A Capitalist War?

Some people dispute the claim that the US attack on Iraq is motivated — at least in part — by the desire for Iraq’s oil. What can we say about them? They may be hopelessly naïve about the public sector in general. Some of the same people who are pleased to finger greed and avarice as the root cause of all accounting problems on Wall Street are loath to consider that similar impulses might inspire politicians and bureaucrats as well.

It could also be that those who deny an oil connection aren’t reading the newspapers. After all, it was the New York Times that carried no less than two large articles on Iraq’s oil resources in its prominent "Week in Review" section (November 3), one of which contained a map of reserves. The reporter noted: "112 billion barrels of proven reserves is also something nobody can overlook…. Iraq’s u2018ability to generate oil’ is always somewhere on the table, even if not in so many words."

Or consider the MSNBC story that ran on November 11, "Iraqi Oil, American Bonanza?," which says: "Iraq’s vast oil reserves remain a powerful prize for global oil companies…. Such a massive rebuilding effort represents a huge opportunity for the companies chosen to tackle it…. It’s unlikely that American firms will be left empty-handed if the U.S. follows through on threats of military action."

What does oil have to do with the Bush administration? The MSNBC reporter gives the reader that information too: "American oil companies are also hoping to benefit from the industry’s unusually strong ties to the White House. President Bush, himself the former head of a Texas oil company, has pursued a national energy policy that relies on aggressively expanding new sources of oil. Vice President Dick Cheney is the former CEO of oil services giant Halliburton. National security adviser Condoleezza Rice is a former director of Chevron."

Was Lenin Right?

The connection between the war on Iraq and the desire for oil raises an important ideological consideration. Millions of college students are taught the Leninist idea that capitalist economies are inherently imperialistic. This is supposedly because exploitation exhausts capital values in the domestic economy, and hence capital owners must relentlessly seek to replenish their funds through grabbing foreign resources. It takes war to avoid the final crisis of capitalism, in this view.

College students might be forgiven for thinking there is some basis for this in the real world. In American history up to the present day, the onset of war tends to track the onset of economic doldrums. Might war be just the ticket to revive a moribund capitalist class? Recall that it was then-secretary of state James Baker who said the first Iraq war was all about “jobs, jobs, jobs.” The line between the owners of capital and the warfare state has never been that clean in American history, and it has arguably never been as conspicuously blurred as it is today.

The view that sustaining capitalism requires aggressive war is usually said to originate with V.I. Lenin as a way of rescuing Marxism from a serious problem. The problem was that capitalism was not collapsing in the 19th century. It was growing more robust and more productive, and the workers were getting richer, not poorer — all facts that weighed heavily against the Marxist historical trajectory. The Leninist answer to the puzzle was that capitalism was surviving only thanks to its military aggression. The prosperity of the West originated in blood.

Capitalist Imperialism

But was Lenin really the originator of the theory? Not at all. The capitalists beat him to it. As Murray N. Rothbard explains in his History of Money and Banking in the United States (2002), the idea began with a group of Republican Party theoreticians during the late Gilded Age, who were concerned that the falling rate of profits would end up crippling capitalism and that the only salvation was a forced opening of foreign markets to US exports. These were the brain trusters of Theodore Roosevelt, who ended up heralding US aggression against Spain in 1898.

The fear of falling profit stemmed from the mistaken embrace of the theory of David Ricardo that the rate of profit is determined by the stock of capital investment. In fact, the rate of profit, over the long run, is determined by the rate of time preference in society. All else being equal, as savings rise, profits fall, which doesn’t at all spell disaster for capitalism. It could in fact be an indication of a robust, competitive economy in which no business interest can count on a sure thing in the marketplace.

But the theorists of imperialism didn’t believe it. Economist Charles Conant developed the theory in a series of essays beginning in 1896, including "The Economic Basis of Imperialism" which appeared in the North American Review in 1898. In this piece, Conant argued that there is too much savings in advanced countries, too much production, and not enough consumption, and this was crowding out profitable investment opportunities for the largest corporations.

The best way to find new consumers and resources, he said, is to go abroad, using force, if necessary, to open up markets. He further said that the US industrial trusts then dominant on the landscape could be useful in promoting and waging war. This would further cartelize American industry and increase profits. Hence, said Conant, "concentration of power, in order to permit prompt and efficient action, will be an almost essential factor in the struggle for world empire."

Yes, that sounds exactly like the version of reality given to us by Lenin, only the judgment is reversed. While Lenin found imperialism for profit morally wrong, Conant found it praiseworthy, an inspiring plan of action. Indeed, many of his contemporaries also did. Boston’s US Investor argued that war is necessary to keep capital at work. An "enlarged field for its product must be discovered," and the best source "is to be found among the semi-civilized and barbarian races."

By the turn of the century, this view had largely caught on in the economics profession, with even the eminent theorist John Bates Clark of Columbia praising imperialism for providing American business "with an even larger and more permanent profit."

Today’s Profits of War

Today the same creed is captured in the pithy if chilling mantra of the New York Times columnist Thomas Friedman: “The hidden hand of the market will never work without a hidden fist” (The Lexus and the Olive Tree, p. 464). Lenin himself couldn’t have said it better. Joseph Nye of Harvard fleshes out the point: "To ignore the role of military security in an era of economic and information growth is like forgetting the importance of oxygen to our breathing.”

Brink Lindsey of the Cato Institute puts a different spin on the same line. His goal in Against the Dead Hand is to convince military imperialists that international trade can be an important ally in the fight for global dominance. Instead of seeing trade across borders as the extension of voluntary exchange among individuals, he sees global trade as a weapon to use against foreign states that do not conform to the DC ideal. In Lindsey’s view, foreign trade, managed by the US through treaties and bureaucracies, is merely a way to wage the fight against terrorism “with maximum effectiveness.”

Historian Robert Kagan is even more brutally clear: “Good ideas and technologies also need a strong power that promotes those ideas by example and protects those ideas by winning on the battlefield.”

So there you have it: if you want to use a cell phone, you have to be willing to send your son to die for the US imperium in a war against Iraq! And if you do lose your son in battle, know that this was necessary in order to shore up US domination of the world economy. This is the creed of the global social democrats who champion both military and economic globalization.

How far we’ve come from George Washington’s “great rule of conduct for us, in regard to foreign nations”: extend commercial relations but avoid political connections. He continues: “Harmony, liberal intercourse with all nations, are recommended by policy, humanity, and interest. But even our commercial policy should hold an equal and impartial hand; neither seeking nor granting exclusive favors or preferences; consulting the natural course of things; diffusing and diversifying by gentle means the streams of commerce, but forcing nothing.”

Peace and Freedom

With the communists and capitalists agreeing that war and profit are mutually dependent, how is a believer in peace and freedom to respond? While war can result in profit for a few, it is not the case that the entire system of a free economy depends on such wartime profiteering. Indeed, war comes at the expense of alternative uses of resources. To the extent that people are taxed to pay for armaments, property is diverted from its most valuable uses to purposes of destruction.

Indeed, the idea that commerce and war are allies is a complete perversion of the old liberal tradition. The first theorists of commerce from the 16th century through the 18th century saw that a most meritorious aspect of commerce is its link to freedom and peace, that commerce made it possible for people to cooperate rather than fight. It made armaments and war less necessary, not more.

What about the need to open foreign markets? The expansion of markets and the division of labor is always a wonderful thing. The more people involved in the overarching business of economic life, the greater the prospects for wealth creation. But force is hardly the best means to promote the cooperative and peaceful activity of trade, any more than it is a good idea to steal your neighbor’s mower to improve lawn care on your block. Bitterness and acrimony is never good business, to say nothing of death and destruction.

In any case, the problem in Iraq is not that Iraq is somehow withholding its oil from the market. For ten years, and even before the first war on Iraq, its oil supplies have been available to the world. In one of the great ironies of modern war history, the first Bush administration waged war, it said, to keep Iraq from withholding its oil resources from world markets. The US then proceeded to enforce a decade of sanctions that withheld most of Iraq’s oil reserves from the market (thereby increasing prices and profits for US firms).

We are somehow not permitted to say this, but the solution to Iraq is at hand. Repeal sanctions immediately. Trade with Iraq. Oil prices would fall dramatically. Hatred of the US would abate. The plight of Iraq could no longer be used as exhibit A in terrorist recruitment drives. The only downside, of course, is that US companies connected to the Bush administration would not be the owners of the oil fields, but instead would have to compete with other producers in supplying consumers with oil.

Well, so be it. The idea of free enterprise is that everyone gets a chance, and no one industry or group of producers enjoys special privileges. Through competition and cooperation, but never violence, the living standards of everyone rise and we all enjoy more of the life we want to live. It’s not hard to understand, except in the corridors of the Bush administration, where theorists have linked arms with Leninists in the belief that war is always good, and always necessary, for business.

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