found wanting.
Not for lack of trying, of course. In their quest for a formula that might actually accomplish the mission, those charged with directing U.S. military efforts in the Greater Middle East have demonstrated notable flexibility. They have employed overwhelming force and “shock-and-awe.” They have tried regime change (bumping off Saddam Hussein and Muammar Gaddafi, for example) and “decapitation” (assassinating Mansour and a host of other militant leaders, including Osama Bin Laden). They have invaded and occupied countries, even giving military-style nation-building a whirl. They have experimented with counterinsurgency and counterterrorism, peacekeeping and humanitarian intervention, retaliatory strikes and preventive war. They have operated overtly, covertly, and through proxies. They have equipped, trained, and advised — and when the beneficiaries of these exertions have folded in the face of the enemy, they have equipped, trained, and advised some more. They have converted American reservists into quasi-regulars, subject to repeated combat tours. In imitation of the corporate world, they have outsourced as well, handing over to profit-oriented “private security” firms functions traditionally performed by soldiers. In short, they have labored doggedly to translate American military power into desired political outcomes.
In this one respect at least, an endless parade of three- and four-star generals exercising command in various theaters over the past several decades have earned high marks. In terms of effort, they deserve an A.
As measured by outcomes, however, they fall well short of a passing grade. However commendable their willingness to cast about for some method that might actually work, they have ended up waging a war of attrition. Strip away the light-at-the-end-of-the-tunnel reassurances regularly heard at Pentagon press briefings or in testimony presented on Capitol Hill and America’s War for the Greater Middle East proceeds on this unspoken assumption: if we kill enough people for a long enough period of time, the other side will eventually give in.
On that score, the prevailing Washington gripe directed at Commander-in-Chief Obama is that he has not been willing to kill enough. Take, for example, a recent Wall Street Journal op-ed penned by that literary odd couple, retired General David Petraeus and Brookings Institution analyst Michael O’Hanlon, that appeared under the pugnacious headline “Take the Gloves Off Against the Taliban.” To turn around the longest war in American history, Petraeus and O’Hanlon argue, the United States just needs to drop more bombs.
The rules of engagement currently governing air operations in Afghanistan are, in their view, needlessly restrictive. Air power “represents an asymmetric Western advantage, relatively safe to apply, and very effective.” (The piece omits any mention of incidents such as the October 2015 destruction of a Doctors Without Borders hospital in the Afghan provincial capital of Kunduz by a U.S. Air Force gunship.) More ordnance will surely produce “some version of victory.” The path ahead is clear. “Simply waging the Afghanistan air-power campaign with the vigor we are employing in Iraq and Syria,” the authors write with easy assurance, should do the trick.
When armchair generals cite the ongoing U.S. campaign in Iraq and Syria as a model of effectiveness, you know that things must be getting desperate.
Granted, Petraeus and O’Hanlon are on solid ground in noting that as the number of U.S. and NATO troops in Afghanistan has decreased, so, too, has the number of air strikes targeting the Taliban. Back when more allied boots were on the ground, more allied planes were, of course, overhead. And yet the 100,000 close-air-support sorties flown between 2011 and 2015 — that’s more than one sortie per Taliban fighter — did not, alas, yield “some version of victory.” In short, we’ve already tried the Petraeus-O’Hanlon take-the-gloves-off approach to defeating the Taliban. It didn’t work. With the Afghanistan War’s 15th anniversary now just around the corner, to suggest that we can bomb our way to victory there is towering nonsense.
In Washington, Big Thinking and Small
Petraeus and O’Hanlon characterize Afghanistan as “the eastern bulwark in our broader Middle East fight.” Eastern sinkhole might be a more apt description. Note, by the way, that they have nothing useful to say about the “broader fight” to which they allude. Yet that broader fight — undertaken out of the conviction, still firmly in place today, that American military assertiveness can somehow repair the Greater Middle East — is far more deserving of attention than how to employ very expensive airplanes against insurgents armed with inexpensive Kalashnikovs.
To be fair, in silently passing over the broader fight, Petraeus and O’Hanlon are hardly alone. On this subject no one has much to say — not other stalwarts of the onward-to-victory school, nor officials presently charged with formulating U.S. national security policy, nor members of the Washington commentariat eager to pontificate about almost anything. Worst of all, the subject is one on which each of the prospective candidates for the presidency is mum.
From Secretary of Defense Ashton Carter and Chairman of the Joint Chiefs of Staff General Joseph Dunford on down to the lowliest blogger, opinions about how best to wage a particular campaign in that broader fight are readily available. Need a plan for rolling back the Islamic State? Glad you asked. Concerned about that new ISIS franchise in Libya? Got you covered. Boko Haram? Here’s what you need to know. Losing sleep over Al-Shabab? Take heart — big thinkers are on the case.
As to the broader fight itself, however, no one has a clue. Indeed, it seems fair to say that merely defining our aims in that broader fight, much less specifying the means to achieve them, heads the list of issues that people in Washington studiously avoid. Instead, they prattle endlessly about the Taliban and ISIS and Boko Haram and al-Shabab.
Here’s the one thing you need to know about the broader fight: there is no strategy. None. Zilch. We’re on a multi-trillion-dollar bridge to nowhere, with members of the national security establishment more or less content to see where it leads.
May I suggest that we find ourselves today in what might be called a Khe Sanh moment? Older readers will recall that back in late 1967 and early 1968 in the midst of the Vietnam War, one particular question gripped the national security establishment and those paid to attend to its doings: Can Khe Sanh hold?
Now almost totally forgotten, Khe Sanh was then a battlefield as well known to Americans as Fallujah was to become in our own day. Located in the northern part of South Vietnam, it was the site of a besieged and outnumbered Marine garrison, surrounded by two full enemy divisions. In the eyes of some observers, the outcome of the Vietnam War appeared to hinge on the ability of the Marines there to hold out — to avoid the fate that had befallen the French garrison at Dien Bien Phu slightly more than a decade earlier. For France, the fall of Dien Bien Phu had indeed spelled final defeat in Indochina.
Was history about to repeat itself at Khe Sanh? As it turned out, no... and yes.
The Marines did hold — a milestone! — and the United States lost the war anyway.
In retrospect, it seems pretty clear that those responsible for formulating U.S. policy back then fundamentally misconstrued the problem at hand. Rather than worrying about the fate of Khe Sanh, they ought to have been asking questions like these: Is the Vietnam War winnable? Does it even make sense? If not, why are we there? And above all, does no alternative exist to simply pressing on with a policy that shows no signs of success?
Today the United States finds itself in a comparable situation. What to do about the Taliban or ISIS is not a trivial question. Much the same can be said regarding the various other militant organizations with which U.S. forces are engaged in a variety of countries — many now failing states — across the Greater Middle East.
But the question of how to take out organization X or put country Y back together pales in comparison with the other questions that should by now have come to the fore but haven’t. Among the most salient are these: Does waging war across a large swath of the Islamic world make sense? When will this broader fight end? What will it cost? Short of reducing large parts of the Middle East to rubble, is that fight winnable in any meaningful sense? Above all, does the world’s most powerful nation have no other choice but to persist in pursuing a manifestly futile endeavor?
Try this thought experiment. Imagine the opposing candidates in a presidential campaign each refusing to accept war as the new normal. Imagine them actually taking stock of the broader fight that’s been ongoing for decades now. Imagine them offering alternatives to armed conflicts that just drag on and on. Now that would be a milestone.
Andrew J. Bacevich, a TomDispatch regular, is author of America’s War for the Greater Middle East: A Military History.
Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Nick Turse’s Next Time They’ll Come to Count the Dead, and Tom Engelhardt's latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.
Copyright 2016 Andrew Bacevich
Top photo by Icholakov/Fotolia
Middle photo by Kanin Studio/Fotolia
Bottom photo by Lazyllama/Fotolia
This piece, the second of two parts, is excerpted from Noam Chomsky’s new book, Who Rules the World? (Metropolitan Books). If you haven’t yet, read part one American Power Under Challenge.
In brief, the Global War on Terror sledgehammer strategy has spread jihadi terror from a tiny corner of Afghanistan to much of the world, from Africa through the Levant and South Asia to Southeast Asia. It has also incited attacks in Europe and the United States. The invasion of Iraq made a substantial contribution to this process, much as intelligence agencies had predicted. Terrorism specialists Peter Bergen and Paul Cruickshank estimate that the Iraq War “generated a stunning sevenfold increase in the yearly rate of fatal jihadist attacks, amounting to literally hundreds of additional terrorist attacks and thousands of civilian lives lost; even when terrorism in Iraq and Afghanistan is excluded, fatal attacks in the rest of the world have increased by more than one-third.” Other exercises have been similarly productive.
A group of major human rights organizations — Physicians for Social Responsibility (U.S.), Physicians for Global Survival (Canada), and International Physicians for the Prevention of Nuclear War (Germany) — conducted a study that sought "to provide as realistic an estimate as possible of the total body count in the three main war zones [Iraq, Afghanistan, and Pakistan] during 12 years of ‘war on terrorism,'" including an extensive review “of the major studies and data published on the numbers of victims in these countries,” along with additional information on military actions. Their "conservative estimate" is that these wars killed about 1.3 million people, a toll that "could also be in excess of 2 million." A database search by independent researcher David Peterson in the days following the publication of the report found virtually no mention of it. Who cares?
More generally, studies carried out by the Oslo Peace Research Institute show that two-thirds of the region’s conflict fatalities were produced in originally internal disputes where outsiders imposed their solutions. In such conflicts, 98% of fatalities were produced only after outsiders had entered the domestic dispute with their military might. In Syria, the number of direct conflict fatalities more than tripled after the West initiated air strikes against the self-declared Islamic State and the CIA started its indirect military interference in the war — interference which appears to have drawn the Russians in as advanced US antitank missiles were decimating the forces of their ally Bashar al-Assad. Early indications are that Russian bombing is having the usual consequences.
The evidence reviewed by political scientist Timo Kivimäki indicates that the “protection wars [fought by ‘coalitions of the willing’] have become the main source of violence in the world, occasionally contributing over 50% of total conflict fatalities.” Furthermore, in many of these cases, including Syria, as he reviews, there were opportunities for diplomatic settlement that were ignored. That has also been true in other horrific situations, including the Balkans in the early 1990s, the first Gulf War, and of course the Indochina wars, the worst crime since World War II. In the case of Iraq the question does not even arise. There surely are some lessons here.
The general consequences of resorting to the sledgehammer against vulnerable societies comes as little surprise. William Polk’s careful study of insurgencies, Violent Politics, should be essential reading for those who want to understand today’s conflicts, and surely for planners, assuming that they care about human consequences and not merely power and domination. Polk reveals a pattern that has been replicated over and over. The invaders — perhaps professing the most benign motives — are naturally disliked by the population, who disobey them, at first in small ways, eliciting a forceful response, which increases opposition and support for resistance. The cycle of violence escalates until the invaders withdraw — or gain their ends by something that may approach genocide.
Playing by the Al-Qaeda Game Plan
Obama’s global drone assassination campaign, a remarkable innovation in global terrorism, exhibits the same patterns. By most accounts, it is generating terrorists more rapidly than it is murdering those suspected of someday intending to harm us — an impressive contribution by a constitutional lawyer on the 800th anniversary of Magna Carta, which established the basis for the principle of presumption of innocence that is the foundation of civilized law.
Another characteristic feature of such interventions is the belief that the insurgency will be overcome by eliminating its leaders. But when such an effort succeeds, the reviled leader is regularly replaced by someone younger, more determined, more brutal, and more effective. Polk gives many examples. Military historian Andrew Cockburn has reviewed American campaigns to kill drug and then terror “kingpins” over a long period in his important study Kill Chain and found the same results. And one can expect with fair confidence that the pattern will continue.
No doubt right now U.S. strategists are seeking ways to murder the “Caliph of the Islamic State” Abu Bakr al-Baghdadi, who is a bitter rival of al-Qaeda leader Ayman al-Zawahiri. The likely result of this achievement is forecast by the prominent terrorism scholar Bruce Hoffman, senior fellow at the U.S. Military Academy’s Combating Terrorism Center. He predicts that “al-Baghdadi’s death would likely pave the way for a rapprochement [with al-Qaeda] producing a combined terrorist force unprecedented in scope, size, ambition and resources.”
Polk cites a treatise on warfare by Henry Jomini, influenced by Napoleon’s defeat at the hands of Spanish guerrillas, that became a textbook for generations of cadets at the West Point military academy. Jomini observed that such interventions by major powers typically result in “wars of opinion,” and nearly always “national wars,” if not at first then becoming so in the course of the struggle, by the dynamics that Polk describes. Jomini concludes that “commanders of regular armies are ill-advised to engage in such wars because they will lose them,” and even apparent successes will prove short-lived.
Careful studies of al-Qaeda and ISIS have shown that the United States and its allies are following their game plan with some precision. Their goal is to “draw the West as deeply and actively as possible into the quagmire” and “to perpetually engage and enervate the United States and the West in a series of prolonged overseas ventures” in which they will undermine their own societies, expend their resources, and increase the level of violence, setting off the dynamic that Polk reviews.
Scott Atran, one of the most insightful researchers on jihadi movements, calculates that “the 9/11 attacks cost between $400,000 and $500,000 to execute, whereas the military and security response by the U.S. and its allies is in the order of 10 million times that figure. On a strictly cost-benefit basis, this violent movement has been wildly successful, beyond even Bin Laden’s original imagination, and is increasingly so. Herein lies the full measure of jujitsu-style asymmetric warfare. After all, who could claim that we are better off than before, or that the overall danger is declining?”
And if we continue to wield the sledgehammer, tacitly following the jihadi script, the likely effect is even more violent jihadism with broader appeal. The record, Atran advises, “should inspire a radical change in our counter-strategies.”
Al-Qaeda/ISIS are assisted by Americans who follow their directives: for example, Ted “carpet-bomb ’em” Cruz, a top Republican presidential candidate. Or, at the other end of the mainstream spectrum, the leading Middle East and international affairs columnist of the New York Times, Thomas Friedman, who in 2003 offered Washington advice on how to fight in Iraq on the Charlie Rose show: “There was what I would call the terrorism bubble... And what we needed to do was to go over to that part of the world and burst that bubble. We needed to go over there basically, and, uh, take out a very big stick, right in the heart of that world, and burst that bubble. And there was only one way to do it... What they needed to see was American boys and girls going house to house from Basra to Baghdad, and basically saying, which part of this sentence don’t you understand? You don’t think we care about our open society, you think this bubble fantasy we’re going to just let it go? Well, suck on this. Ok. That, Charlie, was what this war was about.”
That’ll show the ragheads.
Atran and other close observers generally agree on the prescriptions. We should begin by recognizing what careful research has convincingly shown: those drawn to jihad “are longing for something in their history, in their traditions, with their heroes and their morals; and the Islamic State, however brutal and repugnant to us and even to most in the Arab-Muslim world, is speaking directly to that... What inspires the most lethal assailants today is not so much the Quran but a thrilling cause and a call to action that promises glory and esteem in the eyes of friends.” In fact, few of the jihadis have much of a background in Islamic texts or theology, if any.
The best strategy, Polk advises, would be “a multinational, welfare-oriented and psychologically satisfying program... that would make the hatred ISIS relies upon less virulent. The elements have been identified for us: communal needs, compensation for previous transgressions, and calls for a new beginning.” He adds, “A carefully phrased apology for past transgressions would cost little and do much.” Such a project could be carried out in refugee camps or in the “hovels and grim housing projects of the Paris banlieues,” where, Atran writes, his research team “found fairly wide tolerance or support for ISIS’s values.” And even more could be done by true dedication to diplomacy and negotiations instead of reflexive resort to violence.
Not least in significance would be an honorable response to the “refugee crisis” that was a long time in coming but surged to prominence in Europe in 2015. That would mean, at the very least, sharply increasing humanitarian relief to the camps in Lebanon, Jordan, and Turkey where miserable refugees from Syria barely survive. But the issues go well beyond, and provide a picture of the self-described “enlightened states” that is far from attractive and should be an incentive to action.
There are countries that generate refugees through massive violence, like the United States, secondarily Britain and France. Then there are countries that admit huge numbers of refugees, including those fleeing from Western violence, like Lebanon (easily the champion, per capita), Jordan, and Syria before it imploded, among others in the region. And partially overlapping, there are countries that both generate refugees and refuse to take them in, not only from the Middle East but also from the U.S. “backyard” south of the border. A strange picture, painful to contemplate.
An honest picture would trace the generation of refugees much further back into history. Veteran Middle East correspondent Robert Fisk reports that one of the first videos produced by ISIS “showed a bulldozer pushing down a rampart of sand that had marked the border between Iraq and Syria. As the machine destroyed the dirt revetment, the camera panned down to a handwritten poster lying in the sand. ‘End of Sykes-Picot,’ it said.”
For the people of the region, the Sykes-Picot agreement is the very symbol of the cynicism and brutality of Western imperialism. Conspiring in secret during World War I, Britain’s Mark Sykes and France’s François Georges-Picot carved up the region into artificial states to satisfy their own imperial goals, with utter disdain for the interests of the people living there and in violation of the wartime promises issued to induce Arabs to join the Allied war effort. The agreement mirrored the practices of the European states that devastated Africa in a similar manner. It “transformed what had been relatively quiet provinces of the Ottoman Empire into some of the least stable and most internationally explosive states in the world.”
Repeated Western interventions since then in the Middle East and Africa have exacerbated the tensions, conflicts, and disruptions that have shattered the societies. The end result is a “refugee crisis” that the innocent West can scarcely endure. Germany has emerged as the conscience of Europe, at first (but no longer) admitting almost one million refugees — in one of the richest countries in the world with a population of 80 million. In contrast, the poor country of Lebanon has absorbed an estimated 1.5 million Syrian refugees, now a quarter of its population, on top of half a million Palestinian refugees registered with the U.N. refugee agency UNRWA, mostly victims of Israeli policies.
Europe is also groaning under the burden of refugees from the countries it has devastated in Africa — not without U.S. aid, as Congolese and Angolans, among others, can testify. Europe is now seeking to bribe Turkey (with over two million Syrian refugees) to distance those fleeing the horrors of Syria from Europe’s borders, just as Obama is pressuring Mexico to keep U.S. borders free from miserable people seeking to escape the aftermath of Reagan’s GWOT along with those seeking to escape more recent disasters, including a military coup in Honduras that Obama almost alone legitimized, which created one of the worst horror chambers in the region.
Words can hardly capture the U.S. response to the Syrian refugee crisis, at least any words I can think of.
Returning to the opening question “Who rules the world?” we might also want to pose another question: “What principles and values rule the world?” That question should be foremost in the minds of the citizens of the rich and powerful states, who enjoy an unusual legacy of freedom, privilege, and opportunity thanks to the struggles of those who came before them, and who now face fateful choices as to how to respond to challenges of great human import.
Noam Chomsky is institute professor emeritus in the Department of Linguistics and Philosophy at Massachusetts Institute of Technology. ATomDispatch regular, among his recent books are Hegemony or Survivaland Failed States. This essay, the second of two parts, is excerpted from his new book, Who Rules the World? (Metropolitan Books, the American Empire Project, 2016). For part 1, read American Power Under Challenge. His website is www.chomsky.info.
Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Nick Turse’s Next Time They’ll Come to Count the Dead, and Tom Engelhardt's latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.
Copyright 2016 Valeria Galvao Wasserman-Chomsky
Top photo by Flickr/Andrew Rusk
Middle photo by Flickr/thlerry ehrmann
Bottom photo by Flickr/Karl-Ludwig Poggemann
This piece, the first of two parts, is excerpted from Noam Chomsky’s new book, Who Rules the World? (Metropolitan Books). Read part two: The Costs of Violence.
When we ask “Who rules the world?” we commonly adopt the standard convention that the actors in world affairs are states, primarily the great powers, and we consider their decisions and the relations among them. That is not wrong. But we would do well to keep in mind that this level of abstraction can also be highly misleading.
States of course have complex internal structures, and the choices and decisions of the political leadership are heavily influenced by internal concentrations of power, while the general population is often marginalized. That is true even for the more democratic societies, and obviously for others. We cannot gain a realistic understanding of who rules the world while ignoring the “masters of mankind,” as Adam Smith called them: in his day, the merchants and manufacturers of England; in ours, multinational conglomerates, huge financial institutions, retail empires, and the like. Still following Smith, it is also wise to attend to the “vile maxim” to which the “masters of mankind” are dedicated: “All for ourselves and nothing for other people” — a doctrine known otherwise as bitter and incessant class war, often one-sided, much to the detriment of the people of the home country and the world.
In the contemporary global order, the institutions of the masters hold enormous power, not only in the international arena but also within their home states, on which they rely to protect their power and to provide economic support by a wide variety of means. When we consider the role of the masters of mankind, we turn to such state policy priorities of the moment as the Trans-Pacific Partnership, one of the investor-rights agreements mislabeled “free-trade agreements” in propaganda and commentary. They are negotiated in secret, apart from the hundreds of corporate lawyers and lobbyists writing the crucial details. The intention is to have them adopted in good Stalinist style with “fast track” procedures designed to block discussion and allow only the choice of yes or no (hence yes). The designers regularly do quite well, not surprisingly. People are incidental, with the consequences one might anticipate.
The Second Superpower
The neoliberal programs of the past generation have concentrated wealth and power in far fewer hands while undermining functioning democracy, but they have aroused opposition as well, most prominently in Latin America but also in the centers of global power. The European Union (EU), one of the more promising developments of the post-World War II period, has been tottering because of the harsh effect of the policies of austerity during recession, condemned even by the economists of the International Monetary Fund (if not the IMF’s political actors). Democracy has been undermined as decision making shifted to the Brussels bureaucracy, with the northern banks casting their shadow over their proceedings.
Mainstream parties have been rapidly losing members to left and to right. The executive director of the Paris-based research group EuropaNova attributes the general disenchantment to “a mood of angry impotence as the real power to shape events largely shifted from national political leaders [who, in principle at least, are subject to democratic politics] to the market, the institutions of the European Union and corporations,” quite in accord with neoliberal doctrine. Very similar processes are under way in the United States, for somewhat similar reasons, a matter of significance and concern not just for the country but, because of U.S. power, for the world.
The rising opposition to the neoliberal assault highlights another crucial aspect of the standard convention: it sets aside the public, which often fails to accept the approved role of “spectators” (rather than “participants”) assigned to it in liberal democratic theory. Such disobedience has always been of concern to the dominant classes. Just keeping to American history, George Washington regarded the common people who formed the militias that he was to command as “an exceedingly dirty and nasty people [evincing] an unaccountable kind of stupidity in the lower class of these people.”
In Violent Politics, his masterful review of insurgencies from “the American insurgency” to contemporary Afghanistan and Iraq, William Polk concludes that General Washington “was so anxious to sideline [the fighters he despised] that he came close to losing the Revolution.” Indeed, he “might have actually done so” had France not massively intervened and “saved the Revolution,” which until then had been won by guerrillas — whom we would now call “terrorists” — while Washington’s British-style army “was defeated time after time and almost lost the war.”
A common feature of successful insurgencies, Polk records, is that once popular support dissolves after victory, the leadership suppresses the “dirty and nasty people” who actually won the war with guerrilla tactics and terror, for fear that they might challenge class privilege. The elites’ contempt for “the lower class of these people” has taken various forms throughout the years. In recent times one expression of this contempt is the call for passivity and obedience (“moderation in democracy”) by liberal internationalists reacting to the dangerous democratizing effects of the popular movements of the 1960s.
Sometimes states do choose to follow public opinion, eliciting much fury in centers of power. One dramatic case was in 2003, when the Bush administration called on Turkey to join its invasion of Iraq. Ninety-five percent of Turks opposed that course of action and, to the amazement and horror of Washington, the Turkish government adhered to their views. Turkey was bitterly condemned for this departure from responsible behavior. Deputy Secretary of Defense Paul Wolfowitz, designated by the press as the “idealist-in-chief” of the administration, berated the Turkish military for permitting the malfeasance of the government and demanded an apology. Unperturbed by these and innumerable other illustrations of our fabled “yearning for democracy,” respectable commentary continued to laud President George W. Bush for his dedication to “democracy promotion,” or sometimes criticized him for his naïveté in thinking that an outside power could impose its democratic yearnings on others.
The Turkish public was not alone. Global opposition to U.S.-UK aggression was overwhelming. Support for Washington’s war plans scarcely reached 10% almost anywhere, according to international polls. Opposition sparked huge worldwide protests, in the United States as well, probably the first time in history that imperial aggression was strongly protested even before it was officially launched. On the front page of the New York Times, journalist Patrick Tyler reported that “there may still be two superpowers on the planet: the United States and world public opinion.”
Unprecedented protest in the United States was a manifestation of the opposition to aggression that began decades earlier in the condemnation of the U.S. wars in Indochina, reaching a scale that was substantial and influential, even if far too late. By 1967, when the antiwar movement was becoming a significant force, military historian and Vietnam specialist Bernard Fall warned that “Vietnam as a cultural and historic entity... is threatened with extinction... [as] the countryside literally dies under the blows of the largest military machine ever unleashed on an area of this size.”
But the antiwar movement did become a force that could not be ignored. Nor could it be ignored when Ronald Reagan came into office determined to launch an assault on Central America. His administration mimicked closely the steps John F. Kennedy had taken 20 years earlier in launching the war against South Vietnam, but had to back off because of the kind of vigorous public protest that had been lacking in the early 1960s. The assault was awful enough. The victims have yet to recover. But what happened to South Vietnam and later all of Indochina, where “the second superpower” imposed its impediments only much later in the conflict, was incomparably worse.
It is often argued that the enormous public opposition to the invasion of Iraq had no effect. That seems incorrect to me. Again, the invasion was horrifying enough, and its aftermath is utterly grotesque. Nevertheless, it could have been far worse. Vice President Dick Cheney, Secretary of Defense Donald Rumsfeld, and the rest of Bush’s top officials could never even contemplate the sort of measures that President Kennedy and President Lyndon Johnson adopted 40 years earlier largely without protest.
Western Power Under Pressure
There is far more to say, of course, about the factors in determining state policy that are put to the side when we adopt the standard convention that states are the actors in international affairs. But with such nontrivial caveats as these, let us nevertheless adopt the convention, at least as a first approximation to reality. Then the question of who rules the world leads at once to such concerns as China’s rise to power and its challenge to the United States and “world order,” the new cold war simmering in eastern Europe, the Global War on Terror, American hegemony and American decline, and a range of similar considerations.
The challenges faced by Western power at the outset of 2016 are usefully summarized within the conventional framework by Gideon Rachman, chief foreign-affairs columnist for the London Financial Times. He begins by reviewing the Western picture of world order: “Ever since the end of the Cold War, the overwhelming power of the U.S. military has been the central fact of international politics.” This is particularly crucial in three regions: East Asia, where “the U.S. Navy has become used to treating the Pacific as an ‘American lake’”; Europe, where NATO — meaning the United States, which “accounts for a staggering three-quarters of NATO’s military spending” — “guarantees the territorial integrity of its member states”; and the Middle East, where giant U.S. naval and air bases “exist to reassure friends and to intimidate rivals.”
The problem of world order today, Rachman continues, is that “these security orders are now under challenge in all three regions” because of Russian intervention in Ukraine and Syria, and because of China turning its nearby seas from an American lake to “clearly contested water.” The fundamental question of international relations, then, is whether the United States should “accept that other major powers should have some kind of zone of influence in their neighborhoods.” Rachman thinks it should, for reasons of “diffusion of economic power around the world — combined with simple common sense.”
There are, to be sure, ways of looking at the world from different standpoints. But let us keep to these three regions, surely critically important ones.
The Challenges Today: East Asia
Beginning with the “American lake,” some eyebrows might be raised over the report in mid-December 2015 that “an American B-52 bomber on a routine mission over the South China Sea unintentionally flew within two nautical miles of an artificial island built by China, senior defense officials said, exacerbating a hotly divisive issue for Washington and Beijing.” Those familiar with the grim record of the 70 years of the nuclear weapons era will be all too aware that this is the kind of incident that has often come perilously close to igniting terminal nuclear war. One need not be a supporter of China’s provocative and aggressive actions in the South China Sea to notice that the incident did not involve a Chinese nuclear-capable bomber in the Caribbean, or off the coast of California, where China has no pretensions of establishing a “Chinese lake.” Luckily for the world.
Chinese leaders understand very well that their country’s maritime trade routes are ringed with hostile powers from Japan through the Malacca Straits and beyond, backed by overwhelming U.S. military force. Accordingly, China is proceeding to expand westward with extensive investments and careful moves toward integration. In part, these developments are within the framework of the Shanghai Cooperation Organization (SCO), which includes the Central Asian states and Russia, and soon India and Pakistan with Iran as one of the observers — a status that was denied to the United States, which was also called on to close all military bases in the region. China is constructing a modernized version of the old silk roads, with the intent not only of integrating the region under Chinese influence, but also of reaching Europe and the Middle Eastern oil-producing regions. It is pouring huge sums into creating an integrated Asian energy and commercial system, with extensive high-speed rail lines and pipelines.
One element of the program is a highway through some of the world’s tallest mountains to the new Chinese-developed port of Gwadar in Pakistan, which will protect oil shipments from potential U.S. interference. The program may also, China and Pakistan hope, spur industrial development in Pakistan, which the United States has not undertaken despite massive military aid, and might also provide an incentive for Pakistan to clamp down on domestic terrorism, a serious issue for China in western Xinjiang Province. Gwadar will be part of China’s “string of pearls,” bases being constructed in the Indian Ocean for commercial purposes but potentially also for military use, with the expectation that China might someday be able to project power as far as the Persian Gulf for the first time in the modern era.
All of these moves remain immune to Washington’s overwhelming military power, short of annihilation by nuclear war, which would destroy the United States as well.
In 2015, China also established the Asian Infrastructure Investment Bank (AIIB), with itself as the main shareholder. Fifty-six nations participated in the opening in Beijing in June, including U.S. allies Australia, Britain, and others which joined in defiance of Washington’s wishes. The United States and Japan were absent. Some analysts believe that the new bank might turn out to be a competitor to the Bretton Woods institutions (the IMF and the World Bank), in which the United States holds veto power. There are also some expectations that the SCO might eventually become a counterpart to NATO.
The Challenges Today: Eastern Europe
Turning to the second region, Eastern Europe, there is a crisis brewing at the NATO-Russian border. It is no small matter. In his illuminating and judicious scholarly study of the region, Frontline Ukraine: Crisis in the Borderlands, Richard Sakwa writes — all too plausibly — that the “Russo-Georgian war of August 2008 was in effect the first of the ‘wars to stop NATO enlargement’; the Ukraine crisis of 2014 is the second. It is not clear whether humanity would survive a third.”
The West sees NATO enlargement as benign. Not surprisingly, Russia, along with much of the Global South, has a different opinion, as do some prominent Western voices. George Kennan warned early on that NATO enlargement is a “tragic mistake,” and he was joined by senior American statesmen in an open letter to the White House describing it as a “policy error of historic proportions.”
The present crisis has its origins in 1991, with the end of the Cold War and the collapse of the Soviet Union. There were then two contrasting visions of a new security system and political economy in Eurasia. In Sakwa’s words, one vision was of a “‘Wider Europe,’ with the EU at its heart but increasingly coterminous with the Euro-Atlantic security and political community; and on the other side there [was] the idea of ‘Greater Europe,’ a vision of a continental Europe, stretching from Lisbon to Vladivostok, that has multiple centers, including Brussels, Moscow and Ankara, but with a common purpose in overcoming the divisions that have traditionally plagued the continent.”
Soviet leader Mikhail Gorbachev was the major proponent of Greater Europe, a concept that also had European roots in Gaullism and other initiatives. However, as Russia collapsed under the devastating market reforms of the 1990s, the vision faded, only to be renewed as Russia began to recover and seek a place on the world stage under Vladimir Putin who, along with his associate Dmitry Medvedev, has repeatedly “called for the geopolitical unification of all of ‘Greater Europe’ from Lisbon to Vladivostok, to create a genuine ‘strategic partnership.’”
These initiatives were “greeted with polite contempt,” Sakwa writes, regarded as “little more than a cover for the establishment of a ‘Greater Russia’ by stealth” and an effort to “drive a wedge” between North America and Western Europe. Such concerns trace back to earlier Cold War fears that Europe might become a “third force” independent of both the great and minor superpowers and moving toward closer links to the latter (as can be seen in Willy Brandt’sOstpolitik and other initiatives).
The Western response to Russia’s collapse was triumphalist. It was hailed as signaling “the end of history,” the final victory of Western capitalist democracy, almost as if Russia were being instructed to revert to its pre-World War I status as a virtual economic colony of the West. NATO enlargement began at once, in violation of verbal assurances to Gorbachev that NATO forces would not move “one inch to the east” after he agreed that a unified Germany could become a NATO member — a remarkable concession, in the light of history. That discussion kept to East Germany. The possibility that NATO might expand beyond Germany was not discussed with Gorbachev, even if privately considered.
Soon, NATO did begin to move beyond, right to the borders of Russia. The general mission of NATO was officially changed to a mandate to protect “crucial infrastructure” of the global energy system, sea lanes and pipelines, giving it a global area of operations. Furthermore, under a crucial Western revision of the now widely heralded doctrine of “responsibility to protect,” sharply different from the official U.N. version, NATO may now also serve as an intervention force under U.S. command.
Of particular concern to Russia are plans to expand NATO to Ukraine. These plans were articulated explicitly at the Bucharest NATO summit of April 2008, when Georgia and Ukraine were promised eventual membership in NATO. The wording was unambiguous: “NATO welcomes Ukraine’s and Georgia’s Euro-Atlantic aspirations for membership in NATO. We agreed today that these countries will become members of NATO.” With the “Orange Revolution” victory of pro-Western candidates in Ukraine in 2004, State Department representative Daniel Fried rushed there and “emphasized U.S. support for Ukraine’s NATO and Euro-Atlantic aspirations,” as a WikiLeaks report revealed.
Russia’s concerns are easily understandable. They are outlined by international relations scholar John Mearsheimer in the leading U.S. establishment journal, Foreign Affairs. He writes that “the taproot of the current crisis [over Ukraine] is NATO expansion and Washington’s commitment to move Ukraine out of Moscow’s orbit and integrate it into the West,” which Putin viewed as “a direct threat to Russia’s core interests.”
“Who can blame him?” Mearsheimer asks, pointing out that “Washington may not like Moscow’s position, but it should understand the logic behind it.” That should not be too difficult. After all, as everyone knows, “The United States does not tolerate distant great powers deploying military forces anywhere in the Western hemisphere, much less on its borders.”
In fact, the U.S. stand is far stronger. It does not tolerate what is officially called “successful defiance” of the Monroe Doctrine of 1823, which declared (but could not yet implement) U.S. control of the hemisphere. And a small country that carries out such successful defiance may be subjected to “the terrors of the earth” and a crushing embargo — as happened to Cuba. We need not ask how the United States would have reacted had the countries of Latin America joined the Warsaw Pact, with plans for Mexico and Canada to join as well. The merest hint of the first tentative steps in that direction would have been “terminated with extreme prejudice,” to adopt CIA lingo.
As in the case of China, one does not have to regard Putin’s moves and motives favorably to understand the logic behind them, nor to grasp the importance of understanding that logic instead of issuing imprecations against it. As in the case of China, a great deal is at stake, reaching as far — literally — as questions of survival.
The Challenges Today: The Islamic World
Let us turn to the third region of major concern, the (largely) Islamic world, also the scene of the Global War on Terror (GWOT) that George W. Bush declared in 2001 after the 9/11 terrorist attack. To be more accurate, re-declared. The GWOT was declared by the Reagan administration when it took office, with fevered rhetoric about a “plague spread by depraved opponents of civilization itself” (as Reagan put it) and a “return to barbarism in the modern age” (the words of George Shultz, his secretary of state). The original GWOT has been quietly removed from history. It very quickly turned into a murderous and destructive terrorist war afflicting Central America, southern Africa, and the Middle East, with grim repercussions to the present, even leading to condemnation of the United States by the World Court (which Washington dismissed). In any event, it is not the right story for history, so it is gone.
The success of the Bush-Obama version of GWOT can readily be evaluated on direct inspection. When the war was declared, the terrorist targets were confined to a small corner of tribal Afghanistan. They were protected by Afghans, who mostly disliked or despised them, under the tribal code of hospitality — which baffled Americans when poor peasants refused “to turn over Osama bin Laden for the, to them, astronomical sum of $25 million.”
There are good reasons to believe that a well-constructed police action, or even serious diplomatic negotiations with the Taliban, might have placed those suspected of the 9/11 crimes in American hands for trial and sentencing. But such options were off the table. Instead, the reflexive choice was large-scale violence — not with the goal of overthrowing the Taliban (that came later) but to make clear U.S. contempt for tentative Taliban offers of the possible extradition of bin Laden. How serious these offers were we do not know, since the possibility of exploring them was never entertained. Or perhaps the United States was just intent on “trying to show its muscle, score a victory and scare everyone in the world. They don’t care about the suffering of the Afghans or how many people we will lose.”
That was the judgment of the highly respected anti-Taliban leader Abdul Haq, one of the many oppositionists who condemned the American bombing campaign launched in October 2001 as "a big setback" for their efforts to overthrow the Taliban from within, a goal they considered within their reach. His judgment is confirmed by Richard A. Clarke, who was chairman of the Counterterrorism Security Group at the White House under President George W. Bush when the plans to attack Afghanistan were made. As Clarke describes the meeting, when informed that the attack would violate international law, "the President yelled in the narrow conference room, ‘I don’t care what the international lawyers say, we are going to kick some ass.'" The attack was also bitterly opposed by the major aid organizations working in Afghanistan, who warned that millions were on the verge of starvation and that the consequences might be horrendous.
The consequences for poor Afghanistan years later need hardly be reviewed.
The next target of the sledgehammer was Iraq. The U.S.-UK invasion, utterly without credible pretext, is the major crime of the twenty-first century. The invasion led to the death of hundreds of thousands of people in a country where the civilian society had already been devastated by American and British sanctions that were regarded as “genocidal” by the two distinguished international diplomats who administered them, and resigned in protest for this reason. The invasion also generated millions of refugees, largely destroyed the country, and instigated a sectarian conflict that is now tearing apart Iraq and the entire region. It is an astonishing fact about our intellectual and moral culture that in informed and enlightened circles it can be called, blandly, “the liberation of Iraq.”
Pentagon and British Ministry of Defense polls found that only 3% of Iraqis regarded the U.S. security role in their neighborhood as legitimate, less than 1% believed that “coalition” (U.S.-UK) forces were good for their security, 80% opposed the presence of coalition forces in the country, and a majority supported attacks on coalition troops. Afghanistan has been destroyed beyond the possibility of reliable polling, but there are indications that something similar may be true there as well. Particularly in Iraq the United States suffered a severe defeat, abandoning its official war aims, and leaving the country under the influence of the sole victor, Iran.
The sledgehammer was also wielded elsewhere, notably in Libya, where the three traditional imperial powers (Britain, France, and the United States) procured Security Council resolution 1973 and instantly violated it, becoming the air force of the rebels. The effect was to undercut the possibility of a peaceful, negotiated settlement; sharply increase casualties (by at least a factor of 10, according to political scientist Alan Kuperman); leave Libya in ruins, in the hands of warring militias; and, more recently, to provide the Islamic State with a base that it can use to spread terror beyond. Quite sensible diplomatic proposals by the African Union, accepted in principle by Libya’s Muammar Qaddafi, were ignored by the imperial triumvirate, as Africa specialist Alex de Waal reviews. A huge flow of weapons and jihadis has spread terror and violence from West Africa (now the champion for terrorist murders) to the Levant, while the NATO attack also sent a flood of refugees from Africa to Europe.
Yet another triumph of “humanitarian intervention,” and, as the long and often ghastly record reveals, not an unusual one, going back to its modern origins four centuries ago.
Noam Chomsky is institute professor emeritus in the Department of Linguistics and Philosophy at Massachusetts Institute of Technology. A TomDispatch regular, among his recent books are Hegemony or Survival and Failed States. This essay, the first of two parts, is excerpted from his new book, Who Rules the World? (Metropolitan Books, the American Empire Project, 2016). Read part two: The Costs of Violence. His website is www.chomsky.info.
Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Nick Turse’s Next Time They’ll Come to Count the Dead, and Tom Engelhardt's latest book, Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.
Copyright 2016 Valeria Galvao Wasserman-Chomsky
Top photo by Flickr/jeanbaptisteparis
Middle photo by Flickr/U.S. Pacific Command
Bottom photo by Flickr/DVIDSHUB
Reprinted with permission from TomDispatch.
There’s a pile of money hiding offshore. It’s true that jobs are also leaving the United States because American companies find it convenient to cut labor costs by moving manufacturing abroad, the economic issue you’re hearing most about in this election season. But the stunning amount of money that continues to flow across American borders (and those of other countries), and eventually disappears into the pockets of the corporate and political elite, ultimately causes even more damage to our finances and our lives.
While the two leading candidates for the presidency, Donald Trump and Hillary Clinton, have indeed suggested cosmetic fixes for a situation that only grows more extreme with the passage of time, they have themselves taken advantage of numerous tax “efficiency” strategies that make money evaporate. Of course, you shouldn’t doubt for a second that they’ll change their ways once in the Oval Office.
As with so much in our American heritage, there’s a history to the “offshore” world, too. Finding places to shield money from tax collection first became commonplace among upper-crust industrialists, bankers, and even public servants back in the 1920s. Treasury Secretary Andrew Mellon, a millionaire mogul who served presidents Calvin Coolidge, Warren Harding, and Herbert Hoover (and had a knack for cutting taxes on the wealthy), left office under mounting congressional probes into his tax evasion strategies.
Fast-forward about a century and tax dodging has been woven into the fabric of the lives of the affluent and corporate worldwide in an extraordinary way. According to an April 2016 Oxfam report, the top 50 U.S. companies are hoarding more than $1.4 trillion in cash offshore.
Big businesses lobby for favorable tax treatment from Congress, and get huge payouts in return.
What’s more, for every dollar that these firms spent lobbying Congress for “favorable” tax treatment (a collective total of $2.6 billion between 2008 and 2014), they received $130 dollars in tax breaks and $4,000 in subsidies from the U.S. government. These companies, including Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter & Gamble, created “an opaque and secretive network” of more than 1,600 company subsidiaries located in tax havens that they decided to disclose. (Because of the weak reporting requirements of the Securities and Exchange Commission, there could be thousands more.) According to a March 3rd report from the Citizens for Tax Justice, the Fortune 500 companies are now saving $695 billion in federal income taxes on a total of $2.4 trillion in offshore holdings.
Americans can’t afford to ignore such tax games, since we’re the ones who, in effect, wind up paying the taxes these firms don’t. For government policymakers, such tax evasion is a grim matter of attrition, since the U.S. (and other countries) plunge ever deeper into debt thanks to such antics and then find themselves cutting services or raising taxes on us to cover the gap between the money they’re losing and the taxes they’re collecting.
Not only are such firms unpatriotic, they are parasitic and while they’re at it, they use similar techniques — let’s not call it theft (though it is) — to avoid tax payments in the poorest places on Earth. As Oxfam reports, “the biggest burden” of tax havens “falls on the poorest people.” In the process, they only increase already oppressive levels of inequality globally.
Tax “secrecy” specialists — people working in the money-hiding field — help rich individuals, multinational corporations, political leaders, terrorists, and organized crime groups divert cash and capital, sometimes in staggering amounts, from local economies into an obscure, complex, multi-layered global financial network that operates outside any national or international regulatory or tax system. Given this, isn’t it a little surprising that the top candidates for the presidency barely pay lip service to the impact of such hidden money? What toothless policies they have proposed to deal with the phenomenon will do little or nothing to change it.
The Panama Papers
U.S. trade agreements generally include rosy promises about partnering with regional economies around the world to encourage the flow of goods and services across borders. At the same time, they generally are focused on the obliteration of barriers that in any way restrict money from flowing out of the United States or into the embrace of other nations. The free movement of capital, or financial globalization as it’s called, has been a bedrock Washington policy for a century and, since the 1980s, places like Panama — a renowned tax haven — have abetted this process.
A month ago, the International Consortium of Investigative Journalists released a trove of documents, 2.6 terabytes of them, including “more than 4.8 million emails, 3 million database files, and 2.1 million PDFs.” These were turned over by an undisclosed source (“John Doe”), communicating through encrypted channels to avoid repercussions. Now known as “the Panama Papers,” they reveal how elite multinational companies, the super rich, and government figures have engaged in tax-dodging practices engineered by a single Panama City-based law firm, Mossack Fonseca (MF).
In addition to public officials and billionaires, more than 500 global banks, their subsidiaries and branches, have registered at least 15,600 shell companies there using MF’s services. That word “shell” is descriptively accurate since such “companies” rarely have employees and are commonly no more than a post office box providing a façade through which books can be doctored, taxes dodged, losses concealed, and money-laundering and other criminal actions carried out. And keep in mind that MF, which acts for approximately 300,000 companies, is only the fourth largest provider of such offshore services globally.
One mega-bank that used its services extensively was HSBC, which created an astonishing 2,300 shell companies with that law firm’s help. We’ll return to HSBC.
While tax avoidance is perfectly legal in the U.S., tax evasion takes advantage of secretive ways to conceal taxable income.
Mossack Fonseca’s official mission, it claims, is “to deliver quality, reliable and comprehensive services to our worldwide clients in the legal, trust, investment consultancy, and digital solution fields.” That’s code for helping select establishment outfits and dubious enterprises to avoid paying taxes on profits, investments, or money made from buying and selling real estate, luxury yachts or planes, oil wells, weapons, or drugs, among other things.
Secrecy is its calling card. Tax havens, or locales amenable to tax dodging, whether in the Caribbean, Central America, Switzerland (still the world’s top location for financial secrecy), or for that matter the state of Delaware, exist to circumvent tax laws. Period. And these operations are so shady that even the functionaries working in the shadows to establish such secret accounts are barely aware of exactly who owns them, where the money came from, or where it’s going. For regulators, prosecutors, and tax collectors, the opacity is far worse.
You don’t necessarily have to be rich or powerful to access the services of such offshore firms and banks, but it helps. Some havens take anyone ready to put up a minimum of $25,000, while others demand staggering sums. Western Samoa, for instance, requires a cool $10 million to get started.
The most alarming aspect of the Panama Papers revelations was not MF’s clientele or even its secretive practices, but that what it does is completely “legal.” Nor was this the first such disclosure. In November 2014, for instance, the “Luxleaks” scandal involving a whole “menagerie of Luxembourg-based tax schemes,” as the Guardian put it, was disclosed by two whistleblowers from the accounting firm PricewaterhouseCoopers. (Luxembourg is a major European tax haven.) Citigroup, Deutsche Bank, Facebook, HSBC, JPMorgan Chase, and Microsoft were on the list of its more than 350 multinational “tax avoiders.”
Avoiding vs. Evading Taxes and Corporate Inversions
Avoiding and evading taxes are technically considered different kinds of acts, the former being legal in the U.S., the latter not. According to the Internal Revenue Service, “Taxpayers have the right to reduce, avoid, or minimize their taxes by legitimate means.” Tax evasion, on the other hand, involves an “act to evade or defeat a tax, or payment of tax” by “deceit, subterfuge, camouflage, concealment, attempts to color or obscure events, or make things seem other than they are.”
The line between the two is obviously thin and vague, but both practices result in the same thing: paying fewer taxes or hiding money.
The subject of tax avoidance and evasion has generally gotten little traction on the campaign trail in election 2016, the exception being corporate “inversions.” These happen when, for example, an American company merges with a foreign one in a tax haven, and so gets a lower tax rate by re-incorporating (filling out some paperwork) there. This, too, is “legal,” although it represents the purest form of corporate tax evasion. Perhaps you won’t be surprised to learn that the practice began in Panama about 30 years ago.
In 2014, companies with household names like Apple, Microsoft, Pfizer, and General Electric avoided paying a collective $90 billion in taxes through inversion strategies. Apple led that list, holding $181.1 billion offshore. That’s a lot of iPhone sales.
The Leading Candidates and Hidden Money
Tax havens are, in essence, perfectly “legal” criminal facilities designed to steal money from the rest of us. The two leading candidates in this election season, however, aren’t talking about closing down tax havens for good (which would piss off lots of rich people, banks, drug cartels, and terrorists). They are instead focused on getting companies to voluntarily repatriate, or return, profits made abroad for taxation purposes or on closing tax “loopholes” that allow money to disappear. Neither, however, offers much detail as to what that means.
Both do share one thing, however, when it comes to tax havens: Hillary Clinton and Donald Trump have companies registered at the same address (also “shared” by 285,000 other companies) in Wilmington, Delaware. In other words, they make use of the “Delaware loophole,” which allows for the legal shifting of earnings from elsewhere in the country to the ultimate tax haven state in the U.S. Neither, as Rupert Neate of the Guardian has written, has been willing to offer any explanation for this. That’s the political beauty of loopholes: closing one is different from eradicating an entire practice but suffices as a promise.
Hillary has gone after tax havens before. In 2004, as a New York senator, she vowed to close tax loopholes for “people who create a mailbox, or a drop, or send one person to sit on the beach in some island paradise and claim that it is their offshore headquarters.” She introduced no bills to do so, however.
She has spoken out against corporate tax inversions, too. She wants Congress to prevent them by imposing what she calls a “commonsense 50%” threshold on them; in other words, as long as a company keeps at least half of its operations in this country, it would be considered a U.S. company for tax purposes, no matter the inversions. She also has favored an “exit tax” to ensure that multinationals pay a “fair” share of U.S. taxes owed on earnings stored overseas. Both of these suggestions would put some modest limits on offshore tax dodging (after the fact), but not come within a country mile of banning it.
On such subjects, she can sound strong indeed at appropriate moments. In February 2016, for instance, she said, “We need to go after a company like Johnson Controls that is trying to avoid paying taxes after all of us bailed it out by pretending to sell itself in a so-called inversion in Europe.” It evidently didn’t matter to her that the same automotive parts company set to merge with Tyco International (based in Ireland to dodge taxes) had donated money to the Clinton Foundation charity as recently as December 2015. (Johnson Controls denied Hillary’s claims that it had received a bailout during the financial crisis.)
Hillary, lest we forget, joined the board of directors of the the Clinton Foundation, the family charity, in 2013. She resigned in April 2015 to run for president. Now, keeping it in the family, her husband, Bill, and her daughter, Chelsea, remain standing members of the board. Spawned from the William J. Clinton Foundation, founded in 1997, the charity has raised $2 billion, has about 2,000 employees (including at times members of Hillary's political team), and boasts an annual budget of $223 million.
Like many gilt-edged couples, Hillary and Bill Clinton have themselves utilized onshore and offshore tax loopholes. In 2010, they used a common tax-dodging technique by placing their multi-million dollar home in Chappaqua, New York, in a “residence trust.” After he left office, Bill spent five years as an “adviser” to billionaire (now-ex-pal) Ron Burkle’s investment fund, Yucaipa Global, which had funds registered in the Cayman Islands and Dubai. That alliance netted Bill at least $15 million.
Hillary’s bedrock thinking on money flowing out of the U.S. and into the offshore world can best be seen in her support for the 2012 U.S.-Panama Trade Promotion Agreement when she was secretary of state. The agreement removed “barriers to U.S. services, including financial services,” which actually simplified the process of squirreling money away in or through Panama by allowing it to flow freely into that country.
The Clinton Foundation inhales donations from people using tax havens (including Panama). Although Hillary denounced Mossack Fonseca’s dealings on cue after the Panama Papers story broke, a number of individuals and multinationals that have contributed to the foundation used MF to establish offshore accounts, according to McClatchy. These include Canadian mining billionaire Frank Giustra who features in the foundation’s $25 million top-tier donor bracket, and two firms tied to Ng Lap Seng, the Chinese billionaire implicated in a major donor scandal involving the Clintons and the Democratic National Committee.
Similarly, in a speech she gave at the New School in July 2015, Hillary highlighted the “criminal behavior” of global bank HSBC. In 2012, the behemoth financial institution agreed to a record $1.92 billion settlement with the Department of Justice and the Treasury Department for enabling drug cartel money laundering and violating U.S. sanctions by conducting transactions for customers in Iran, Libya, Sudan, and Burma. She vowed, “On my watch, it will change.”
Yet, in 2014, the Clinton Foundation accepted between $500,000 and $1 million from that bank.
The Panama Papers are but one conflicted instance in which Hillary’s stated beliefs, her actions, and the generosity of her friends and acquaintances came together in a contradictory fashion. The evidence suggests that tax-dodgers will, in fact, be able to breathe a sigh of relief if she becomes president. Her actions are likely to — if you’ll excuse the expression — trump her words when it comes to curtailing the behavior of offshore scofflaws in significant ways. And speaking of Trump ...
Comparing presidential candidates' views on tax evasion reveals some disparity between actions and stated beliefs.
Consider the fact that The Donald won’t even disclose his tax returns. His indignantly delivered explanation is that they are “under audit.” Under the circumstances, don’t hold your breath. Perhaps he doesn’t make nearly as much money as he claims — or maybe he has an embarrassing tax haven habit. Who knows?
Ironically, Mossack Fonseca’s Panama City headquarters is located a mere seven-minute drive from the Trump International Hotel and Towers in Panama City. (If you’re interested, its website is pitching a bargain on rooms at “15% off our currently available Best Unrestricted Rate.”) That decadent complex is one of many sketchy enterprises to which Trump lent his name for licensing purposes. According to his (unaudited) personal financial disclosure report filed with the Federal Election Commission, the deal earned him $5 million. In true Trumpian style, lawsuits and battles surround the endeavor.
Under the tax plan he’s touting in his presidential campaign, U.S. businesses would see a reduction in their maximum tax rate from 35% to 15%. This lower rate (“one of the best in the world”) would, he claims, render corporate inversions unnecessary. The Donald apparently hopes that corporate America will be so eternally grateful to him that they’ll move their money back onshore and pay taxes on it voluntarily (though most of them already don’t pay the top tax rate here anyway).
Trump’s views on a “repatriation tax holiday” that would let companies bring home their overseas stashes on a one-time basis for little or nothing have shifted over the course of his candidacy. Last year, he proposed the repatriation of hidden funds without penalty or taxation of any kind. Now he’s advocating a more populist one-time 10% tax on them.
Although a key promise of his tax reform plan is to end the practice of stockpiling money in offshore accounts by American companies, he has personally invested in many of the companies that do so. As CBS News noted, in October 2015, Trump owned stock in 22 of the top 30 Fortune 500 companies ranked by their number of offshore subsidiaries. It’s a group that has engineered 1,225 tax-haven subsidiaries holding $1.4 trillion. Of course, Trump has a keen understanding of the practices that disguise or shelter money from taxes. As he explained to supporters in Iowa this January, when it comes to his own business enterprises, "I pay as little as possible. I use every single thing in the book."
As far as we know, Bernie has no personal experience with tax havens and has a far more structured plan than either of the leading candidates to combat their money-sucking, tax-dodging prowess. His policies would prevent American companies from avoiding U.S. taxes through inversions, block them from escaping taxes by establishing a post office box in a tax haven site, and end the practice of letting corporations defer paying taxes on profits from offshore subsidiaries.
In the real world, financial speculation, crime, and tax evasion — sorry for this word again — trump the highly touted goal of “free trade” when it comes to tax havens. Bernie understood this well when he voted against the Panama “free trade” agreement of 2011. In a Senate speech on the subject, he presciently noted that “Panama is a world leader when it comes to allowing large corporations and wealthy Americans to evade U.S. taxes by stashing their cash in offshore tax havens. And the Panama free trade agreement would make this bad situation much worse.”
He was right then and he remains right today. Unfortunately, no one was listening or interested in acting on his warning — certainly not Hillary, who, as secretary of state, characterized the agreement as “an example of the Obama Administration’s commitment to economic statecraft and deepening our economic engagement throughout the world.”
In practical terms, Sanders went significantly further than Hillary by formulating actual legislation on the subject. Last April, he introduced the Corporate Tax Dodging Prevention Act of 2015 in the Senate. Among other things, it aspires to “prevent corporations from sheltering profits in tax havens like Bermuda and the Cayman Islands and would stop rewarding companies that ship jobs and factories overseas with tax breaks.”
Regarding inversions, he would treat companies as American for tax purposes if they were majority-owned by U.S. interests and operating in this country. Even his plan, however, would fall short unless it made inversions illegal — and too many companies are invested in not letting that happen.
Ted would abolish the Internal Revenue Service and enable people and companies to file taxes on a postcard, so there’s no real point in further analysis of his “positions” on tax havens.
Missing Money Costs
As of 2014, according to Gabriel Zucman, University of California economist and author of The Hidden Wealth of Nations, at least $7.6 trillion, or approximately 8% of global financial wealth, was “missing” somewhere offshore. His analysis demonstrates that the sorts of tax-dodging practices we’ve been discussing put governments across the planet in the red by approximately $200 billion annually. Tax avoidance by major U.S. companies costs governments an additional $130 billion per year since nearly a third of their profits are hidden offshore.
The U.N. estimates that tax dodging by multinational companies costs developing countries $100 billion a year, an amount “equivalent to what it would cost to provide basic life-saving health services or safe water and sanitation to more than 2.2 billion people.”
There are, in other words, harrowing costs to tax dodging. When the wealthy and powerful hide money from governments or speculate with it in sneaky ways, it destabilizes economies and enables the commission of crimes that place a further burden on ordinary people. When money flows from the economic necessities needed by the less privileged to the top fraction of a percent of the world’s population and is then hidden offshore, essentially “disappeared,” it’s a net drain on and a blow to the world economy. This impacts jobs and the quality of our future. Unfortunately, the leading candidates in this election year aren’t championing a major change for the better.
Nomi Prins, a TomDispatch regular, is the author of six books, a speaker, and a distinguished senior fellow at the non-partisan public policy institute Demos. Her most recent book is All the Presidents' Bankers: The Hidden Alliances That Drive American Power (Nation Books). She is a former Wall Street executive. Special thanks go to researcher Craig Wilson for his superb work on this piece.
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Copyright 2016 Nomi Prins
Top photo by Fotolia/Anuska Sampedro
Middle photo by Fotolia/Comugnero Silvana
Bottom photo by Fotolia/Burlingham