2ndlook

Western Political Concepts – End Of The Road

Posted in Business, Current Affairs, European History, Feminist Issues, Gold Reserves, History, Uncategorized by Anuraag Sanghi on October 9, 2008

Political Evolution In Europe

Europe, long used to slavery (as were other large parts of the world), has tried to invent political systems that give them the ‘benefits’ of slavery without the accompanying corollaries. Apart from linguistic and cultural factors, the significant factor in all these ‘different political’ systems is approach to labour.

Western political discourse stems from the fractured and fissured European history. As a comment on the 2ndlookblog said,

“Western notions of a nation evolved from their tribal roots, where linguistic and cultural identities eventually defined their political units as nations … Since the late twentieth century Europe is making an attempt to politically unite these disparate nations.” (comment by Parag Tope, 2ndlook blog reader).

Contemporary discussions on political systems centre around Western academic terms and theories. While, these are true (partly or completely) for most countries in the world, they are of little relevance in India.

Feudalism

Rulers gave large land tracts to feudal lords – who in turn provided kings with tax revenues, soldiers and administered laws in their fiefdoms. With the rise of nationalism, authority became centralized. And the economy passed into the hands of land owners. Farm workers and tenants lived under paternalistic land owner-employers. Employer change was not allowed.

In return, the serfs and tenants received ‘protection’ from slave raiders, invaders, the king’s soldiers and the Church authorities. Extremely rigid social structures and static social status in feudal societies increased resentment among ‘farm’ workers. Increase in tithes, taxes, wreaked havoc in farming – reducing trade, farm productivity. Demand for labour was thus also fluctuating.

Primogeniture ensured that feudal titles passed from father to eldest son in most European societies. Primogeniture led to high unemployment among the upper classes with two options – employment with the Church or a mercenary soldier. This gave rise to an increase of members in the Church service and a large mercenary class of knight-soldiers, who fought for the spoils of war. The rich Roman Church gave lifelong employment and a comfortable standard of living – with prestige. Mercenaries were used in the crusades, for waging colonial wars, capture of slaves. The effects of primogeniture were widespread and a cause for concern.

…disinherited sons, victims of the law of primogeniture, victimised others in turn: they became, as we shall presently see, public robbers; … In our own time, much of the corruption in church and state, and not a little of the vice festering in the bosom of society, are traceable to the same cause (primogeniture). (Bold letters, ellipsis, brackets mine)

The decline in feudalism and primogeniture coincided with the rise of capitalism.

By the seventeenth century a number of factors have begun to undermine primogeniture as a system of inheritance. The most important is the development of capitalism and the concomitant rise of the bourgeoisie which challenges the hegemony of the landed aristocracy …

Russia provides an interesting case study. Due to its vibrant agricultural sector, lack of access to slaves and colonies, Russia’s industrialization was delayed. Post-slavery Europe, with a shortage of labour was a ready market for agricultural output. Russia used its agricultural output to finance Russian industrialization.

The abolition of feudal serfdom was designed to accelerate the industrialization of the economy by compelling the peasantry to raise crops on a commercial basis, the idea being that the profits from exporting grain would be used to import foreign technology and machinery. In many ways, the strategy seems to have been successful: grain exports increased fivefold between 1860 and 1900, while manufacturing activity expanded rapidly. Further measures in 1906, known as the Stolypin Agrarian Reform, helped to establish large, consolidated farms in place of some of the many small-scale peasant holdings.

As a NYT article notes,

Russia occupies an unusual niche in the global food chain. Before the Russian Revolution and the subsequent forced collectivization of farming under Stalin, it was the largest grain exporting nation in the world.

Wandering Gypsies increased discontent with ‘free’ lifestyle. Result – persecution of the Gypsies. This discontent paved the way for the communist ‘revolution’. Lenin happened to be there.

Capitalism

Feudal employers reacted to demands for greater labour freedom with increased imports of slaves. In turn, slavery created labour surplus – leading to depressed wages for labour. Free labour moved to cities where industry could absorb this low-cost labour. Capitalists wanted and got ‘laissez faire’ capitalism – which was a ‘coda’ for unlimited slavery. The restrictions on laissez faire were actually restrictions on slaves.

Decreasing demand for agricultural labour due to slavery led to depressed wages. Unemployed peasants entered the trades – and revolutions.

Slavery depressed wages and increased unemployment – giving rise to a new class of journeymen. Possibly, even freemasons cults were born in similar manner – where ‘free’ masons withheld knowledge to stay free from serfdom. This unified organization was the object of both envy and resentment – resulting in persecution by the Church and authorities.

This lessened responsibility for land-owner employers and increased the number of employers – with greater freedom to exploit foreign markets. Lowered entry barriers with lesser labour welfare responsibility increased competition levels among the employers.

Colonial loot from South America and India, Canada and Australia reduced cost of capital to hasten industrialization. Thus ‘zero’ cost capital from colonial loot and ‘zero’ cost slave labour drove the engines of industrial Europe. Patronage by large land owners, financial backing by emerging ‘industrialists’ gave the educated and qualified, the resources to focus on innovation and invention.

Marxist 'critque' of Capitalism!

Marxist 'critque' of Capitalism!

This was the ‘Golden Age of Capitalism.’ As slavery receded (due to many revolts and rebellions) in 19th century, Capitalism also faded. Slavery and colonialism allowed creation greater concentration of wealth – in exchange for greater perceived freedom. Two aspects led to decline of capitalism. One, was receding slavery, and secondly lack of new colonies and peoples to loot, pillage, and commit genocides.

After the eclipse of Capitalism, the West needed a new economic model.

A popular writer waxing nostalgic for this ‘golden age’ was Ayn Rand. Her glossing over slavery, her token objections to segregation were reminiscent of an age gone by. Her disregard for family structures was her contribution to ‘modernizing’ capitalism. The economic contribution of slavery to the wealth of the West, the creation of patronage structures for ‘innovation and invention’ and the loot from the colonies were all absent from Ayn Rand’s hagiography on capitalism.

Communism

Faced with a crisis of labour due to abolition of slavery, Europe (specially England) started looking at alternatives for a new economic model. They selected a fugitive theorist, whose theories were creating unrest in mainland Europe.

Communism awarded a monopoly over slavery to one employer – the State. Single employer, total monopoly (on labour, political power, economic resources), impress the slaves with the glory and future – were the elements of the new political system that Europe devised. This was the only Western ideology that was born out of design. With the demise of slave trafficking, 1832 in Britain; slavery re-introduced in 1802 by France) Europe was concerned about labour and industry.

France, Brussels, Britain etc. took the lead and provided patronage to Karl Marx and Frederick Engels to devise another system – an alternate to slavery. In the next few years, their publications found eager publishers and sold well. Their books, Economic and Philosophical Manuscripts of 1844, The Communist Manifesto (published in) 1848 laid the basis for an alternative to capitalism. Marx and Engels received significant royalties from the sale of their books – and could survive on earnings from their writing careers.

Obviously, Communism could not besold’ to the designated victims, that they were the new slaves. It had to be ‘bought’ willingly by the ‘target audience’ as yet another ‘level of freedom’. Slavery sold as a promise of freedom – You have nothing to lose but your chains.

Socialism

Socialism

Socialism

Most European countries moved away from the slavery-capitalism-colonialism model during the 1900-1950 period. The new political construct was Socialism – which gave freedom to labor to change employers. This was a major improvement for labour – from earlier slavery and serfdom model, where employer change was not possible.

In turn, the number of employers was restricted, so that there was not too much competition for labour or markets. The burden of labour welfare was imposed on the limited number of employers – in return for limited competition for customers and employees. This resulted in a high tax burden on employers – in return for lesser competition, high trade barriers, non-tariff barriers.

A twist in this socialist model was the Bretton Woods mechanism. At one stroke this created ‘invisible’ reverse flows from the poor to the rich countries – with minuscule but ‘visible’ show of flows from the rich to the poor.

Same difference ...!

Same difference ...!

Individual Variations

There are individual variations in each country – based on its own history. Some countries, like Russia, China, Vietnam, Albania moved directly from feudal system to Communist State model. Japan, Germany and Italy managed to move faster to socialism, directly from feudalism – with a short period of capitalism.

Non European Models

These political structures were propagated very aggressively by their respective adherents. Modern academia touted these structures as the only matrix in which countries can be slotted.

All socialists now ...

All socialists now ...

India for instance is very different – where non-State reform has played a very major role in crime, policing (JP’s dacoit reform), land reform (Vinoba Bhave’s Bhoodan movement), political change (JP’s Sampoorna Kranti movement). After the economic buffer from Bombay High oil discovery in 1974, the Indian State has certainly, steadily shed various aspects of its colonial legacy. More importantly, India did not go through the slavery-colonialism-capitalism route at all.

It has instead inching towards a republican, (largely) market driven, democratic, declining role of State, multi-ethnic-religion-linguistic political model which is unique in modern history. What India needs to do is to one decrease the colonial inheritances further and two, give this country model a name. The lack of an academic name, slots India as a socialist country – where as it has been reducing the features of a socialist State.

Bretton Woods – What they wont teach or tell you …

Posted in Business, Current Affairs, Environment, European History, Gold Reserves, History, Media, Uncategorized by Anuraag Sanghi on October 8, 2008

Prequel to Bretton

Keynes’ first book that gained him some following in the world of economics was the ‘Indian Currency And Finance‘. This work examined in significant detail the workings of the Indian currency system. The Indian colonial currency system was anchored to the British pound – and various other local Indian currencies were in use – and even legal tender in large parts of India.

G5 will take on G8

G5 will take on G8

Thus there was always great pressure on Britain to keep the British pound on gold standard – as there was always the option for the common citizen to use coinage from other kingdoms and princely states. In 1900, the British colonial Government tried to enforce circulation of British sovereigns in India – which failed.

Of course, gold importation into India was severely restricted. The gold blockade against India was effective as the major gold production centres were under Anglo Saxon occupation (Australia, Canada, USA, South Africa, Rhodesia, Ghana, etc.).

The Birth Of Bretton Woods

As WW2 was winding down, the Anglo Saxon Bloc went ahead and devised the Bretton Woods system. This system was a copy of the Indian currency system – where instead of the British pound, the American dollar became the Index currency.

Instead of milking only India, the Anglo Saxon Bloc could now milk the whole world. Keynes noted how America when dealing ‘her dependencies, she has herself imitated almost slavishly, India.’ So, when the time came, it took very little time for the US to scale the Indian currency model on the rest of the world.

The success of Bretton Woods-I depended on blockading India from buying gold – which was effectively done by Morarji Desai. (I wonder why the ungrateful Anglo Saxon Bloc has not made a statue of Morarji Desai at Mount Rushmore). He has after all been the single biggest contributor to their prosperity for the last 50 years.

What was Bretton Woods

The world stamped their approval on Bretton Woods.

As per the agreement, all countries of the world would use the dollar as the index currency – for international trade and foreign exchange reserves and for nominal exchange rate fixation. This system allowed the USA to print ‘excess’ dollars. These ‘excess’ initially in limited quantities, but soon at an accelerating pace. Today the USA has flooded the world (and the USA markets with more than US$50 trillion) of excess currency. The housing bubble, the M&A frenzy, the credit crisis are by products of this printing of dollars. With these excess dollars, the US consumers and others bought what they wanted – and US went ahead and printed some more dollars.

Bearing the dollars cross

Bearing the dollar's cross

Behind Bretton Woods – Gold

If the Bretton Woods system was defective, unfair, weighted et al, why was it accepted? Why did the world believe that only the Anglo-Saxon Bloc could deliver.

Why?

In 1944, the Anglo Saxon Bloc (countries, colonies and companies) controlled more than 90% of gold production and reserves. The largest private gold reserve in the world, India was still a British colony. Hence, it was fait accompli.

The Cornering Of Gold Supplies

For the last 150 years, the ABC countries (America, Australia, Britain, Canada) comprising the Anglo Saxon bloc (countries, colonies and companies) have controlled 90% of the world’s gold production. Till (a large part of) India was a British Colony, they also controlled more than 50% of the above-the-ground gold reserves. This gave them absolute liberty to print depreciating currency and flood the world pieces of paper(called dollars and pounds), manipulate the world financial system and keep other populations poor and backward.

Who paid for the dollar hegemony

Who paid for the dollar hegemony

Bretton Woods – Broken Promises

The promise of the Bretton Woods system was stability. USA promised the world that they will redeem the US dollar for gold – at a rate of US$35. Anyone could (except Indians and Americans) buy an ounce of gold from the USA for US$35 – managed by the the London Pool system. Within 20 years, the first promise was broken. Redemptions of dollar for gold to individuals was stopped in 1968 (March15th).

The Bretton Woods system worked for 20 years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

His break with Indira Gandhi began when the Finance portfolio was taken away from him. Morarji Desai’s ban on gold imports allowed the sham of Bretton Woods to continue for 20 years. His adamant attitude on gold cost the government popularity and electoral losses – and the Indian economy and Indians much more. Was it a co-incidence that many of the RBI functionaries later got (and even now) plum postings at LSE (IG Patel) and BN Aadarkar (IMF)?

The Bretton Woods Twins

Bretton Woods also gave rise to the the Bretton Woods twins (the IMF and the World Bank) which are run and managed by the Anglo Saxon countries. The ABC countries, their client states like Japan, OECD, etc. have 65% of the voting rights. With this huge voting majority, less than 5% of the world’s population (of the ABC countries) decide how 95% of the world lives.

The Bretton Woods twins (the IMF and the World Bank) been significant failures. Aid (spelt, ironically, very similarly to AIDS) projects are approved – which are tied to imports from these Anglo Saxon countries.

Bretton Woods Fraud

The Bretton Woods system was technically created by more than 700 delegates from the 44 allied nations. But the match was fixed.

It was designed by the Anglo-Saxon countries (America, Australia, Britain, Canada), for the benefit of the Anglo Saxon countries. Notice how much Britain resisted and finally did not join the European Currency Union. This system has swamped the world with accelerating inflow of dollars (American, Australian, Canadian) and British pounds. Producers and exporters are left with vast reserves of a depreciating currencies.

Nixon Chop And Bush Whack

From the Nixon Chop to the Bush Whack final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also the US Vice President during the 8 years of Reagan Presidency.

The bend in the flow

The bend in the flow

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

The Nixon Chop

On August 15th, 1971, President Nixon after a two day huddle with 15 advisers at Camp David, delivered the Nixon Chop to the world. The Nixon chop (my name for this event), one month after his China breakthrough, cut the convertibility peg of US$35 to gold as US gold reserves were severely depleted.

The French had been regularly redeeming gold for their dollar earnings – and for this ‘perfidy’ the US had not forgiven France. This was much like the pre-WW2 French methodology of devaluation, new peg, old debt for new gold routine which got the US hackles up. Many decades have passed since these redemption by France, and the new French President, Sarkozy believes it is now possible to renew US-French relations again.

On the opposite side of the world, a beleaguered Indian Prime Minister was celebrating 24 years of Independence with a “ship-to-mouth” economy, dependent on PL-480 grain. Private gold reserves in the Indian economy after nearly 25 years of post-colonial rule, were steadily rising. Over the next 10 years, the western world (and most of the rest) blamed OPEC for post-1971 inflation, gold scaled US$800 an ounce; the Hunt Brothers launched their bid to corner the silver market; stagflation made an entry and Soviet power grew. Nixon Chop , itself the result of many years of gold reserves erosion, was one in many steps that brought the US$ to its knees.

Can the dollar be fixed?
Can the dollar be fixed?

On August 15th, 1971, the world got the Nixon Chop – where even Governments could not redeem dollar holdings. The dollar was put on float. In little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories links), gold prices were managed and brought down to US$225 per ounce – but still 80% reduction in value of dollar value. Foreign reserves of poor countries got eroded. It was a gigantic fraud on the world – especially the poor, developing countries. And the fraud continues.

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don’t see is that the Anglo Saxon bloc with 80% of the world’s gold production in a choke-hold does what it wants.

On December 31st, 1974, nearly forty years after Roosevelt nationalized private American gold stocks, Americans were allowed to invest in gold again. Again Indian liberalization (1991) of gold imports happened a good 17 years after the US laws (1974) were liberalized. I wonder, how that was tied.

And that is what has happened for the last 60 years. Of course, all good (for the Anglo-Saxon Bloc) things come to an end. And so has Bretton Woods – I & II.

China And India – 2 Books, Two Views, Take a 2ndlook

Posted in Current Affairs, Indo Pak Relations, Media, Uncategorized by Anuraag Sanghi on September 29, 2008

The India China Relationship

To most in India, China is possibly the biggest defence threat and is a ‘feared’ competitor.

However, the 2ndlook blog has discounted the ‘threat of the Chinese dragon’ based on an active engagement with China – and not benign neglect.

No less than Arun Shourie has weighed in on the ‘Chinese threat’ side of perception. This puts the 2ndlook blog in a minority. In the 2ndlook blog dated May 31st 2008, there was a significant analysis of the China-India face off. More on that later.

Two Books – Opposite Themes

In the meantime, Arun Shourie’s book has evoked scant interest – excerpted below.

… important parallels, as Shourie points out, between the situation pre-1962 and the situation now. Border talks are regressing, Chinese claims on Indian territories are becoming publicly assertive, Chinese cross-border incursions are rising, and India’s China policy is becoming feckless … India has always been on the defensive against a country that first moved its frontiers hundreds of miles south by annexing Tibet, then furtively nibbled at Indian territories before waging open war, and now lays claims to additional Indian territories. By contrast, on neuralgic subjects like Tibet, Beijing’s public language still matches the crudeness and callousness with which it sought in 1962, in Premier Zhou Enlai’s words, to “teach India a lesson”. (Stagecraft and Statecraft: Lessons for today’s India from the 1962 Chinese invasion).

The lack of coverage in Indian media for an important book like this is a matter of concern. At the same time, another book on a similar subject, from an American perspective is vastly different – and closer to the views of the 2ndlook blog.

This one, … (by) Ms Shirk (former deputy assistant secretary of state who dealt with China) … should become a must read for every Indian who cowers and cringes at the very mention of China. For, as Shirk shows, there is no reason to do so. The core of her message is that only one thing has changed over the last two decades: instead of being a paper tiger, China has become a cardboard tiger.

… recall how China responded to the Tibetan uprising just before the Olympics to get a sense of its vulnerabilities and the resultant paranoia. The Chinese embassy in New Delhi was surrounded by three rings of defence against attacks by Tibetan women. You don’t become a super power merely because you have some money and some guns.

the Chinese leadership no longer has to fear the foreign devil who speaks English; it has to fear the average Chinaman who does so. She also shows how there is no shortage in the variety of unrests in China: you name a type of discontent, and it is there. But unlike India, China has not had the sense to develop political outlets for the head of steam that is building up. The only way it knows of dealing with mass discontent is repression.

Shirk also deals with the aspect that the Chinese leadership is most anxious to hide: a split not in the ranks of the party, but in the highest echelons of the leadership. And the second- and third-level Chinese leadership knows this. The drive against corruption, for example, when mayors are hanged, is seen as just a tea leaf, a straw in the wind that the big boys are pulling in opposite directions.

contrary to popular belief, especially in India, China can’t get along with anyone. Japan, Taiwan, Korea, India all have difficulties with a neighbour whose word can’t be trusted and who tends to rely more on strong-arm tactics than diplomacy. This, too, seems to be a part of the Communist party repertoire, merely their way.

As we see in this book, when push comes to shove, China always backs down. Its leaders simply don’t have the stomach for a confrontation because they don’t know how it will turn out for them personally. That’s the key thing: the personal interests of the Chinese communist leaders. It now always comes before the country’s interests, or is at least seen as being coterminous with it. (Book Review of FRAGILE SUPERPOWER by Susan L Shirk).

The Chinese Paper Dragon

The Chinese success is similar story. Much like USSR’s break-up, the Chinese monolith is more fragile than apparent. Apart from the usual suspects of democracy, economic disparities, social upheavals, etc, there are 3 factors, which most Chinese analysts miss.

One, the Tibetan’s are held together by force – and no one imagines that this holding them together by force, can be in perpetuity. The Muslim provinces of Xinjiang (another one-third of China) is usually ignored. These issues are usually minimized by the current strength with which China holds these provinces together.

But possibly, the biggest issue is the share of revenues of the Chinese central governments.

Secondly, the Chinese Central Government commands less than 25% of the total tax revenues – and the 75% goes to provinces. This, possibly is why the Chinese Government cannot reduce cigarette usage in China. Most expenditures on health, education, pension, unemployment, housing etc. are borne by the local government – and hence there is patchwork of systems which run across China. Most of executions and imprisonments of bureaucrats (including the Mao’s Cultural Revolution) is to demonstrate central authority. The PLA is the only factor that keeps China together. A Chinese Lech Walesa or a Nelson Mandela could unwind China very quickly.

Significantly, and thirdly, the Chinese diaspora and Western MNCs are biggest investors in China – and also the main beneficiaries. This currently keeps resentments of the local Chinese under control – as the neighbour is not getting much richer. But at one stage the domestic Chinese will want to greater say and control over the Chinese economy. He may not be happy with just a well paying job and abundant, low quality goods.

India vs China

On these three counts India scores significantly better than China. India’s problems with Kashmir are a British legacy, an external creation – as is the North East problem, to a degree. India’s significant issue (probably temporary) is the Naxalite problem. India’s central Government has greater control and share over total revenues – than the Chinese. India’s recent economic and political successes are entirely home bred – with the exception of remittances from the expat workers in the Middle East.

2ndlook blog proposes a different way out of this India-China stalemate.

The Detritus

As various colonial powers were forced out of various colonies, left behind was the garbage of colonialism. This post-colonial debris has become the ballast, that is dragging down many newly de-colonized countries. And it is the stereotypes and images of each other that seem to be determining the relationships between the two countries.

India

Vietnam suffered from a prolonged war (1956-1976) – and finally peace had a chance after 20 years of war. Korea remains divided. The Cyprus problem between Turkey, Greece and the Cypriots has been simmering for nearly 100 years. The role of the Anglo Saxon Bloc, in Indonesia, the overthrow of Sukarno, installation of Suharto and finally the secession of East Timor is another excellent example. The Israeli-Palestinian conflict (1935 onwards) will soon enter its 75th year. The entire Arab-Israeli-Palestinian conflict is a creation of the Anglo-French-American axis. The many other issues in the West Asia and Africa are living testimony of the Western gift to the modern world.

Closer home is the Kashmir problem. After 60 years of negotiations, India-Pakistan relations have remained hostage to the Kashmir issue. Similarly, between China and India, the border issues remain 60 years after the eviction of Britain from India.

We Hereby Resolve

Let us (India and China) decide that for the next 60 years, these legacy border issues will remain in cold storage! There are far more pressing issues that need our attention. Let us focus on those issues. We have a lot of catching up to do.

Nixon Chop And Bush Whack

Posted in Business, Current Affairs, European History, Gold Reserves, History, Indo Pak Relations by Anuraag Sanghi on September 24, 2008
The Bush Era Balanced Score Card

The Bush Era Balanced Score Card

The Dollar-Oil Tango

From the Nixon Chop to the Bush Whack, in the final months of Dubya’s Presidency, the Bush Family has been in the Presidency for 12 years of the 37 years. And in positions of lesser power for the entire period. George Bush Sr. was the US representative to the UN during the Nixon era – when Nixon made his infamous remarks to Kissinger about the ‘sanctimonious Indians’ who had pissed on us (the US) on the Vietnam War’. George Bush Sr. was also with the CIA and the US Vice President during the 8 years of Reagan Presidency.

During these 37 years – between the Nixon Chop (1971) and the Bush Whack (2008), the world has changed significantly.

Every Few Years

Every 10-25 years, the world seems to go from one financial crisis to another. Trucks full of economic analysis follow each crisis – and everyone agrees after each meltdown, that there will not be another catastrophe. What the poor (and not so poor) economists don’t see is that the Anglo Saxon bloc with 80% of the world’s gold production in a choke-hold does what it wants. And the second element – they also control and influence 80% of the Oil production.

Why has this system been such a failure? Simple!

Oil & Dollars

After the Nixon Chop, the OPEC went into a huddle. After all they were selling a limited resource against payment through pieces of paper. After the Nixon Chop, the chain of events, post 1970 developments were as follows: –

The international monetary developments as of 15 August 1971 prompted OPEC, in its meeting in Beirut on 22 September 1971, to call for negotiations with the oil companies holding concessions in member countries. By 14 January 1972 there was no progress in negotiations. OPEC, in spite of a total loss of more than 11.5%, was asking for a hike of only 8.57% –- which was the loss in value of the US dollar relative to gold. In fact, what OPEC was asking for was very close to what the International Maritime Conference had, at the time, announced: a minimum increase in the dollar freight rates of 8.6%. Finally, an agreement was reached in Geneva on 20 January 1972 that provided an immediate increase in the posted prices by 8.49%. The settlement also included provisions for further adjustments until 1975 based on an index that reflected changes in the dollar and other key currencies.

Concurrently, on October 17th 1973, OAPEC members (OAPEC, consisting of the Arab members of OPEC plus Egypt and Syria) announced embargo against shipping oil to all countries supporting Israel in the the ongoing Yom Kippur War against Syria, Egypt and Iraq – i.e. the United States, Western Europe, and Japan. Non Arab OPEC members decided to leverage their power to raise world oil prices, after the failure of negotiations with the Oil Companies (then popularly called “Seven Sisters”).

The targeted countries responded with a wide variety of new, and mostly permanent, initiatives to contain their further dependency. Europe tied with Russia for the trans-Europe gas pipeline. North Sea Oil production was ramped up. Norway and other countries also increased their output. Thus while not fully dependent on the OPEC, this served an important purpose – to demonstrate that the West and OPEC were on opposite sides, whereas the truth was opposite.

OPEC and West – Partners In Loot

Actually, the West saw a transfer of wealth, all over again from the Third World, via the OPEC Petro Dollars. The dollar regime was significantly beneficial to the Western World in general – and US in particular. The Oil dollar linkage allowed the US to create global reserves with other countries of US$6 trillion in just foreign exchange reserves. Other debt and trade add upto another US$14 trillion.

Approx US$20 trillion is the amount of dollars that the OPEC has managed to transfer from the Third World to the West. But the unhappy outcome of the Oil Crisis of the ’73 (for the West) was the riches and power of the Arab countries. What followed was a rising crescendo of Islamic Demonization for the last 37 years.

Oil output is currently over-valued as Western producers and OPEC jointly rig up prices. The Rest of the world pays (recently its is largely India and China) – and pays in dollars which again benefits the West.

The West limits its own output to keep up the prices. OPEC has the advantage of high oil prices. The petro dollars are reinvested back in the West. Finally, OPEC gained – and so did the West.

Who paid!

Mostly poor Indians and Chinese. And even poorer Africans.

Bush Whacked

Bush Whacked

War, Oil , Dollars & The Middle East

The justifications for invading Iraq given by the USA, were finally found to be false. The invasion was finally not related to 9/11. Iraq did not have any WMDs either. So, what was were the reasons for Iraqi invasion?

A ring side observer, former Indian Ambassador to Iraq, Ranjit Singh Kalha’s book, ‘The Ultimate Prize’ makes some interesting observations on the genesis of the Iraq invasion.

“The first mistake Saddam made was when he decided in October 2000 to move away from using US dollars as the currency for oil exports, …under the UN ‘oil-for-food’ programme.” Saddam also converted Iraq’s USD 10 billion reserve fund from US dollars to Euros. “Although this act of Saddam was not of very great economic significance in overall terms, it represented for the United States a direct challenge to the use of the dollar as a currency for transactions,” … in his just-released book, “The Ultimate Prize”. Iran followed Saddam’s move and Venezuela started initiating barter deals outside the dollar system. “If most other Organisation of Petroleum Exporting Countries (OPEC) followed the Iraqi and Iranian example, the stability of the US dollar would be at stake,” Kalha, who was posted in Baghdad during the tumultuous 1992-94 period, says.

Sidelined to the (Indian) National Human Rights Commission, Kalha’s book was also buried under a mound of silence, not reviewed and made no impression in the popular media. One press release by PTI was recycled by The Economic Times, Outlook, Sahara Samay, The Hindu, India Today, and NDTV. Google and Live Search hardly turned up anything. Yahoo.co.in showed some these links.

Bush Whacking Iraq

Bush Whacking Iraq

Iran and Venezuela followed Iraq and also moved away from designating oil sales in US dollars. After the Bretton Woods-I collapse, instead of gold, it was oil that anchored the US currency. West Asian Oil producers agreed to denominate oil in dollars after the Nixon Chop – and in turn there was no real resistance by the West to OPEC oil cartel increase oil prices by a factor of 10.

Western Oil companies also acted in concert with OPEC by limiting their own oil production. From around 4 dollars a barrel to US$40. The West was relatively unscathed – as these petro-dollars were re-invested back in the West. Europe managed to insulate itself with the North Sea Oil (Britain, Norway were the main producers along with Germany and Denmark. Europe also concluded a deal with Russia for a pipeline into Europe. North Sea Oil Production peaked in 1999-2000 with a 6 million barrels per day.

India was also not highly impacted as Bombay High started production in 1974. It was the rest of the Third World which paid this bill.

Bretton Woods – I & II

As Ron Paul noted,

“The agreement with OPEC in the 1970s to price oil in dollars has provided tremendous artificial strength to the dollar as the preeminent reserve currency. This has created a universal demand for the dollar, and soaks up the huge number of new dollars generated each year.”

The Bretton Woods-I system worked for from 1945-1971 (26 years) years because Indians were not allowed to buy gold. India’s finance minster during that crucial period, Morarji Desai, (allegedly on CIA payroll during Lyndon Johnson’s Presidency 1963-1968), presented a record 10 budgets, between February 1958, up to 1967.

Bretton Woods-II, based on oil-dollar anchor, worked for another 35 years (1973-2008) till now. Oil exploration is a 5-10 year investment. Oil should be made another commodity. An easy option is to create a Republic of Pacific Islands – Haiti, Cuba, Grenada, and other West Indies. These islands can become vast oil production centres – that will help them raise their economies and can feed Asia with oil, peacefully.

The third currency bloc is essential – and it can happen only if India and South Africa decide to make it happen.

India’s Pakistan Fixation

Posted in Current Affairs, History, Indo Pak Relations, Media, Uncategorized by Anuraag Sanghi on September 13, 2008

India‘s Pakistan Fixation

September 11th, 2008. US President George Bush permitted US troops to take offensive actions against its ally, Pakistan – in the US War against terror! Indian news channels were elated – and it must have taken Arnab Goswami (of Times Now) a lot of self-restraint not to do a gig. It took 4 generations of Indian (and now part of Pakistan) leaders to throw out the West from the sub-continent. 60 years later, India is celebrating the return of the West, to the sub-continent. The most potent symbol of this is India’s Pakistan Fixation.

The Pakistan Fixation is a a cover-up of India’s laziness or lack of resolve. I don’t really believe that Pakistan has the focus or the persistence to do half the things that India imagines Pakistan is doing. In the last 20 years, India has lowered its guard – and has become further fixated on the Pakistan bogey. The Pakistan Fixation hides Indian ineptness at confronting the root of Pakistani problem – USA, amongst others.

Two-fer-One Offer

'Two-fer-One' Offer

The Detritus

As Britain (and the West) was forced out of various colonies, left behind was the garbage of colonialism. This post-colonial debris has become the ballast, that is dragging down many newly de-colonized countries.

Vietnam suffered from a prolonged war (1956-1976) – and finally peace had a chance after 20 years of war. Korea remains divided. The Cyprus problem between Turkey, Greece and the Cypriots has been simmering for nearly 100 years. The role of the Anglo Saxon Bloc, in Indonesia, the overthrow of Sukarno, installation of Suharto and finally the secession of East Timor is another excellent example. The many issues in the West Asia and Africa are living testimony to the British gift to the modern world. The entire Arab-Israeli-Palestinian conflict is a creation of the Anglo-French-American axis.

The clue is in the body language

The clue is in the body language

Closer home is the Kashmir problem. After 60 years of negotiations, India-Pakistan relations have remained hostage to the Kashmir issue. India and Pakistan must remember that the Pakistani armies and the Indian armies at the time of the 1948 Indo-Pak War, were under the command of British Generals. India’s Governor General , in 1948 was Mountbatten, who was removed after this mischief was done.

Things become more difficult when leaders like Asif Ali Zardari dismiss written agreements with his coalition partners, PML (N) headed by Nawaz Sharf, claiming agreements were not”holy like the holy Koran.” Or when General Musharraf starts a Kargil War with a rogue army that is no longer under the command of the civilian authority.

India and Islamic Demonization

In 1990, an ‘orientalist’ writer from Belgium, Koenraad Elst, waded into India. His books on Hinduism, Aryan culture, Islamic history in India were avidly lapped up by a section which was eager for Western approval. Elst’s blatant anti-Islamic agenda warmed the cockles of many hearts. LK Advani released Elst’s book in India. BJP’s proximity has given Elst’s ideas high visibility which imbalances the discussion.

In the siege mentality during 1989-1995, one fine day, a US Senator, Larry Pressler, announced at a press conference in New Delhi, that India was encircled by an Islamic coalition of 9 countries. The proxy war against India by Pakistan was at its height. This ‘Islamic Crescent’ (as Larry Pressler called it) first stunned India – and then stampeded its foreign policy.

Larry Pressler was seen as a friend of India – by Indians. He got some well-paying corporate board room positions – and he has kept himself in the back ground after that. But his 1992 press conference still rings in Indian ears. And Pressler’s proximity to Indian liberal establishment (which is close to both the BJP and the Congress), flanks India’s movement towards Western paranoia from the opposite direction. (Strangely, Google search, Yahoo search, Indiatimes search, websites of newspapers like The Hindu, cannot find any newspaper coverage for that press conference.)

Soon after Pressler’s press conference, India upgraded its relationship with Israel, (practically) abandoned the Palestinians (not to ignore West Asia’s own desire to cosy with the West) – and started getting closer to the US. The Vajpayee Government (with a historic tendency) continued with this rush to embrace the US.

Western Outsourcing Of Their Animosities

Western Outsourcing Of Their Animosities

The Islamic Crescent

While the activities of these Western ‘friends’, sensitised India to the Islamic ‘threat’, it more importantly, has lowered the Indian guard against the resurgent Western encirclement.

American forces are based in Afghanistan, Pakistan, Diego Garcia – and of course Iraq. The wolf pack behaviour of pursuit of quarry does not allow co-operation between packs – but within the pack itself. So, while the Islamic crescent perception has some validity, the threat of The Star and The Cross is equal, if not greater.

Sometimes, ‘friends’ are more dangerous than a recognised opposition.

India’s Record – And the Reversal

India was in the vanguard of opposition to Apartheid, neo-colonialism, (especially in the Middle East). Especially, when you consider the Khilafat Movement by Gandhiji. However, in the last 15 years, under the garb of ‘geo-strategic interests /initiatives /imperatives’, changed ‘super power equations,’ ‘uni-polar world,’ India is losing its moral initiative – and equally importantly its long term interests. It is getting sucked into uni-directional relationships – which are going down.

Equally, India should not acquire the practices or memberships that have made recent history bloody and exploitative. While many civilizations have stumbled (Greeks, Romans, Egypt) and fallen by the wayside, India’s many comebacks, have been based on never losing moral stature – and it is late in the day to start down that path. Manmohan Singh’s desperate desire to ‘sit at at the high table in the comity of nations’ is both repugnant and undesirable.

Islamic Demonization

There is too much tradition and culture for India to go down the demonization path, but recent developments do call for consciousness on this account. Is India falling prey to Western case-building and logic for Islamic demonization? Is the ‘Islamic demonisation’ an attempt by the ‘wolf pack’ to separate a member of the herd and then go for the kill – like Iraq. Is India getting co-opted in this ‘wolf pack hunt’?

India’s intellectual vacuity is best demonstrated in this post by Gurcharan Das, an ex-MNC CEO, who started writing in various newspapers. His latest post in The Times Of India, plumbs the depth of misdirected warmth towards Western democracies. He writes,

thanks to the treaty, which paved the way for closer ties with the Western democracies. The West stood by India during its times of trouble and eventually India went on to balance power in Asia and the world”.

Gurcharan Das’ gullibility on matters of international relations is worth a bucketful of tears. Why would any country (let us keep Western powers aside for a minute) support India (or any other country) – except if it in their self interest? After 300 years of pillage, loot, murder, genocide, slavery are Western nations going to suddenly change become Good Samaritans, Mr.Das?

Your naivete, Shrimaan Das, makes me squirm.

Indo-Pak Cricket – Use The Experts

This India Pakistan Cricketing relationship is very healthy – and has been managed by four people. Of course, there has been no case study, or a book or even a news report on this partnership. So some of this is my perception based on media interaction.

The four people in this complex relationship have been Jagmohan Dalmiya and Shahriyar Khan at the administration level. Between these two, they have managed a consensus between the Asian cricketing countries and South Africa. Jagmohan Dalmiya has a business background – and a career in cricket administration. Shahriyar Khan is a career diplomat and also a cricket administrator.

The other two are Sunil Gavaskar and Imran Khan – two well known and respected players in each of the countries. Between, these four, they have managed this complex cricketing relationship. Some of it is visible – but mostly, below the line. Especially, significant is the management of agreements.

Another cricketer showed us the way of getting over the Pakistan Fixation. For decades, India had a mental block while playing cricket against Pakistan. It took a Sourav Ganguly to break that fixation in the Indo-Pak Test Series in 2004.

The Learning

Now, if these four can overcome the complex political situation and the minefield of history, is there a learning for others? Especially, for those who manage the India-Pakistan political relationship.

Hidden in this cricketing relationship, is the solution to the sub-continental peace.

India’s Relations With Other Neighbours

If India’s problems were limited to Pakistan, possibly, there is some merit to India’s Pakistan Fixation. India’s relations with its other neighbours are also in trouble. Its relations with Bangladesh are at a historic low. Relations with Sri Lanka are back from the brink. Nepal is the new fire in the sub-continent.

What should India do?

A foreign affairs columnist, writing for financial daily, Jyoti Malhotra says,

How should Delhi treat its smaller and economically weak neighbours? There are many answers to that, but one thought remains central. The rest of the world will never take India seriously until it is able to bring the rest of South Asia on its side. Going out of your way to be nice to old friends could be one way of doing it.

The Root Of This Problem

The state of inter-government relations in South Asia is a sign of lazy Indian diplomatic corps (the IFS) which considers all these neighbourhood postings as ‘punishment’ postings. The ‘best’ of IFS corps wants postings to Western capitals. Like the IAS, the IFS is another albatross around India’s neck.

A large part of India’s Foreign Ministry budget goes towards Western engagement (for proof, look at the dubious Festivals of India in USA, France, Russia, Britain, etc). Instead if the same money was spent in the sub-continent, it would have been better spent. The huge monies spent on Western embassies are mis directed. It would be ideal if those Western embassies were Spartan, frugal (I should actually say Gandhian) – and our the money saved was invested in the sub-continent.

India’s Western engagements are at a direct cost of involving and managing the neighbourhood relationships. The terrorism related issues have an element of Indian element. After all, who propped up Bhindranwale? The treatment of J&K Governments by the Rajiv and Indira Gandhi do not bear repetition. The birth of LTTE was midwifed by India. I have not followed the Naga and ULFA story as closely to get a clearer fix – but there is an element of ‘games’ in there also. And these ‘games’ have a habit of getting out of hand! It is not a co-incidence that John Nash suffered from schizophrenia.

Hence, our favorite game is blame game – blame the neighbours and get on with the Western pre-occupation. The Pakistani involvement in various crimes of omission and commission could be better understood if our relations with our other neighbours were better. It is India’s superior attitude that makes us believe that we know better. No neighbour would want to willingly embrace China! After all, India offers a template that others can use – and China offers a road map that points downhill. It is India’s superior attitude which has made it attractive for our neighbours to embrace China.

For this reason, again SAARC has been bombast – and little action. It is our diplomatic corps that are found wanting. The SAARC opportunities in the economic area are huge – and history is on our side. It is our Western pre-occupation and Pakistani Fixation which are to blame for the slow uptake on SAARC. SAARC has become a case of all potential and no performance.

LaRouche's Triple Curve

Western Adventurism – The Imperative

Without slavery, the West does not enjoy the manpower edge that it had till 1900. The loss of colonies from 1900-1950 has taken away the resource base and captive markets for Western dominance.

Now with the collapse of Bretton Woods, the opacity in financial systems is diminished. The welfare state has put a significant burden on an aging Western population.

With fading prowess on one side, and a resurgent Asia on the other, the US and EU are now at the cross roads. Is the West prepared to quietly fade away in the sunset?

Unlikely.

What Have We Achieved

60 years on, there is nothing to show for these border disputes. Dutifully, the Indians, Pakistanis and the Chinese glare at each other – over colonial border issues. These border issues are less than peripheral to our nations. We have allowed the past to hold our future as a hostage.

The past is extracting a ransom that we cannot afford to pay. Let us recognize our past for what it is – empty ballast that is dragging us down. Having achieved nothing on this front for the last 60 years, why do we wish to continue down that path? We need to see that going downhill is always easier than climbing the Himalayas.

Post Script

As I write this, comes news that New Delhi has been the latest in the series of Bomb blasts. Is it following a clockwise pattern? Bangalore, Ahmedabad, New Delhi – and then Kolkatta or is it Patna or Bhubaneshwar? On August 15th, I was in New Delhi. Large parts of New Delhi were paralysed. Traffic did not move for more than 4 hours. More than 100,000 vehicles were out on New Delhi roads – packed likes sardines. Was that dry run?

This still does not change my thesis. Behind Pakistan …

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