Business Week, September 22, 1975
Kissinger sweet-talks the Third World
The biggest U.S. initiative in foreign economic policy since the Alliance
for Progress was launched last week by Secretary of State Henry Kissinger.
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MK: According to Leo Panitch, the State Department's jurisdiction here was
effectively curtailed by Simon et al. in their, and the IMF's, intervention
in the UK:
"The conditionality attached by the IMF to the British loan of 1976 was a
momentous break with Bretton Woods protocol. For it amounted to nothing less
than the imposition of financial capital's long-standing preference for
price stability and private investment as the pre-eminent goals of economic
policy, upon a major Western state whose people had just voted for public
expenditure and full employment. Key actors in this drama were William
Simon, the American Secretary of the Treasury; his Undersecretary, Edwin
Yeo; and Scott Pardee, Vice-President of the Federal Reserve Bank of New
York. In the last days of the IMF negotiations, Simon flew to London to meet
secretly with Bank of England and UK Treasury officials and get their
appraisal of where the Labour Cabinet stood. To maintain clandestinity, the
meeting took place at an exclusive London tailor's and cost Simon the price
of three suits -- well worth it, he said. Simon had made his first million
as a bond trader before he was thirty; Undersecretary Yeo was a former
Pittsburgh banker. The connexions between Wall Street and the City of London
undoubtedly smoothed their path. But it was only in their capacity as
American _state officials_ that Simon and Yeo could play the role they did
in defeating the radical economic alternative advanced by Tony Benn and
others in the Labour Party.
"It was not easy. Edwin Yeo later described how the Treasury had
'sweated blood' to get its way, not least against Henry Kissinger and the
State Department who favoured gentler handling of such a key Cold War ally.
As William Rodgers, Simon's successor at the Treasury, later put it: 'We all
had a feeling it could come apart in a quite serious way ... it was a choice
between Britain remaining in the liberal financial system of the West as
opposed to a radical change of course. I think that if that had happened the
whole system would have begun to fall apart. So we tended to see it in
cosmic terms.' So, too, in the end, did the Labour Cabinet, who fell to
dismantling Britain's capital controls and welfare state with such a will
that for the first few years of her government Thatcher could claim she was
only following Labour's policies. The Labour Government were not only
managing the British crisis as they did this: they explicitly saw themselves
as junior partners with the US in managing the international crisis, through
policies to accelerate the free flow of capital -- actively helping to
establish, as Poulantzas had put it, 'relations of production characteristic
of American monopoly capitalism' within their own metropolis. Once it had
worked in Britain, this process gave the signal for the new era of imperial
neo-liberalism that came to be known as the 'Washington Consensus'."
--Leo Panitch, "The New Imperial State", New Left Review 2, 2: 5-20
(pp.12-13)
It was also around this time that Chicago economists were beginning to make
their presence felt in institutions like the World Bank especially, as
older, more institutionalist-minded staffers got replaced. A significant
chunk of the economics profession linked arms with the political vanguard of
the New Right, adding "scientific credibility" to the class warfare from
above. Kissinger was of an older variety, grotesque in his own way of
course, but too much the "realist" to countenance the shrill moralism of the
neoconservatives (although he coopts them retrospectively in his evasive
memoirs), or the shrill marketism of born-again Friedmanites. Political
science/international relations discourses had some way to catch up with the
Chicago school, although catch up they did.
In saying this, I remember the "Chicago boys" whoring for Pinochet, c. 1976.
Was this part of Kissinger's great plan, or a separate initiative?
Michael K.
