Massive debt as instrument of foreign policy

Massive debt as instrument of foreign policy Featured

IN 1945, World War 2 ended and another war began. This was not a shooting war — it was the Cold War, a period of geopolitical tension involving erstwhile allies, the United States and the Soviet Union, now competing for hegemony. This rivalry divided the world roughly between the Western and Eastern blocs, classified by their ideological and political moorings; the former championing the capitalist free market economies and the latter, the socialist-communist planned economies.

This rivalry became more intense impelled by two approaches. The first was the nuclear arms race resulting in each accumulating enough weaponry to annihilate each other and the planet several times over. This gave rise to the doctrine of mutually assured destruction (MAD) which posits that "...any use of the nuclear arsenal by any attacker against a nuclear-armed defender with second-strike capabilities, would cause the complete annihilation of both the attacker and the defender." Except as a threat, this took the nuclear option off the table in pursuit of world hegemony,

There were no actual battles between the two protagonists; nevertheless proxy wars were conducted by their respective allies — the Korean War in 1950-1953 and the Vietnam War in 1959-1975. But these engagements threatened to escalate transforming the Cold War into one reprising the past two world conflicts. With uneasy trigger fingers, any miscalculation could result in the unthinkable. This was demonstrated by the 1962 Cuban Missile Crisis edging the world to the brink of nuclear war and the still classified Able Archer War Scare of 1983 — described as "the last paroxysm of the Cold War."

The second overarching approach was subsidiary to the MAD doctrine. This was verbalized by American strategists with the conundrum: How can America and the Western bloc's ideological-political interests be advanced without causing armed conflicts and mass casualties?

Thus, Cold War confrontations shifted to the clash of economies employing methods less deadly than the nuclear option, though nonetheless as disruptive to the world's equanimity.

CIA and the secret wars

Originally the pursuit of American interests in other countries were crude schemes of employing spies and secret agents to foment instability in unfriendly countries. In some instances, they would instigate coups, followed by elections rigged to ensure a more agreeable regime. They made use of extortion, threats and whatever else was necessary to advance America's aims. But being representatives of the US government, these clandestine operations to destabilize governments would be deleterious to America's image once exposed.

A case in point was in 1953. CIA operative Kermit Roosevelt Jr., grandson of the 26th US president Theodore Roosevelt, organized a successful coup in Iran that toppled the government of Prime Minister Mohammad Mosaddegh. The goal was to regain unrestricted access to Iran's oil reserves. The CIA was exposed as the instigator.

US foreign policy

To distance the US government from these nefarious acts of regime change, a paradigm shift was necessary. They changed tactics (or did they?). The US and its Western allies thus started to apply their economic clout as a blunt instrument of foreign policy. The weapons of choice this time was the use of massive debt as leverage to promote US interests around the world, aligning countries with the US and the West.

Third World countries, particularly those in Asia, South America and Africa were just too eager to develop their economies preconditioned on free trade agreements with America and the West; the transfer of technologies and more importantly the injection of capital for investments, some of which were used to line the pockets of despots, politicians and the bureaucracy. Countries were enticed to accept more and more economic aid/capital/debt, beyond their capacity to absorb and repay from complicit multilateral organizations like the World Bank.

This weaponization of debt necessitated the participation of financial institutions, lobbyists, business conglomerates and multilaterals under the aegis of what was to be called the American corporatocracy (AmCorp). An adjunct to this amorphous entity are the "economic hit men" (EHM) — the more sophisticated substitutes for the old CIA spies and secret agents. These were the new "James Bonds," private contractors, employees, consultants and corporate representatives of AmCorp who are sent abroad to deal with governments, local politicians and the local oligarchy.

I quote from one of the celebrated EHM, John Perkins, a former American Peace Corps volunteer, who wrote a book The Confessions of an Economic Hitman a 2004 New York Times bestseller (now on its 2016th edition). The EHM was to respond to a corollary question — "How do you get rid of uncooperative rulers while keeping their countries and their resources under your control — without sending in the Marines?"

The EHM is dispatched to the developing economies to deal with political leaders and the decision makers for the sole purpose of achieving America's political, economic and military goals. "His job was to make massive loans seem like a good idea — loans that would leave countries deep in debt and vulnerable to US influence."

As these private companies are not paid directly by the US government, the terms of the loans granted the developing countries guaranteed the private companies would get rich — with the EHM getting their share of the loot. This AmCorp networks connect corporations, banks, lobbyists, etc. proving to be a powerful vehicle for corruption targeting like-minded politicians and businesses owned by the local oligarchy. The EHM's repertoire include bribery and money laundering, attractive to Third World corruption culture.

An important feature of the dealings of the corporatocracy is that they are mostly transacted in the higher levels of government and remain largely in the shadows.

These massive debts, mostly with onerous conditions, in effect tie down these emerging economies to the apron strings of US and Western businesses making them richer and the rest of the world poorer. The World Bank and other multilaterals' studies show that 70 percent of the world's population now live in countries where economic inequality has increased over the previous 30 years.

Rise of the Eastern hegemon

China, while nominally part of the Eastern bloc, charted a different course for itself. After Deng Xiaoping released the backward country from its ideological prison and opened its markets to the West, its economy flourished, rivaling the US, with its trajectory towards parity achievable in the 2030s. Upon the collapse of the Soviet Union in 1989, presaging the end of the Cold War and creating a vacuum, China emerged as the Eastern hegemon. And it has developed its own method of economic influence and foreign policy — its Belt and Road Initiative (BRI) has already entombed into its web many countries in Asia. BRI is the Chinese version of pressing massive debts on developing countries needing capital with onerous terms (see TMT article of Feb. 1, 2023, "BBM's travels and new bromance with China"). And no doubt, it has its own version of the EHM through its own Chinese corporatocracy — using tools of corruption as an extension of Xi Jinping's foreign policy.



These initiatives merely reflect how US and Chinese foreign policies enable corruption in client countries in a modern concept of imperialism. And this is what BBM faces today. We want him to succeed badly but — Cuidado!

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