Creating a Favorable Climate of Investment

Toward a Homeland Favorable Climate of Investment

March 2011

Edward Herman

Several decades ago, in The Washington Connection and Third World Fascism (with Noam Chomsky, 1979) and The Real Terror Network (Herman, 1982), we gave great weight to the demand for a "favorable climate of investment" as a driving force in explaining U.S. policy in Third World countries. If the business community and its interests have played a very significant role in shaping foreign policy—which I am confident is true—this helps explain why a democracy like ours could regularly align with dictators and regimes of torture, given its nominal commitment to democracy and human rights. U.S. companies, expanding steadily overseas, have always wanted friendly and cooperative leaders in areas of investment interest who would help assure their profitability and security from any "populist" threat. A Suharto in Indonesia would do this as would a Mobutu in Zaire, a Pinochet in Chile, and a Marcos in the Philippines.

Truly democratic governments in those countries might well threaten to serve the local majority after many decades or centuries of colonial and comprador exploitation. This would never do, as even our leaders have acknowledged, especially behind the scenes. Thus, a National Security Council Policy Statement of 1953 on "United States Objectives and Courses of Action With Respect to Latin America" (a document never cited in the New York Times, believe it or not) expressed open hostility to "nationalist regimes maintained in large part by appeals to the masses" that sought an "immediate improvement in the low living standard of the masses." This document is clear that democracy and "populism" (i.e., majority welfare-oriented policies) are dangerous and bad. It is explicit in its heavy weight given to "a political and economic climate conducive to private investment."

Unfortunately, quelling "populist" tendencies often requires harsh measures. For many decades these were regularly provided by U.S.-sponsored and supported military dictatorships and regimes of state terror. Latin America became a hotbed of "national security states" (NSS) in the 1950s-1980s, right in the U.S. backyard (the real terror network). But somehow the mainstream media and liberal America never saw a causal relationship between U.S. dominance, interests, aid, military training, and diplomatic support, and the rise of the NSS, as they did with the character of the puppet regimes in the Soviet Union's backyard in Eastern Europe. The Frontispiece of The Washington Connection, entitled "The Sun and Its Planets," showed that an estimated 26 of the 35 countries using torture on an administrative basis in the 1970s were U.S. client states, all receiving military aid and training, most of them getting police training as well, with dollar flows shown on lines running from the sun to the 26 planets. This book and The Real Terror Network also gave tabular data on the strong relationship between U.S. (and IMF-World Bank) military and economic aid and negative human rights conditions: increases in torture and death squads, repression of labor, increases in numbers of political prisoners.


Egypt: A U.S. Protected Dictatorship


The continuity to 2011 is dramatically displayed with the upheaval in Egypt against one more long-sponsored, lavishly aided and U.S.-protected dictator who served U.S. interests for decades, in this case not so much by providing a favorable climate of investment as by collaborating with U.S. client state Israel in ways strongly opposed by the Egyptian majority. This collaboration was made possible by undemocratic rule and state terror, including torture, underwritten by the U.S. taxpayer. The U.S. media acknowledge that Mubarak ruled by force and terror and that he has been a U.S.-funded ally for many years, but there are no recriminations and reflections on the immorality of supporting a ruthless dictator and state terrorism for over 30 years. It is just one of those things that happened.


In The Real Terror Network I put forward a "joint venture" model that showed how well the U.S. military, political, and business establishment cooperated in de facto alliances with Latin American military and police thugs—often trained in the School of the Americas and U.S. police academies—to quash populism and establish and maintain a favorable climate of investment. In the 1960s, in particular, organizations within the Latin American Catholic Church published periodically on "The Cry of the People" and "Marginalization of the People," describing and objecting to what the joint venture partners were doing to the masses. But, as with that NSC Policy Statement of 1953, readers of the New York Times did not know of these things; only that the red menace was being contained in Latin America. Today they know that the regime of "peace" and collaboration between Egypt and Israel is threatened, but not that that regime made it possible for Israel to ethnically cleanse in Palestine without obstruction and to twice break the peace and invade Lebanon.


Class War At Home


The longstanding joint venture policies and cries of many peoples involved a form of combined imperialist and class war, with the U.S. business and military elite and the local comprador elites cooperating to atomize, terrorize, and exploit the local majorities in these countries under attack. At the same time, there was, of course, an ongoing class war in the United States and other major Western capitalist states, but this at-home class war was for many years somewhat muted, because of the short-run large gains of postwar economic growth, the willingness of labor to accept militarization, imperial expansion, and exploitation in exchange for some participation in income gains—and the importance to Western capitalist leaders of showing the world that capitalism was better for ordinary people than Soviet or Chinese socialism. As a result, welfare states were built in the West and the class war at home was kept for the most part at a low level and in no way comparable to the class war carried out in the pursuit of favorable climates of investment in Brazil, Guatemala, Chile, the Philippines, and elsewhere in the Third World.


This situation began to change in the 1970s with the rise of Germany and Japan as competitors, the spurt in oil prices, continued globalization, and the squeeze on corporate profitability. The business community accelerated its funding of think-tanks, astroturf propaganda, lobbying efforts, and other corporate political investments. During the Reagan years, the U.S. class war intensified sharply, with the government breaking the PATCO union, more widespread union-busting and obstacles to unionization, and harsher attacks on the welfare state and black communities. Helped along further by the death and transfiguration of the Soviet Union and the counter-revolutionary process in China, the advancing class war continued in the Clinton era, with harsher criminal and "anti-terrorism" laws, the growth of the prison-industrial-complex and mass incarceration, further cutbacks in welfare protection, more deregulation, and NAFTA. This set the stage for Bush-Cheney, with more open upward redistribution policies featuring major regressive tax cuts, further deregulation by law, still greater laxity in residual regulation, and more open corruption and open-ended militarization.


The intensified class war has featured the weakening and virtual marginalization of the labor movement, currently down to 11.9 percent of the labor force (6.9 of the private sector force), the further shift of the tax structure to the advantage of the elite, cutbacks and for greater threats to government service for ordinary citizens, including education and Social Security, and a steady increase in income inequality. This growing inequality has fed into media structure and performance, as well as the political process, consolidating elite power and rationalizing and helping implement policies of class warfare.


The election of Barack Obama in 2008 inspired many to believe that some kind of turnabout had arrived, that the invigorated class war would end and some of its excesses would not only be terminated, but even reversed. These believers have been largely disappointed. Obama has perhaps slowed the attack on labor organization, but he failed to support the Employee Free Choice Act and his multi-year freeze on the wages of federal employees has been compared in psychological and political impact to Reagan's firing of the PATCO workers in 1981. His failure or inability to end the recession has had devastating effects on his base, with high unemployment rates, stagnant incomes, a foreclosure crisis, and serious state and local government budget difficulties, plus across-the-board cutbacks in employment and educational and social welfare services.


Obama's January 2011 State of the Union address promises a five-year freeze in federal domestic spending, which is incompatible with his promises to improve education and help rebuild the sagging infrastructure. His support of the huge military budget and permanent war system has kept massive resources from availability to the crisis-ridden civil society, at the same time contributing to a dangerously irrational spiritual environment that bodes ill for the future. In his January 25 address, he talked about "solidarity" and in a remarkable non-sequitur said that the Tucson shooting "reminded us that no matter who we are or where we come from, each of us is part of something greater." Despite all that togetherness talk, he failed to address the massive unemployment, housing, and insecurity problems of millions, the failure to attack the growth of inequality, and the further consolidation of the too-big-to-fail banks. He also put great weight on making this country "more competitive" and lauded his accomplishments in extending "free trade" agreements in Latin America and South Korea. This is the language of corporate business and a throwback to the spirit of mercantilism where low wages were seen as the most important condition of national competitiveness.


Clinton, by ending welfare as we know it, passing NAFTA, bolstering NATO, attacking Yugoslavia, and filling the prisons, opened the way for Bush-Cheney and their wars, anti-labor actions, and regressive tax cuts. Clinton fit nicely into the advancing class war system. With Obama signing off on the compromise tax bill that protected the upper 1 percent, but included a cut in the Social Security tax, and in the spirit of bipartisanship going along with spending constraints and no big program for unemployment, could it be that his historic and class war mission is to impale Social Security, or at least make a strong beginning toward that end as proposed by his "bipartisan" National Commission on Fiscal Responsibility and Reform?


Edward S. Herman is an economist, media critic, and author of numerous articles and books. His latest (with David Peterson) is The Politics of Genocide.