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January 30, 2008

Chomsky on the Rise of the South

Michael Shank
Editor: John Feffer
Foreign Policy In Focus

Noam Chomsky is a noted linguist, author, and foreign policy expert. On

January 15, Michael Shank interviewed him on the latest developments in
U.S. policy toward regional challenges to U.S. power. In the second part of
this two-part interview, Chomsky also discussed the Bank of the South,
nationalization of resources, and the Shanghai Cooperation Organization.
Michael Shank: In December 2007, seven South American countries officially
launched the Bank of the South in response to growing opposition to the World Bank,
the International Monetary Fund and other International Financial Institutions. How
important is this shift and will it spur other responses in the developing world? Will it
at some point completely undermine the reach of the World Bank and the IMF?
Noam Chomsky: I think it’s very important, especially because, contrary to the
impression often held here, the biggest country Brazil is supporting it. The U.S.
propaganda, western propaganda, is trying to establish a divide between the good
left and the bad left. The good left, like Lula in Brazil, are governments they would’ve
overthrown by force 40 years ago. But now that’s their hope, one of their saviors. But
the divide is pretty artificial. Sure, they’re different. Lula isn’t Chavez. But they get
along very well, they cooperate. And they are cooperating on the Bank of the South.
The Bank of the South could turn out to be a viable institution. There are plenty of
problems in the region. But one of the striking things that’s been happening in South
America for quite a few years now is that they are beginning to overcome for the first
time, since the Spanish invasion, the conflicts among the countries and the
separation of the countries. It was a very disintegrated continent. If you look at
transportation systems they don’t have much to do with each other. They’re mostly
oriented toward the imperial power that was dominant. So you send out resources,
you send out capital, the rich tiny elite have their chateaus on the Riviera, and that
sort of thing. But they have not much to do with each other.
There was also a huge internal divide between a rich, mostly white, Europeanized
elite and a massive population. For the first time, both of those kinds of
disintegration, internal to the countries and among the countries, are being
confronted at least. You can’t say they’re overcome but they’re being confronted.
The Bank of the South is one example.
Actually what’s happening in Bolivia is a striking example. The mostly white,
Europeanized elite, which is a minority, happens to be sitting on most of the
hydrocarbon reserves. And for the first time Bolivia is becoming democratic. So it’s
therefore bitterly hated by the West, which despises democracy, because it’s much
too dangerous. But when the indigenous majority actually took political power for the
first time, in a very democratic election of the kind we can’t imagine here, the
reaction in the West was quite hostile. I recall, for example, an article - I think it was
the Financial Times - condemning Morales as moving towards dictatorship because
he was calling for nationalization of oil. They omitted to mention, with the support of
about 90% of the population. But that’s tyranny. Tyranny means you don’t do what
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the United States says. Just like moderation means that you’re like Saudi Arabia and
you do do what we say.
There are now moves toward autonomy in the elite-dominated sectors in Bolivia,
maybe secession, which will probably be backed by the United States to try and
undercut the development of a democratic system in which the majority, which
happens to be indigenous, will play their proper role, namely, cultural rights, control
over resources, political and economic policy, and so on. That’s happening elsewhere
but strikingly in Bolivia.
The Bank of the South is a step towards integration of the countries. Could it weaken
the IFIs, yes it can, in fact they’re being weakened already. The IMF has been mostly
thrown out of South America. Argentina quite explicitly said, “Okay, we’re ridding
ourselves of the IMF.” And for pretty good reasons. They had been the poster child of
the IMF. They had followed its policies rigorously and it led to terrible economic
collapse. They did pull out of the collapse, namely by flatly rejecting the advice of the
IMF. And it succeeded. They were able to pay off their debts, restructure their debts
and pay them off with the help of Venezuela which picked up a substantial part of the
debt. Brazil in its own way paid off its debt and rid itself of the IMF. Bolivia is moving
in the same direction.
The IMF is in trouble now because it is losing its reserves. It was functioning on debt
collection and if countries either restructured their debt or refused to pay it, they’re
in trouble. Incidentally the countries could legitimately refuse to pay much of the
debt, because, in my opinion at least, it was illegal in the first place. For example, if I
lend you money, and I know you’re a bad risk, so I get high interest payments, and
then you tell me at one point, sorry I can’t pay anymore, I can’t call on my neighbors
to force you to pay me. Or I can’t call on your neighbors to pay it off. But that’s the
way the IMF works. You lend money to a dictatorship and an elite, the population has
nothing to do with it, you get very high interest because it’s obviously risky, they say
they can’t pay it off, you say okay your neighbors will pay for it. It’s called structural
adjustment. And my neighbors will pay me off. That’s the IMF as a creditors’ cartel.
You get higher taxes from the north.
The World Bank is not the same institution, but there’s the same kind of conflicts and
confrontations going on. In Bolivia, one of the major background events that led to
the uprising of the majority indigenous population to finally take political power was
an effort by the World Bank to privatize water. Take an economics course, they’ll tell
you that you ought to pay the market price and so on. True value, yes, very nice,
except that means poor people, which is most of the population, can’t drink. Well
that’s called an externality; don’t worry about things like that.
What the population did - and it was a big conflict, mostly in Cochabamba - peasants
just forced the international water companies, Bechtel and others, just to pull out. It
was supported by a solidarity movement here, it was quite interesting. But the World
Bank had to pull out of that project and there are others like it. On the other hand,
some of the things they do are constructive. It’s not a totally destructive institution.
But that’s weakening too.
The same thing is happening in Asia. Take the Asian Development Bank. At the time
of the Asian financial crisis, in 1997-98, Japan wanted to work through the Asian
Development Bank to create a substantial reserve which would enable countries to
survive the debt crisis instead of selling off their assets to the West. The United
States just blocked it. But they can’t do that anymore. The reserves in the Asian
countries are just too high. In fact the United States survives on funding from Japan
and China, which subsidizes the high consumption-high borrowing economy here. I
don’t think the United States at this point could tell the Asian Development Bank,
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“I’m sorry you can’t do this.” That’s somewhat parallel to the Bank of the South.
Similar things are now happening in the Middle East, with sovereign funds and so on.
Shank: With these institutions springing up in the developing world as alternatives
to the IMF and the World Bank, what similar initiatives will emerge in the developing
world regarding currencies?
Chomsky: It’s already happening. Kuwait has already made a limited move toward a
basket of currencies. The United Arab Emirates and Dubai are moving toward their
own partial development funds. Saudi Arabia, that’s the big important one, if they
join in it’ll become a major independent center of funding, lending, purchasing, and
so on. It’s already happening. Investment in the rich countries and to some extent in
the region, particularly North Africa. Separate development funds. It’s a limited
move; they don’t want to anger the United States.
Of course they rely on the United States in many ways, the elites. China, in particular,
relies on the U.S. market. They don’t want to undermine it. The same with Japan. So
they’re willing to buy treasury bonds instead of more profitable investments in order
to sustain the U.S. economy, which is their market. But it’s a very fragile situation.
They very well may turn elsewhere and they’re beginning to. I don’t think anyone
knows what would happen if the reserve-rich countries were to turn to profitable
investment rather than supporting the U.S. high-consumption, high-debt economy.
Shank: The West resists countries nationalizing their oil supplies and their gas
supplies but that trend continues regardless. Where is this headed? Do you see all
oil- and-gas rich countries getting together and establishing an alternative market?
Chomsky: They tried with OPEC, which to some extent does it. But they have to face
the fact that the West will not allow it to happen. If you go back to 1974, that was the
first move toward oil independence by the oil-rich countries. Just read what American
journalists and commentators were writing. They were saying they have no right to
the oil. The more moderate writers were saying the oil should be internationalized for
the benefit of the world. American agricultural wealth shouldn’t be internationalized
for the benefit of the world, but the oil of Saudi Arabia should be because they’re not
following what we tell them to do anymore.
The more extreme people, I guess it was Irving Kristol, said insignificant nations like
insignificant people sometimes gain illusions about their own significance. So
therefore the age of gunboat diplomacy is never over, we’ll just take it from them by
force. Robert Tucker, a serious international relations specialist who is considered
pretty moderate, said it’s just a scandal that we’re letting them get away with
running their own resources. Why are we sitting here, we’ve got the military force to
take them. Go back to somebody like George Kennan, who’s considered a great
humanist. When he was in the planning sector, in the late 1940s and early 1950s, he
said harsh measures may be necessary for “protection of our resources” -- which
happen to be in some other country. That’s just an accident of geography. They’re
our resources and we have to protect them by harsh measures, including police
states and so on.
Take Bill Clinton. He had a doctrine too, every president has a doctrine. He was less
brazen about it than Bush, didn’t get criticized a lot, but his doctrine was more
extreme than the Bush doctrine if taken literally. The official Clinton doctrine
presented to Congress was that the United States has the unilateral right to use
military force to protect markets and resources. The Bush doctrine said we’ve got to
have a pretext, like we’ve got to claim they’re a threat. Clinton doctrine didn’t even
go that far, we don’t need any pretext. With markets and resources, we have a right
to make sure that we control them, which is logical on the principle that we own the
world anyway so of course we have that right.
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You’re going to have to look far in the political spectrum to find any deviation from
this. So if the oil-rich countries were to try to really take independent control of the
resources, there would be a very harsh reaction. The United States, by now, has a
military system; more is spent on the military system than the rest of the world put
together. There’s a reason for that. That’s not to defend the borders.
Shank: Do you think India will swing towards Russia and China as it positions itself in
its allegiances or will it continue to cozy up with the U.S. post-nuclear agreement?
Chomsky: It’s going in both directions. Part of the purpose of the nuclear agreement
from the U.S. point of view was to try to encourage them to move into the U.S. orbit.
But the Indians are playing a double game. They’re improving relations with China
too. Trade relations, other relations, joint investment are improving. They haven’t
been accepted as members but they’re official observers in the Shanghai
Cooperation Organization (SCO), which is mainly China-based but is a big developing
organization that could be a counter to NATO. It includes the Central Asian states. It
includes Russia with its huge resources, and China, a big growing economy.
Observers include India, Pakistan and, crucially, Iran which is accepted as an
observer and may join. But it excludes the United States.
The United States wanted to join as an observer. It was rejected. The SCO has
officially declared that U.S. forces should leave the Middle East. And it’s part of a
move toward developing what’s called an Asian Energy Security grid and other steps
that will integrate that region and allow it to move toward independence from
imperial control, Western control. South Korea has not yet joined but it might -
another major industrial power. Japan is so far accepting its role as a U.S. client, but
that’s not graven in stone either.
So there are these centrifugal developments taking place all over the world.
The first part of the interview, Chomsky on World Ownership, was published on
January 23, 2008
Michael Shank is a contributor to Foreign Polcy In Focus and an analyst with George
Mason University’s Institute for Conflict Analysis and Resolution