Today's Stories

May 14, 2009

Michael Hudson
Where Russia Went Wrong

May 13, 2009

Brian M. Downing
The Road Out of Iraq

Gareth Porter
Gen. McChrystal and Afghanistan

Robert Sandels
Obama and Latin America: No Light, All Tunnel

Ricardo Alarcón
Cuba: Measure of a Revolution

Eric Walberg
NATO in Georgia: Fun and Games

Dave Lindorff
The Sinking of GM: When Captains of Industry Don't Go Down with the Ship

Deepak Tripathi
A Culture of Abuse

William S. Lind
Back to the Balkans: Hillary and the Sleeping Dragon

Kevin Zeese
A Populist Health Care Rebellion

Franklin Lamb
Lebanon: From Perdition to Redemption?

Website of the Day
Beth McIntosh: The Wild Ride

May 12, 2009

Gary Leupp
The Bomb Iran Faction

Richard Neville
The AfPak Blues: Corpses of the Kids by the Truckload

Wajahat Ali
Obama Chooses a Reliable Dictatorship

Dean Baker
The Banker Boys Are Alright! Time to End the Bailouts

Franklin Lamb
What Palestinian Refugees Need From Lebanon's Elections

Norman Solomon
A Progressive Challenge to Jane Harman

Paul Craig Roberts
Beware the Hate Crimes Bill

Lisa M. Hamilton
Let's Grow a New Crop of Farmers

Bob Fitrakis /
Harvey Wasserman:
Why Isn't Obama Turning to Credit Unions?

David Macaray
Wading Through the Grassroots

Website of the Day
Electronic Police States

May 11, 2009

Andrea Peacock
No Justice for Libby

Michael Hudson
Gordon Brown Spills the Beans on the IMF

Patrick Cockburn
Who Killed 120 Civilians?

Ralph Nader
The Single-Payer Taboo

John Kelly
Pseudoscience and Wrongful Convictions in the War on Drugs

Saul Landau
Cuba's Biggest "Crime"

Dave Lindorff
Blaming the Dead Victims

David Michael Green
Get Obama

Anthony Papa
Gov. David Paterson Does the Right Thing

Paul Krassner
Jon Stewart and Truman, the War Criminal

Website of the Day
Generational Homelessness

May 8-10, 2009

Alexander Cockburn
Dead Souls

Jeffrey St. Clair
Echoes of Amchitka: 40 Years After America's Biggest Nuclear Blast, the Damage Continues

Paul Wolf
Obama's Axis of Obedience

Steve Niva
Iraq: The Return of the Suicide Bombers

Neve Gordon
Jailed for Caring

Mike Whitney
Has Bernanke Pulled the Economy Back From the Brink?

Warren Hinckle
DiFi vs. Marilyn Chambers

Serge Halimi
In Praise of Revolutions

Gareth Porter
The Pakistan Conundrum

Sharon Smith
Something Stinks at Whole Foods

Andy Worthington
Obama's New Gitmo Policy: Back to the Bush Era?

Mark Weisbrot
Hillary and Latin America

Rosa Miriam Elizalde Cyber Command and Cyber Dissident: More of the Same?

David Macaray
Recessions and Labor Unions

Missy Beattie
The Real Housewives of War

Ron Jacobs
Mothers and War

Diane Farsetta
About Face on Pentagon Pundits?

Ramzy Baroud
War Without Context

Phelie Maguire
Living Next to Settlers

Robert Fantina
Party of Rush

Kevin Zeese
A Break From the Past in the Drug War?

Margaret Flowers, MD
The Baucus 8: Why We Risked Arrest for Single-Payer

Dave Lindorff
The Joke's on Us

Richard Rhames
Revenge of the Tundra

Ben Sonnenberg
Let the Right One In: A Vampire Visits a Welfare State

Kim Nicolini
Sin Nombre: Giving Faces to People Who Don't Have Names

Stephen Martin
The Riotous Action of the Complete Banker

Charles R. Larson
The Commencement Address You'll Never Hear

David Yearsley
Jean Ferrard, Organist Extraordinary

Lorenzo Wolff
Death Cab for Cutie: Surprisingly Familiar

Poets' Basement
G.S. Heiligschreib and David Farrelly

Website of the Weekend
Zombie Bank

May 7, 2009

Paul Craig Roberts
Criminalizing Criticism of Israel

Chris Floyd
A Full-Court Press for Pakistan War

Andy Worthington
Mixed Messages on Torture

Alan Farago
No Place Like Home: a Stress Test for Land Use, Not Just Banks

Ray McGovern
Deux ex Machina on Torture?

Dave Lindorff
Stain Removal: Impeaching the Torture Judge

Eric Toussaint /
Damien Millet
Why is There Rampant Famine in the 21st Century?

Ana M. Malinow, MD
Why We Need a Single-Payer Health Care System

Jeff Armstrong
Freeing Leonard Peltier: What Would Warren Harding Do?

Norman Solomon
A Green New Deal

Website of the Day
The End of Lake Mead?

May 6, 2009

Doug Peacock
The Fate of the Yellowstone Grizzly

Patrick Cockburn
Afghans to Obama: Get Out, Take Karzai With You

Richard Neville
The Torturer's Apprentice

Manuel Garcia, Jr.
To Power a Nation: Nuclear Bombs or Sunshine?

Winslow T. Wheeler
Of Pork and Baloney: Obama's Defense Budget

Deepak Tripathi
Pakistan in Crisis

Stephen Soldz
A "Natural Reaction": APA Ethics Policy-Maker Endorses Torture

Reuven Kaminer
Nice is Not Enough: Obama vs. Netanyahu and Lieberman

David Macaray
The Chrysler-UAW Deal

Kevin Zeese
Why We Were Arrested at the Senate Finance Committee Hearings

Marjorie Cohn
Stanford Antiwar Alums Call for War Crimes Investigation of Condoleezza Rice

Coalition for an Ethical Psychology
Investigate Psychologist and Health Provider Complicity in Torture

Website of the Day
Who's Behind the Financial Meltdown?

May 5, 2009

William Blum
Torture and Mr. Obama

Uri Avnery
Netanyahu's Plan

Steven Higgs
Autism and Toxic Pollution

Dean Baker
Why Economists Should Learn Arithmetic

Daniel Wolff
The Education of Rachel Carson

Sibel Edmonds
The Broken Congress

Carole King Klein
A New Chance to Save the Northern Rockies

Fidel Castro
Giving One's All

Belén Fernández
Oil and Aguardiente in the Ecuadoran Elections

Dan Bacher
Schwarzenegger's Big Lie About Fish vs. Jobs

Website of the Day
"I Married Isis on the Fifth Day of May"

May 4, 2009

James G. Abourezk
The AIPAC Spy Case

Jeff Leys
Obama's War Budget

Patrick Cockburn
Afghan Ayatollahs Press Marital Rape Law

Andy Worthington
A Start on Guantánamo, But Not Enough

Jaime Avilés
Mexico's Plague-Bringers

David Swanson
An Even Worse Bybee Memo

Paul Craig Roberts
Working with Jack Kemp

P. Sainath
Celeb Crusades and the Death of Politics

Eugenia Tsao
Canada's Obama and the Cult of the Prof

Benjamin Dangl
Protest and Rubber Bullets in Paraquay

Sami Al-Arian
Mourning William Moffitt

Website of the Day
"Soldiers Are Cutting Us Down": Kent State, May 4, 1970

May 1 - 3, 2009

Alexander Cockburn
Game-Changers: Specter Jumps, Souter Quits

Gary Leupp
Dropping the AIPAC Spying Case

Peter Linebaugh
The Key to the Bastille

Jeffrey St. Clair /
Joshua Frank:
Half Life of a Toxic War: Iraq's Wrecked Environment

C. G. Estabrook
Minion of the Long War

Patrick Cockburn
Kabul's New Elite

Mike Whitney
Economy on the Ropes

Pierre Sprey /
Winslow Wheeler
What "Sweeping Overhaul" of the Pentagon?

Andy Worthington
Al-Marri's Plea Deal: Dictatorial Powers Unchallenged

Mairead Maguire
Stand Up to Israeli Apartheid: a Letter to Obama From a Nobel Peace Prize Laureate

Nadia Hijab
The Israel Boycott is Biting

Diane Farsetta
Life, Death and Water Policy

Michael Calderón-Zaks
The Déjà Vu Flu: Why Much of the Discussion About Swine Flu is Racist

Richard Rhames
When Piggies Come Home to Roost: Swine Flu and the Industrial Meat Gulags

Russell Mokhiber
Inside the Beltway Baucus

Ramzy Baroud
Clinton's Unpromising Start

Rannie Amiri
Understanding Lebanon's June Elections

Deb Reich
No Talking, Dammit!

Steven Higgs
Indiana Criminalizes Dissent: Roadblocks on the NAFTA Highway

Brian Cloughley
Malice in Blunderland

David Michael Green
The Party's Over

Farzana Versey
Sex, Swat and Susan Boyle

Jim Goodman
Think Before You Eat: Agriculture and the Environment

Carl Finamore
New Prescription for a Healthy Union Movement

Christopher Brauchli
The Sounds of Silence: the Texas Option

Susie Day
The Real Cause of Unemployment: Employees!

David Yearsley
Nuts Over Beethoven

Lorenzo Wolff
Three Minutes of Perfection

Peter Stone Brown
Dancing with Dylan

Poets' Basement Dominguez, Orloski and Springate

Website of the Weekend
May Day Europe

April 30, 2009

Ellen Cantarow
Obama and "Two States": Seamless Continuity From Bush Time

Dana L. Cloud
The McCarthyism That Horowitz Built

Paul W. Lovinger /
Jeannette Hassberg
A Nation of Laws

Binoy Kampmark
Swine at the Trough: the Business of Pandemics

Brian Downing
The Perils of Modernization in Afghanistan

Frank Snepp
Tortured by the Past

David Swanson
The Wrong Torture Question

Conn Hallinan
The Coming Asian Storm

Ron Jacobs
Not Dead Yet: an Interview with Jerry Gordon on the State of the Antiwar Movement

John Goekler
The Only Path to a Middle East Picnic?

Jasmine L. Tyler /
Anthony Papa
An End to Crack/Powder Cocaine Sentencing Disparity?

Website of the Day
Emergency Petition: Stop Coal Industry Intimidation of Activists

April 29, 2009

Joann Wypijewski
Death at Work in America

Patrick Cockburn
The Taliban's Roads to Kabul

Andy Worthington
Cheney's Twisted World

Chris Floyd
The Specter Diversion

Dave Lindorff
No More Excuses: a Specter is Haunting the Democrats

Jeremy Scahill
The Nuremberg Truth and Reconciliation Commission?

Doug Henwood
Zionist Lobby Targets Another Tenured Professor: an Interview with William Robinson

Michael Hudson
Will Iceland be Handed Over to a New Gang of Kleptocrats?

Russell Mokhiber
My Ron Pollack Problem--And Yours

Eric Toussaint
Ecuador at the Crossroads

Website of the Day
An Interview with Leslie and Andrew Cockburn on "American Casino"

April 28, 2009

Uri Avnery
A Little Red Light: On Israeli Fascism

Jeremy Scahill
Obama's Iraq: the Picture of Dorian Gray

Dean Baker
The Perfect Gift for Wall Street: a Financial Transactions Tax

Michael D. Yates
At the Factory Gate

Conn Hallinan
Georgian Plots? Saakavili's "Order No. 2"

John Stauber
Beyond MoveOn

Tom Barry
The Failed Border Security Initiative

Harvey Wasserman
Who Pays for America's Chernobyl Roulette?

Jeff Nygaard
Pirates, Profits and Propaganda

Frederico Fuentes
Why the U.S. Still Hates Cuba

Website of the Day
The Man Behind the Hood

April 27, 2009

Pam Martens
The Far Right's Plot to Capture New Hampshire

Patrick Cockburn
Torture? It Probably Killed More Americans Than 9/11

Andrew J. Bacevich Guardian of the Status Quo: Obama's Sins of Omission

Mitu Sengupta
The Bloodbath in Sri Lanka

Franklin Lamb
Hillary Does Beirut: The 165-Minute Swoop-In

Firmin DeBrabander
Crimes of Economic Madness

Dave Lindorff
Wide Open to Pandemic?

Russell Mokhiber
How Corrupt is That?

Mike Whitney
Pinter's Message to Obama

Mark Weisbrot
Overhauling the IMF

Rev. José M. Tirado
Iceland's New Dawn: How the Right Got Trounced

Website of the Day
American Casino

April 24-26, 2009

Alexander Cockburn
Putting the Bush Years on Trial

Marjorie Cohn
Torture Used to Try to Link Saddam with 9/11

Andy Worthington
Who Ordered the Torture of Abu Zubaydah?

Jeremy Scahill
Are Leading Democrats Afraid of a Special Prosecutor to Investigate Torture?

Chris Floyd
Top of the Heap: the Democrats' Teachable Moment on Torture

Mike Whitney
A Housing Crash Update

Anthony DiMaggio
Obama and the Housing Crisis

Chris Kromm
Democratic Lobbyists Key to Fight Against Employee Free Choice Act

Saul Landau
Seventeen Months in "the Hole:" an Interview with the Leader of the Cuban Five

Dave Lindorff
Free John Walker Lindh

Greg Moses
The Debt Looters

Joshua Frank
Calling for a Coal Moratorium: an Interview with Ted Nace

Fred Gardner
Collective Farming and the Lynch Case

Manuel Garcia, Jr.
Homework, Testing and Stealth Apartheid in Education

David Michael Green
Of Tea Parties and Teleprompters

Ramzy Baroud
Middle East Spies: a New Front in Gaza's Conflict

Rannie Amiri
Mubarak's Expanding Enemies List

Laura Carlsen
Mr. President, Calderon is Not Mexico

Richard Morse
The Haitian People Need a Lobbyist

Nikolas Kozloff
Protecting the Bald Eagle: a Task Now Falling to ... Hugo Chavez?

Kent Peterson
The Fight to Save Mexico's Mangroves

Robert Bryce
The Ethanol Scammers Rent a General

Niranjan Ramakrishnan The Financial Experts

Ron Jacobs
Torture is More Than Just "Harsh Tactics"

Richard Rhames
Roman Legends, Book Burning and History's Hunt

Stephen Martin
Wherefore Art Thou American Dream?

David Yearsley
Rodgers, Hammerstein, Michener and Nostalgia's Clammy Embrace

Poets' Basement
Khalil and Mankh

Website of the Weekend
Doug and Andrea Peacock on Grizzlies and Edward Abbey

April 23, 2009

Eamonn Fingleton
How the Wall Street Journal and the New York Times Buried the Madoff Scandal for at Least Four Years

Ray McGovern
Obama Plays Hamlet on Torture

Michael Ratner
The Torture Commission Trap

Alan Farago
The Quicksand Economy

Rob Larson
Business Gets Carded

Nadia Hijab
The Real Heroes of Durban

Fawzia Afzal-Khan
Deconstructing the Taliban

Dave Lindorff
Are Members of Congress Being Blackmailed?

Helen Redmond
Selling Out Single-Payer: the "Public Option" Con

Adam Federman
The Battle Over New York's Marcellus Shale

Website of the Day
An Interactive Map of Vanishing Employment Across the Country

April 22, 2009

Chris Floyd
The Fatal Thread: Torture, War and the Imperial Project

Joanne Mariner
Torture Evidence and Terror Blacklists

Vijay Prashad
Obama's Afghan Plan: Fracturing the Antiwar Movement

Gareth Porter
U.S. Lacks Capacity to Win Over Afghans

Dean Baker
The Tyranny of Bad Economics

Peter Morici
Housing Sales and Fixing the Economy

Winslow T. Wheeler
Eliminating Bad Pentagon Habits

Barucha Calamity Peller
The Battle to Take Back the New School

Harvey Wasserman
Chernobyl Could Happen Here

Aisha Brown /
Dedrick Muhammad
White Privilege in the Americas

Teo Ballvé
Obama's Feel Good Meeting with Colombia's Uribe

Website of the Day
Ahmedinejad's Durban Speech: What He Actually Said

April 21, 2009

Randy Rowland
Lindy Blake's Great Escape

Dave Lindorff
Jay Bybee's Conspiracy to Torture

Fidel Castro
The Secret Summit

George McGovern
Pull Out of Iraq This Year

Greg Moses
The Unemployment Channel

Benjamin Dangl
Argentina Remembers

Sonia Nettnin
Saving Lives in Gaza

Frank Barat
The Death of Bassem: a Shooting at the Wall in Bil'n

Binoy Kampmark
Legal Purgatory and John Demjanjuk

John V. Walsh
Code Red for Single Payer

David Macaray
SAG Should be Praised, Not Assailed

Website of the Day
Bonus Man: For Executive Assholes Everywhere

April 20, 2009

Mike Whitney
Housing Bust Comes Roaring Back, Worse Than Ever

Andrea Peacock
Histrionics and Legalisms in Missoula

Henry A. Giroux
Ten Years After Columbine: the Tragedy of Youth Deepens

Liaquat Ali Khan
Drone Attacks on Pakistan's Indigenous Tribes

Fred Gardner
Obama's DoJ Backs Prosecution of Medical Marijuana Providers

Stephen Soldz
Obama, Blair, Panetta and the Torture Memos: Praising Moral Cowards, Ignoring Real Heroes

Nadia Hijab
Obama's Multi-Polar Middle East

Dave Lindorff
The Meeting in Trinidad

P. Sainath
India's Press Nixes "R" Word

Nelson P Valdés
A Modest (Transition) Proposal to Obama

Mark Engler
American Empire Foreclosed?

Belén Fernández
The FARC Can't Dance

Website of the Day
Dear Mr. Buffett...

May 14, 2009

The Collapse of the Neoliberal Model

Where Russia Went Wrong

By MICHAEL HUDSON

Last week Izvestiya published an interview with former Premier Yevgeny Primakov, now president of the Chamber of Commerce and Industry. (Johnson’s Russia List published a translation on May 8). The discussion centered on a universal problem – what China and other Asian countries, as well as OPEC and Europe should do with the export surpluses and proceeds mounting up in their central banks from mortgaging or selling off their real estate and industry. Or to put matters in retrospect, what should they have done to avoid the neoliberal monetarist ideology that governments should do nothing at all with these surpluses, not even use them to fuel economic growth.

If U.S. diplomats had their way, countries would simply let their foreign exchange reserves accumulate in the form of loans to the United States, in the form of Treasury bonds and other securities. Mr. Primakov has long opposed what his interviewer called “the fetishization of the Stabilization Fund – our beloved ‘piggy bank.’” Urging that it be spent on “primary needs,” to buy tangible capital goods, undertake infrastructure investment and finance imports to rebuild Russia’s dismantled manufacturing sector, he explained, “I was always opposed to having the Stabilization Fund considered something saved for an emergency. Money needs to be spent inside the country. Naturally not all of it. Some part should certainly be kept as a reserve.” But it was Vladimir Putin’s own “initiative to divide the Stabilization Fund into the Reserve Fund and the Fund for Well-Being. The latter was to be used to develop the economy and for social needs. It is too bad that they did not get to it in time.”

Ever since the Asian financial crisis of 1997, countries that have built up foreign exchange reserves have found themselves targets of global raiders. The tactic has been to sell a currency short, that is, to promise to deliver a few hundred million (or nowadays a few billion dollars) of it to a buyer (usually the central bank) near the current price, and then drive down the exchange rate by selling. The central bank tries in vain to absorb the selling wave, until finally its reserves are exhausted and the currency depreciates. This is how George Soros broke the Bank of England – and what he denies having done in Malaysia during the 1997 crisis.

Under Prime Minister Dr. Mahathir Mohammed, Malaysia protected itself by not making its currency available for foreign speculators to buy and cover their short-sale position. But most other countries have passively built up reserves in an attempt to outspend potential raiders. Today, however, underlying trends are using up these reserves. The global financial crisis has ended the real estate bubble that enabled many countries to cover their trade deficits by selling off their real estate or simply taking out foreign-currency mortgages against it. The Baltics and other post-Soviet countries in particular have been financing their trade deficits by fostering a property bubble that has led real estate owners to borrow mortgage credit from Western banks. In the absence of putting in place a viable domestic banking system, Scandinavian, Austrian and other Western banks are the only institutions able to create credit. Now that the global real estate bubble has burst, this foreign exchange credit is no longer forthcoming. The financial End Time has arrived. Rather than facing the new state of affairs – chronic trade deficits are now over-layered with heavy foreign-debt service. Countries that have built up foreign reserves are running them down.

Many countries are trying to delay the Day of Judgment by borrowing from the IMF, dissipating the proceeds by subsidizing capital flight by investors and speculators who can see that exchange rates for chronic trade-deficit countries are about to plunge steeply. Russia has joined in expending its foreign-exchange reserves to stabilize the ruble in the face of capital flight and foreign speculative selling.

In retrospect this appears to have been inevitable, and indeed was widely foreseen by critics of the neoliberal Washington Consensus. The reserves built up during the oil-price run-up last year and the recent boom in minerals prices are being spent without having used the proceeds to develop its industry so as to replace imports and develop export markets for what used to be a high-technology economy prior to the Yeltsin “reforms” (that is, dismantling of industry). Russia continued to rely almost exclusively on raw materials and oil exports. “In our country,” explained Mr. Primakov, “40% of GDP was created and is created through raw material exports. The share of industrial enterprises engaged in development and introduction of new technologies barely comes to 10%.” The problem is that having given away its mineral resources and other public enterprises to insiders and their cronies, Russia has relied on what they choose to leave in the country from their exports and sale of shares in their companies. “The prolonged refusal to inject the capital being built up into the real economy and its direct investment in American treasury securities instead of its use inside the country to diversify the economy. … As a result, Russia will most likely come out of the recession in the second echelon – after the developed countries.”

The alternative, Mr. Primakov said, would have been to use the Stabilization Fund “to switch the economy to the innovation track and for its restructuring. ‘Patching the holes does not help for long.’” But he the then-minister of economics, German Gref, fought off attempts “to cannibalize the Stabilization Fund.” Under the kleptocracy the money was left to be stolen.

The problem is where to go from here. Neoliberal “monetarist” ideology conjures up the threat of inflation to deter public spending. This IMF and World Bank propaganda blocked Russia from investing in industry during the Yeltsin disaster of the mid-1990s. “Fear of inflation,” Mr. Primakov explained, “was named as the main reason that huge amounts of money lay idle. They said that inflation would soar if what had been built up began to be spent. At one of the representative conferences, I asked: ‘What kind of inflation can there be in building roads? The work would just spur on production of concrete, cement, and metal ...’ But our financial experts have a monetarist view of inflation. They are afraid of releasing an additional money supply into circulation. But in reality inflation rises much more strongly from that fact that we have colossal monopolization.” Trade dependency leads the ruble’s exchange rate to weaken, raising the price of imports and thus aggravating the inflation – precisely the opposite of what Washington Consensus orthodoxy insists.

I myself have heard Scandinavian and other European officials make this argument in almost the same words, and it has persuaded many Third World governments to do nothing with their raw-materials export proceeds but “save for a rainy day,” not promote domestic self-sufficiency in food and consumer goods. The argument seems maddeningly stupid, because it pretends that all government spending is inherently inflationary, adding to the spending stream without producing any production to absorb it. The practical effect is to block countries from growing in the way that the United States and other developed nations have done – by investing in infrastructure and other capital formation, with the government providing basic infrastructure at cost or even freely (as in the case of roads) so as to minimize the cost of living and doing business. Instead of having investment in place to show for the foreign exchange earned by exporting raw materials (and selling off ownership of national assets), countries that follow this policy are now seeing their reserves drained rapidly. And as far as government spending is concerned, the economic collapse is increasing public budget deficits after all!

Contrast this behavior with Pres. Obama’s February 17 economic stimulus plan for the United States. When the Izvestiya interviewer asked Mr. Primakov what he thought about it, he noted that: “In America investments in ‘intellect’ have been increased – in science, progressive technologies, and education, and expenditures for medicine are rising. ... Doesn’t it seem to you that our package of anti-crisis measures is less ambitious? … This law should be considered a plan of investment related to the American economy and society entering the 21st century and a new technological platform of competitiveness. That is why expenditures for science have been increased. The same thing, undoubtedly, with human capital.”

But that is not the Russian strategy today, Mr. Primakov complained. Russia has been living in the short run. “The TPP (Chamber of Commerce and Industry) conducted a poll in 720 firms. Only a third of the managers said that they associate getting out of the crisis with producing new output. The rest are counting on staff cutbacks. If the ministries are given the assignment of reducing expenditures at their discretion, the first thing they sacrifice is scientific research and experimental design development. However, research and development should be classified as protected articles of any budget.”

So much for the free-market policy of automatic stabilizers and do-nothing government policy, leaving choice in the hands of the nation’s financial oligarchs. The situation calls for structural change, coordinated by the government. “If a plane is having trouble, the autopilot cannot handle an unusual situation. Only the personal skills of the pilot can save the ship. It is similar with the economy. Autopilot does not work in extreme conditions. … Self-regulation of the economy disappears as a factor.”

When asked about the oligarchs keeping their funds abroad rather than investing them in domestic industry, Mr. Primakov replied that Russian officials did not “take into account that banks’ interests do not coincide with the interests of the real sector of the economy. … It should have been explained that after receiving state support, in using it banks no longer [should] act as commercial structures but as agents of the state. It should have been watched to make sure that the state capital was not commingled with the banks’ other assets in common accounts but was marked off with a red line. But that was not done. Probably some people were lobbying for the banks’ interests at that point. And the bankers hurriedly began to convert the rubles into hard currency and export it abroad and build up their capitalization” instead of “extend[ing] credit to the real sector of the economy.” Oversight was done poorly, and Russia did not even use its public funds to finance capital investment. But when it comes to what to do at this late point, Mr. Primakov acknowledged, “Punishing the banks for what happened means destroying them.”

The problem is how to restructure the financial system to make it serve the objectives of industrial growth rather than merely facilitating capital flight. Throughout the world financial interests have taken control of government and used neoliberal policies to promote their own gain-seeking – financial gains without industrialization or agricultural self-sufficiency. Betting against one’s own currency is more remunerative than making the effort to invest in capital equipment and develop markets for new output. So unemployment and domestic budget deficits are soaring. The neoliberal failure to distinguish between productive and merely extractive or speculative forms of gain seeking has created a travesty of the kind of wealth creation that Adam Smith described in The Wealth of Nations. The financialization of economies has been decoupled from tangible capital investment to expand employment and productive powers.

Central to any discussion of financialization is the fact that credit creation has been monopolized in the United States and Britain for their own national gain. What makes this interview so relevant is that Mr. Primakov is speaking as head of Russia’s shrunken manufacturing sector. Russia “practically pushes big business outside our borders,” Mr. Primakov noted, “to borrow money from banks there in places where the interest rates are incomparably lower.” Just as the nation was becoming underdeveloped industrially, so it and other post-Soviet economies have failed to create domestic financial institutions to provide the credit that is needed to finance circulation between producers and consumers. As a result, these countries are simply fooling themselves to imagine “that credit can continue to be borrowed abroad ‘for the crisis.’ It is not out of the question that for the first time in 10 years, the state itself will even go begging for a loan again.” So a byproduct of today’s crisis will be to put the world outside of the creditor nations on rations, as it were.

Mr. Primakov was asked what he thought of Moscow Mayor Yuri Luzhkov’s tracing “the sources of the present Russian crisis [to] the 1990s, when the liberal government permitted the ‘stealing, squandering, and distribution of natural resources and the largest sectors of industry to those who could not support their development.’” He replied that there were many smart managers among the oligarchy’s ranks, but acknowledged that “It is a different question that in buying up enterprises (mainly raw material ones) for a song and obtaining mega-profits, many from the beginning preferred not to raise the efficiency of production, but to skim off the cream. … Why think about some processing of raw materials if they bring in big money anyway in natural form? The state should have entered that niche long ago. To have done everything to make certain that some of the petrodollars were pumped into science-intensive industry.”

Contrasting Russia’s failure to industrialize with that of China and its anticipated 8% economic growth in 2009, Mr. Primakov noted: “China exports ready-made products, while in our country a strong raw material flow was traditional.” Now that Western economies are shrinking, China is “moving a large part of the ready-made goods to the domestic market. At the same time, they are trying to raise the population's solvent demand. On this basis the plants and factories will continue to operate and the economy will work. We cannot do that. If raw materials are moved to the domestic market, consumers of such vast volumes will not be found.” Increasing domestic purchasing power will “merely step up imports.” That is the price that Russia is now paying for having failed to sponsor “structural changes in the economy.”

I have cited these long quotations because they have been made by a man who once had a chance to steer Russia along different lines than the economically suicidal death trap promoted by the Harvard Boys and their Washington Consensus. It is the trap into which the Baltics and other countries have fallen. A decade ago Mr. Primakov proposed an alternative, based on a resource-rent tax to finance Russia’s re-industrialization. The government would have collected the “free lunch” of its raw materials sales proceeds in excess of their low costs of production. Instead of retaining the revenue in the public domain from the decades of capital investment that the Soviet government had made to develop its mineral, oil and gas resources, instead of using it to finance economic modernization, Russia simply gave it away to political insiders and let them sell off shares in these resources to foreign buyers on the cheap. Anatoly Chubais and his Western “free-market” backers promised that giving property to individuals in this way would transform them into forward-looking Western-style industrialists. Instead, it turned them into Westernized finance capitalists.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

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Notes from the Dark Side
of the Earth
By Jeffrey St. Clair

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Humanitarian Imperialism
By Jean Bricmont