Seven True Things You Can’t Say on TV

We have been told that the War on Terrorism will be a long war and that it will be unconventional-and it has been. Declaring war on one enemy, then bombing a country known to have no ties to the enemy is certainly unconventional. But of course, there were those alleged financial ties: Saddam Hussein, whom Osama Bin Laden regards as a bitter enemy, nonetheless was supposedly funding him. Hence, while the US claimed to be implementing a policy that would seriously weaken Al Queda by cutting off its source of funds, it seemed logical to extend a sort-of radical asset seizure to Iraq as well. Then that rationalization was replaced by that of curbing WMD–Saddam might not only be giving Al Queda the money to pursue its campaign of terror, but also supply it directly with the means. But if it were true that anti-terrorism was the real objective, and a “follow-the-money” approach one of the most important tools, it seems to have failed abysmally. Now there is talk of a regrouped and reinvigorated Al Queda. Yet no one seems to be subjecting this “follow-the-money” approach, which, even before the Patriot Act extended it considerably, was already a source of gross human rights abuses even within the US, to any critical assessment. No one seems to be asking how well it worked, what the unintended consequences might have been, and whether or not it is the right approach. Nor has it been properly placed in context, namely a long-standing US program of waging financial and economic war against designated enemies (most noteably now, those with Arabic surnames) to achieve poitical and economic objectives.

In order to evaluate what presumably is an on-going strategy, I interviewed R.T. Naylor, an economist, criminologist and historian at McGill University in Montreal, who has spent much of his career studying black markets, the financial affairs of terrorist and criminal organizations, and the effects of economic warfare on underworld economies.

In his most recent book, Wages of Crime: Black Markets, Illegal Finance, and the Underworld Economy, which appeared shortly after September 11th, he attacks several myths about organized crime and international terrorist groups, and shows how these misunderstandings have made policy, not only useless in dealing with the supposed objectives, but damaging to the rest of society and the economy. For one thing, Naylor claims that terror and crime “organizations” are hardly as organized as we have been lead to believe. Attempting to fight the terrorism (or multinational crime) as if it were a mulitnational corporation not only is ineffective, but counterproductive at home and destructive abroad–the destruction is all the greater, the weaker the target country. Worse still, the target group often is driven further underground, and gives it greater access to underworld resources, thereby possibly increasing its staying–and striking – power.

Standard Schaefer: In Wages of Crime, you talk about how hard it is to get trustworthy numbers for the black market economy, and you detail the CIA backed war against
the Soviets that helped establish bin Laden. You also detail the alleged relationship of Al Queda to the Afghanistan opium trade and explain how unlikely bin Laden is to have really wrested control of it from the likes of the Northern Alliance. What do we really now about Al Queda’s financial situation or its illicit fund-raising, and do we know for sure if we’ve seriously curtailed it?

R.T. Naylor: There really is no relationship between Al Queda and the Afghan opium trade. That is because Al Queda itself does not exist, except in the fevered imaginations of neo-cons and Likudniks, some of whom, I suspect, also know it is a myth, but find it extremely useful as a bogeyman to spook the public and the politicians to acquiesce in otherwise unacceptable policy initiatives at home and abroad. By those terms, Al Queda is cast like “the Mafia” and similar nonsense coming from police lobbies. This is a complex issue but, putting it very simply, what you have in both cases is loose networks of likeminded individuals-sometimes they pay homage to some patron figure who they may never have met and with whom they have no concrete relationship. They conduct their operations strictly by themselves, even if they may from time to time seek advice.

In other words, if any line of communication does exist, it is initiated from the people on the ground “upwards” to the presumed patriarch–not the other way around. Of course, from time to time some father-figure, if he really exists, might dish out some cash to some would-be followers or sycophants or hangers-on. But the notion that there is a firm “money trail” used so much in cop discourse, and now hijacked by the national security establishment, is foolish. And the idea that attacking the money trail is the best way to curb either crime or terrorism is a pure fantasy. This follow-the-money stuff has been shown time after time to be useless when it comes to “organized crime” (another stupid term) where the motive is supposedly profit. Therefore how much more so when it comes to “terrorism” where money is not a motive, but merely one among many instruments, and where in any case most actions are actually quite cheap to pull off. The reality is, for “terrorist” actions, the most important resource is commitment and that is something which cannot be frozen in a bank account.

SS: You also mention the important role of Islamic charities, not just as front groups to raise money for terrorists, but as real charities that play a crucial role in the legitimate side of these economies. For example, you point out that in many cases these institutions alone provide a conduit for moving capital investment into depressed regions.
Now that we are ruining charitable organizations, we are also demolishing the much needed infrastructure for economic stability. Can you explain how such a thing became part of the plan and do we know if this strategy does anything other than create a dependence on the criminal economy?

RTN: Remember that the US is targeting these charities selectively. It has made no moves against the Jewish fundamentalist “charities” who have been funding terrorist groups in Occupied Palestine, and indeed inside the U.S. It has made no serious moves I can think of against Hindu fundamentalist charities who may be (it is certainly worth a close look) sending money to the groups responsible for the mass murder of Muslims in India. Granted it does look for the phony charities and other tax-free religious foundations that are linked to militia groups inside the US. But it is doing little or nothing against those which fund Christian fundamentalist proselytizing abroad, even though the reaction in the places where they are active may well provoke further acts of terrorism, or certainly to further sour opinion against the US. As to the impact on the Muslim ones, keep in mind three things. First, some were set up with the collaboration of US intelligence to run support for the Afghan mujahideen in the 1980s–so these can already be monitored as a matter of course. Second, unlike with Christians and Jews, for Muslims giving to charity is more than an individual moral choice; it is so central that it is one of the five pillars of Islam: an attack on their charities is therefore an attack on the foundations of their religious principles. Third, as a result of corruption, poverty, war and pressure from the IMF-World Bank-BIS cartel, many Muslim countries are no longer able to put adequate funds into the public infrastructure of hospitals, schools etc. So they rely all the more heavily on religious institutions who in turn rely on overseas contributions. When the overseas charities are under attack, this gets scaled back. Far from being a blow against terrorism, it is the opposite. The money going to these places may have on occasion been diverted to illegitimate ends, but that was hardly necessary for “terrorist” acts to occur–most of them are cheap and use local resources. But cutting off the flow of funds to these legitimate and essential organizations accelerates the breakdown of social institutions, and, by making the situation on the ground worse, feeds desperation and recruitment.

SS: It is safe to say, then, that the War on Terrorism is fundamentally and most likely permanently altering the structure of the economy in the Middle East. Are we stirring up anti-US sentiment while simultaneously increasing their dependence on the West financially? Or were places like Afghanistan, with its opium trade, already dependent? Is it just a switch from one group of criminals to another? Is the problem that there is no other possible industry, aside from oil?

RTN: These points are all related, but at the same time distinct. Apart from screwing up the flow of funds through the charities and in a few places fouling up the tourist trade, there is little DIRECT impact of the “War on Terrorism” on their economies–indirectly, of course, the instability is harmful. At the same time be careful of the Afghan examples. Afghanistan is always a case apart, so much so that about all it can ever represent is itself. Remember too that most countries which have oil have small populations. Economic development for them will inevitably take a different, more labor intensive path. And there are plenty of opportunities for alternative paths once peace, stability and genuine independence is achieved.

For most Middle Eastern countries, the main resource is not oil, it is their émigré population, well-educated and for the most part anxious to go home. In that sense the US may be indirectly and accidentally doing these countries a favor by creating a racist backlash inside the US against people with Arabic names, whether they are truly Arabs or non-Arab Muslims, all of whom have Arabic names.
As to stirring up anti-US sentiment in the Middle East, keep in mind two things. First, that the people currently in power don’t care. They say it often enough, better to be feared than loved. Plus they are, especially the Christian fundamentalists, heir to a long-standing prejudice in the West. Let us not forget that America was created out of a world-wide movement, launched by the same groups who led the Crusades, to encircle Islam and capture its sources of wealth. When George Bush talks about a Crusade, it was not just an unfortunate choice of figure of speech. Second, US foreign policy towards the Middle East for decades has been largely moulded by the Israel lobby–everyone knows that. So stirring up anger is an essential objective, not just an unfortunate effect. Israel cannot live in peace in the Middle East–if there were real peace, based on justice, the place would collapse in social disarray, and within a couple generations would be utterly transformed, into de facto an Arabic speaking country with a large minority of Jews. That is something obviously its leaders and its lobbies will do their utmost to prevent. Hence the steering of US policy into directions of anti-Muslim confrontation. So when Osama bin Laden talks about defending Islam from Crusaders and Zionists, he is only partly ranting.


SS: The recent announcement that Israel intends to completely eliminate everyone connected to Hamas certainly reveals the intentions of the Israeli leaders. But the lobbyists disingenuously embrace “the road map to peace”. Some like Norman Pattiz, chairman of radio giant Westwood One and member of the government’s Broadcasting Board of Governors, has a thirty million dollar grant to promote pro-US propaganda in Iraq. Robert Fisk of The Independent, recently reported that Paul Bremer, the occupation magistrate in Iraq, has announced to he wants to censor the Iraqi papers. Why bother to promote “the American Way of Life” if the point is provoke confrontation with Muslims? Is this just evidence that US industry plans to exploit Iraqi labor and resources perpetually?

RTN: They are not inconsistent. The anti-Muslim campaign does several things at once. It disparages an existing way of life to weaken the population’s sense of their cultural identity and their sense of historical injustice. That simultaneously westernizes attitudes, winning ideological acceptance. And, not to be ignored, it helps create markets as well. It is not so much MacWorld versus Jihad as it is Big Mac versus shish-kebab. Also never forget that the US is one of the most naïve places on earth. Despite its record of crimes against humanity, it genuinely believes that if the rest of the world doesn’t want to be just like it, the rest of the world should want to be. That being the case, there is nothing wrong with trying to make it come true. As to the censorship of Iraqi media, this is a red herring. Obviously under martial law, there will be censorship. The question is, how effective? And the answer is not very. Everyone will be expecting it, and anyway Iraqis are long used to much more effective and brutally enforced censorship than the US can dish out. The real danger comes from the control of the school system–what looks like simply another case of war profiteering, namely US firms given the contract to print and distribute textbooks and other educational material in Iraq, in fact has the potential for much greater long-term brainwashing. I say “potential” because I also do not think it will be very effective. Let us realize, shocking though it may be to American egos, this is really an unfair contest which the US cannot win. I don’t mean militarily–obviously the US can overwhelm. I mean it socially and culturally. Compare the US on the one side and Iraq on the other in terms of social and cultural consciousness – the US is way out of its league.

SS: You’ve extensively documented America’s economic tactics in Economic Warfare where you mention a trend toward using embargos and sanctions in lieu of military intervention. Those tactics didn’t prevent the second war in Iraq. What do you say to people who contend that Saddam Hussein brought the sanctions on to himself?

RTN: First of all, a central argument of that book is that sanctions and embargoes were invented as an ad joint to military campaigns. It was only in the atmosphere after World War II that people tried to convince themselves, despite the record of failure in the hands of the League of Nations, that sanctions, aka economic warfare, could be detached from military force and used as an alternative. The major powers never truly believed that. The fact is the US employed sanctions the way they were always designed to be used, as a softening up ploy to weaken the other side, and make the military campaign easier. Sure, sometimes the other side gave up before the military campaign, but that was due to unbearable economic immiserization and the realization of the inevitability of an irresistible military strike to follow. The role of the UN in fact was not to use sanctions to get Saddam into line and therefore preclude war, but (perhaps without fully realizing it) to rubber stamp an Anglo-American plan to so weaken the remaining Iraqi military forces that they could wade in and finish the job they started in 1991 with minimal danger of serious casualties. In addition, a population so traumatized and immiserized by the medieval economic siege to which they were subjected would be not only less prone to resist, but possibly even be so demoralized as to welcome the invaders as liberators.


SS: Now that the sanctions have been lifted and US industry seems on the verge of being firmly installed, is the economic situation likely to improve for the average Iraqi or do the former black marketeers simply become legitimate mercantilists who simply speed up the flight of capital?

RTN: First of all, US industry is NOT yet firmly installed. That is the plan, but it will take a long time. What corporation in its right mind would buy any of the privatized Iraqi assets now while the resistance is killing or seriously wounding at least one US soldier per day? And this is before the Shia’ populated areas explode, as they will. As to the living standards of the Iraqis, the British and Americans managed in ten years to reduce them from about equivalent to that of Greece to a position closer to Mali. Almost anything would be an improvement. The key to recovery, I suspect, is going to be the return of the exiles, and how much of the net earnings from oil get pumped back into rebuilding infrastructure. Now this may sound strange. But a US takeover (which will be brief) of the Iraqi economy may actually be a good thing for Iraqis! To support its own transnationals, the US will be forced to stop allowing Iraqi oil money be drained off to buy more gold faucets for the palaces of the emir of Kuwait (“reparations” for 1990-1) and instead rebuild infrastructure. Then when the US is forced out of Iraq, as I suspect it will much sooner than people expect, something positive will be left behind. As to the black marketeers, in every economy subject to severe sanctions, they have been the primary mechanism for capital accumulation. They can switch easily from supporting the old regime to supporting the new–after all, their primary loyalty is to their own bank accounts. But speculators and smugglers are not particularly reliable as agents of long term development. With their typically predatory attitude, they would feel much more at home running investment banking firms on Wall Street than investing in factories in Iraq.

SS: In Hot Money and The Politics of Debt, you argue that “wars against corruption” in places like Latin America are used to distract from the fact that standards of living are dropping as a direct result of the failed policies of the IMF. Is it likely that we’ll see “wars against corruption” in the Iraq now that the IMF is moving in? In the Middle East in general if the proposed free-trade zone goes into effect?

RTN: Ignoring for the moment the fact that these wars on corruption are driven by the US which has about the most criminalized economy and one of the most corrupt political systems in the world, it is important to bear in mind that these wars against corruption are merely a tool to achieve larger political goals. The hidden agenda is to knock down state controls and force the privatization of state assets, using the pretext that they are instruments of corruption. Sometimes they are, but talk about throwing away the baby with the bathwater! Often a new government in some developing country will go along, as a tool for ridding itself and the civil service of partisans of the old regime and clearing space for rewarding its own followers and hangers-on. Then, too, anti-corruption to stop allegedly massive looting is really a matter not of stopping the looting but changing the beneficiaries. If a country is short on foreign exchange because the general who ran it moved all the reserves to Switzerland, you can be sure that whoever benefits from the return of the money will not be the people. Instead the money might be diverted to paying interest and repaying principal on debts contracted to western financial institutions. Iraq is no different.


SS: Drawing in part from some of your ideas in Hot Money and the Politics of Debt, I’ve argued in CounterPunch that instead of free trade what is needed in Iraq is protectionism, good ole fashioned tariffs to sustain the Iraqi economy longer term, to help stabilize fledgling economies. Is that a correct understanding or do tariffs contribute to smuggling and black markets, thus acerbating capital flight?


RTN: The problem of capital flight and smuggling in relation to any particular trade policy is not one for one and depends on the particular circumstances. But, when people talk today about the fact that development is supposedly hampered by predatory governments, high tariffs, failure to protect intellectual property rights, they are showing a profound historical ignorance. In the 19th century, the US achieved a historically unprecedented rate of economic growth AND development; yet it had very high tariffs, an unstable banking and financial system and absolutely no respect for international intellectual property rights. Just the opposite. But it had a huge resource base and a government that was used by big business as a tool to despoil the population at large in order to accelerate capital accumulation. Furthermore, even though US corporations and state governments repeatedly defaulted on their obligations-even though American tycoons flagrantly stole from their foreign partners- money rushed in from abroad. Incidentally one of the most revealing books on this is now nearly 100 years old, and almost forgotten- History of The Great American Fortunes by Gustavus Myers.

SS: I want to ask is about the general trajectory of US foreign policy at the moment. It seems to me that as the stock market was crashing and the Fed was slashing interest rates, the US became less attractive to foreign investors-they were looking for better returns abroad, thus hastening the downward trajectory in the US. I wonder if reversing this trend is figured into the decisions made on the part of the Bush Administration. Is it true that despite the weak dollar, the fickle stock market and low interest rates on US treasuries, the US’s increased efforts to destabilize economies around the globe makes the US more attractive destination for capital? Doesn’t it also make the US dependent on such interventions?


RTN: These are two seemingly interrelated things, but be careful. Yes, it is true that until very recently, whenever there was serious instability in the world, there was a flight of capital to the US dollar, and to the US–two separate things, both of which, however, rebounded to American financial advantage. The flight of capital to the US bolstered its exchange reserves, replenished its capital market, reduced the need for Americans to maintain a high savings rate to finance capital accumulation and propped up the dollar.

The flight of funds within countries abroad towards US dollars in physical form allows the US a massive interest free loan at the expense of the rest of the world–it prints $100 bills for a few cents, then in effect trades them for $100 worth of goods abroad, and, rather than returning home to demand $100 worth of US assets or goods in return, the dollars go into hoards, or are used to finance criminal activity and tax evasion–in other countries. The more economic, social, political and financial instability in the world, and the more black market and criminal activity, the more the US gains from both of these mechanisms. Now, there is no doubt people in Washington factor that in to their calculations. But that does NOT make it a motivation–it is simply icing on the cake. And that raises the second thing about which to be careful.

It is important not to give the troglodytes currently in power more credit for clear and long-term thinking than they deserve. Bush aside, these guys are highly intelligent, but they are not very wise. Contrary to a lot of conspiracy notions too abundant on the critical end of the political spectrum today, my view is that these guys blunder crudely ahead driven by their immediate ideological instincts rather than any real long term plan. It is important to consider one enormous difference between imperial Britain and imperial America. The British elites, while certainly not entirely of one mind, had a much higher degree of consensus on what they wanted from the rest of the world than the American ones. And the British maintained a focus to their policy over a long period of time. That was helped considerably by the existence of a permanent civil service, the top people in which were drawn from the level of the British social hierarchy just below the ‘natural’ governing class.

By contrast, the US really has no foreign policy, just a set of ad hoc moves dictated by domestic constituencies seeking particular advantages. I am not saying that the US elites have no economic and political objectives vis a vis the rest of the world ­obviously they do. It is just that the policies by which they attempt to achieve those objectives are ad hoc and prone to unpredictable changes. Certainly all kinds of supposed think tanks are pushing their agendas, but which one actually takes center stage and for how long is a matter of domestic political balances which can change rapidly. In addition, the US, as a society, has no real capacity to understand the consequences of its own action, or other people’s reactions to them. Incidentally that makes the US more rather than less dangerous to world peace.

SS: In conclusion, I’d like to return to the myth of organized terrorism in relation to Israel. Certainly, Israel knows full well that no one, not Abu Masen or Hamas can really stop all the suicide attacks. What exactly do they gain by demanding the impossible?

RTN: It is fascinating to hear Israeli demands that the Palestinians stop “terrorism” before negotiations can proceed. Apart with it being inconsistent with Israel’s own history, the hypocrisy is craven. In effect, Israel is demanding the legitimization of its own policy of mass murder, systematic incarceration without trial, state-sanctioned torture, theft of land and water, while insisting the reactions of the Palestinians are somehow not kosher.

But then, what do you expect from a country that freely elects terrorists, war criminals and gun runners to its highest offices? Anyway, no one can stop spontaneous acts of retaliation, even though some, like the suicide bombings, are clearly well thought out and backed by a reasonably good infrastructure. If, under the present climate, Hamas were to attempt to stop them without any serious quid pro quo-which has never been offered-then it would suffer the same fate that Zionist terrorist groups did in pre-War Palestine, splits and breakaways. That would merely exacerbate the situation, which I suspect is what the Israelis want anyway.

SS: Thank you.

In addition to the recent Wages of Crime, Professor Naylor’s other books include Hot Money and the Politics of Debt, which is about hot and homeless money, legal or not, and its importance in governmental and corporate finance. It offers a detailed account of how money laundering techniques have changed over the years and how legitimate finance had changed in response. Also there is Economic Warfare is often available in a Canadian edition of which is called Patriots and Profiteers. This book is the best I’ve seen on Economic Warfare, Embargo Busting, State-Sponsored Crime and includes brief, but comprehensive historical background on many current issues in the Middle East. All of the books are relatively free of jargon, graced by vivid, often amusing historical accounts, a wry wit, not to mention sophisticated insight.

Standard Schaefer is an independent economic journalist and cultural historian. He also co-edits the New Review of Literature. He can be reached at