How War and Globalization Support American Business…
As Billions Flow to Oil and Defense Companies
Bombing Of Baghdad Staves Off Financial Uncertainty
by Michel Chossudovsky [2-19-2001]
Professor of Economics, University of Ottawa, author of The Globalization of
Poverty, second edition, Common Courage Press, 2001.
On Friday February 16th, spurred on by the dot-com implosion and the
climactic downfall of Nortel Networks Corporation, the World's leader in
fiber optics, the value of high tech stocks plummeted on Wall Street in
turbulent trading. The NASDAQ stock index declined by more than five percent
to a record low.
But it could have been much worse. Did the bombing of Baghdad pull Wall
Street out of danger? In fact it did more than that. It put billions of
dollars into the deep pockets of Defense contractors and oil companies.
WARNINGS FROM WALL STREET
In the days leading up to the February 16 near-meltdown, stock market
analysts had warned of a worst-case scenario. High tech stocks were heavily
overvalued.
But that day at 1.00pm, a few hours before trading closed on the New York
Stock Exchange, American and British warplanes bombed Baghdad in what the
Pentagon described as "a routine mission of self-defense."
Routine self defense? The US media applauded. And on Wall Street, brokers did
more than applaud; they gasped with relief. For in a cruel irony, the bombing
raids had saved the day. As one British financial analyst noted with
contempt:
"..the American market didn't collapse. It didn't plummet. Indeed, the fall
was less than one per cent. This was a routine day - unless you happened to
live in Baghdad."1 Meanwhile, with telecom and computer stocks in the
doldrums, financial and defense analysts had been working hard to rebuild
"confidence in the stock market":
"Makers of the nation's warfare technologies along with Wall Street analysts
and industry consultants spent a week bragging about new opportunities and
the likelihood of changes to Pentagon policy that would foster growth after
15 years of strained budgets. What's more, defense and aerospace stocks ended
on a high note, climbing amid a broad market slump as 24 U.S. and British
warplanes struck Iraqi military targets using various long-range,
precision-guided weapons."2 In the last hours of trading on the 16th, defense
stocks spiraled; oil and energy stocks boomed following news that Iraq's oil
industry might be impaired. The value of Exxon, Chevron and Texaco stocks
shot up. Harken Energy Corporation --in which George W. Bush served as
company director and corporate consultant before entering politics-- gained
5.4% by the end of trading. Harken Energy happens to be a key player in
Colombian oil (with a multi-billion dollar US military aid package under
"Plan Colombia" on hand to protect its investments). Harken Energy CEO Mikel
Faulkner is a former business associate of George W.
FINANCIAL MELTDOWN
The February 16th meltdown was already being predicted at the close of
trading on the 15th. Business analysts on the evening news said that a major
"correction" in the value of high tech stocks was "inevitable". The financial
press had previously hinted that the US defense industry could also take a
beating if the new Bush Administration were to curtail military procurement.
A few days earlier, Lockheed Martin (LMT) --America's largest defense
contractor-- had announced major cuts in its satellite division due to "flat
demand" in the commercial satellite market. A company spokesman had reassured
Wall Street that Lockheed "was moving in the right direction" by shifting
financial resources out of its troubled commercial (that is, civilian)
undertakings into the lucrative production of advanced weapon systems.
For weeks, defense contractors had been actively lobbying the new
Administration. On Tuesday February 12th, President Bush promised to hike
defense spending based on "a comprehensive review of the military." According
to The New York Times (12 February 2001), George W. Bush said:
"he planned to break with Pentagon orthodoxy and create 'a new architecture
for the defense of America and our allies,' investing in new technologies and
weapons systems rather than making 'marginal improvements' for systems in
which America's arms industry has invested billions of dollars." On the 14th,
he confirmed "a $2.6 billion increase in the Pentagon's budget as a 'down
payment' on new-weapons research and development."3
And two days later Baghdad was bombed by the US Air Force.
The raids were a signal to Wall Street that Bush's promise "to revitalize the
nation's defense" should be taken seriously. Had the Bush administration
decided otherwise, Lockheed Martin's listing on the New York Stock exchange
might well have experienced the same fate as that of Nortel. In fact, while
(civilian) high tech stocks (quoted on the NASDAQ) had plummeted, Lockheed
Martin stocks ended the day up a comfortable 1.6%.
Meanwhile, the F-22 Raptor high tech fighter jet was already scheduled
--pending the Administration's final approval-- to be assembled (at an
estimated cost of $60 billion) at Lockheed Martin Marietta's plant in Georgia:
"Defense Secretary Donald Rumsfeld was an F-22 advocate before joining the
Bush administration, and Lockheed officials said Thursday [February 15th ,
one day before the raids on Baghdad] they are confident Rumsfeld will support
the technologically advanced plane." 4 The message to financial markets was
crystal clear: the bear market was hitting "civilian" high tech stocks
including Nortel, Dell Computers and Hewlett Packard; but defense industry
listings --including Boeing, General Dynamics, Lockheed Martin,
Northrop-Grumman and Raytheon (the "Big Five" defense contractors) --
remained "safe" and "promising." (i.e. "a good place to put your money").
Wall Street analysts had concluded --without batting an eyelid-- that
"with the Bush administration's focus on defense, there is optimism the
industry is on target to outperform the market again this year."5 The new
buzz phrase on Wall Street is that --despite the slow-down of the US
economy-- defense stocks constitute "a safe-haven shelter from the dot-com
implosion". More generally, the assumptions underlying Bush's new defense
budget are considered "good for business": no wonder pension funds and
institutional investors are busy changing the structure of their portfolios!
NEW WORLD 'ORDER'
War and globalization go hand in hand. Militarisation is an integral part of
the neoliberal agenda. The build-up of the defense budget contributes to
beefing up the "Big Five" US defense contractors, while denying financial
resources to civilian programs including health, education and social welfare
not to mention the rebuilding of America's deteriorating urban
infrastructure. Whereas defense production has spiraled, recession has hit
the sectors of the US economy which produce "civilian" consumer goods and
services. The U.S. domestic economy increasingly hinges on the military
industrial complex and the sale of luxury goods (travel, leisure, luxury
cars, etc.). And this satisfies the financial establishment irrespective of
the needs of ordinary people.
The bombing raids on Baghdad were certainly intended to intimidate countries
committed to ending the sanctions on Iraq. But more generally, "missile
diplomacy" is applied to enforce American political and economic domination
under the guise of what is euphemistically called "the free market."
"The hidden hand of the market will never work without a hidden fist –
McDonald’s cannot flourish without McDonnell Douglas, the designer of the
F-15."6 And America's war machine is used in support of the conquest of new
economic frontiers. In the Middle East, the Balkans and Central Asia, the US
military is positioning itself directly and through NATO not only to support
the interests of the Anglo-American oil conglomerates, which are working hand
in glove with defense contractors in lucrative joint ventures, but to further
colonize the former Soviet Union and Asian countries. Meanwhile, spiraling
defense spending pours wealth into the military industrial complex at the
expense of civilian needs.
NOTES
Sunday Mail, London, 18 February 2001.
Reuters, 16 February 2001. About 80 warplanes were involved, of which 24 were
strike aircraft. See Financial Times, 17 February 2001.
"Bush Vows To Modernize Military After Pentagon Review Is Completed", The
Bulletin's Frontrunner, 14 February 2001.
Dave Hirschman, "F-22's Fate to be Decided Next Month; Not on hold: Bush's
Defense Review won't delay Judgment on Raptor", The Atlanta Journal and
Constitution, 16 February 2001.
The Nightly Business Report, NPR, 19 February 2001.
Thomas L. Friedman, "A Manifesto for the Fast World," 'New York Times
Magazine', Mar. 28, 1999.)
