The Globalizing West and the Regional Contenders

WPF Historic Publication

Kees van der Pijl December 31, 2010

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The Globalizing West and the Regional Contenders

Kees van der Pijl

Professor of International Relations at the University of Sussex, United Kingdom

Originally published 2010 in World Public Forum Dialogue of Civilizations Bulletin 7, 111–28. 1

The current period is characterised by a dramatic slowdown in the movement of speculative capital across the globe, and a crisis in the world economy that is still deepening (in terms of job losses and company closures). All this against the background of an environmental crisis that casts doubt on any attempt to resume business as usual. Since the neoliberal model of privatisation and liberalisation, meant to allow the ‘self-regulating market’ to extend its blessings the world over, is closely tied to speculative finance (it was born in response to the Keynesian notion of state intervention and financial repression — see my 2009, chapter 2), neoliberalism as the hegemonic ideology of contemporary capitalism has lost much of its shine too. The neoliberal, anti-Keynesian revolution of the 1980s and 90s, coinciding with the new Cold War against the Soviet bloc and the counterattack against the Third World coalition for a New International Economic Order (NIEO), had its epicentre in the English-speaking West. Thatcher’s Britain, the United States under Reagan, but also Canada, Australia and New Zealand (which for instance pioneered the privatisation of actual state tasks under the doctrine of ‘New Public Management’) led the way in the attack on progressive forces in order to restore profitability and the hegemony of capital, as well as the power of the Western bloc in the face of challengers. Because of this historic connection between the Anglophone West and neoliberalism, the current crisis is therefore also affecting the broader hegemony of the West. The Obama presidency in the US is both an expression and an attempt at a solution of that crisis. In the meantime, a number of regional alternatives have developed in the global political economy. Each of these alternatives is centred on what I call a contender state — a state which historically has pursued development and defended its autonomy by state initiative (with a controlled society and a more or less planned economy), and on this basis had posed a challenge to the West. In this paper I will discuss four such alternatives, each characterised by a resurgence of the contender posture and a regionalisation of limitations imposed on free capital movement. A particular drawback in this resurgence,

2 however, is their multinational make-up — both as states and as regions. I will look specifically at Russia and its ‘near Abroad’; China and East Asia, with its overseas Chinese enclaves; Latin America, and Iran.

The Historical Structure of the Global Political Economy My argument is based on what I see as the evolving, determining structure of the global political economy between the liberal West and the aforementioned contender states. The liberal West was the combined outcome of the English Civil War and overseas settlement in North America. This produced a bourgeois class society under a constitution that confined state action to guaranteeing property and contract at home and abroad, a constitution sealed by the ‘Glorious Revolution’ of 1688. This is what unifies the English- speaking I call the resulting intercontinental social space the ‘Lockean heartland’ in the global political economy, after the ideologue of the liberal state, John Locke. By exterminating the indigenous population and bringing successive waves of immigrants into North America and Australasia, the resulting space was also ‘post-national’ because given the common language and the bourgeois constitutions in the separate states, the territorial link to nationality and the need to turn obtain a separate ‘nation-state’ for an ascendant bourgeoisie, were absent. The individualism celebrated in Calvinism and liberalism, and a range of other, more idiosyncratic aspects of English-speaking culture, allowed the Lockean ‘West’ to become the context in which historical capitalism emerged first. Capital headquartered in London, and after 1914, in New York as well, gave the West a structural advantage over any late-industrialising rivals; just as it allowed the transfer of primacy from imperial Britain to the Unites States to proceed without violent conflict between them. Compared to this, the contender states, beginning with France in the late 17th century until well after Napoleon, have typically lacked the means for such peaceful redistribution. They were also pre-bourgeois, ruled by landowning classes, a church in cahoots with an absolutist monarchy. Here, nationalism

3 was a powerful expression and driver of the assertion of sovereignty. To avoid by colonised or otherwise subjected by the liberal West, and exploited by capital, a contender state can assert its sovereignty only by confiscating, to different degrees, its social basis through a revolution from above. Germany and Italy after unification, Austria-Hungary, and Japan from the Meiji Restoration in 1868, the Soviet Union and its bloc from the Stalinist revolution from above, and China today, have been the key contenders. A host of ‘secondary contenders’ (Turkey, Brazil, Mexico and Argentina, Algeria and Egypt, etc.), i.e. states pursuing comparable development strategies but avoiding confrontation with the West, have played their roles on the sideline of this world-historic process. It was from their ranks that in the 1970s, the NIEO coalition emerged which fuelled by OPEC market power, briefly contributed to the plight of the liberal West to which the Thatcher and Reagan revolutions were the response (Krasner 1985). By challenging Anglophone power and setting the entry conditions for Western goods and capital, the state class holding power in these contender states in the process establishes a radically opposed form of state/society relations. This is also a necessary precondition to industrialise from a weaker starting position; it simultaneously limits their capacity to integrate socially, internally and with others. The need to mobilise the funds for industrialisation by raising the rate of exploitation on the land, has produced the harsh, slave- like exploitation of the peasantry in all the main contender states, including terror, famine, and forced labour. Dispossessing the peasantry both economically and politically in the West was largely avoided because it controlled areas overseas where the equivalent processes could operate to the same effect, as in the ‘Late Victorian Holocausts’ described by Mike Davis in his eponymous book (Davis 2002). The terror accompanying peasant dispossession that Stalin, Mao, and others applied at home, here was relegated to areas far beyond the horizon. However, the rise of a bourgeoisie also entails the aspiration to remould the state at some point into a liberal one; and where the broader constellation in

4 which this happens, is multinational, as in Austria-Hungary, Russia, China, Iran and Turkey, the contender state faces not only a potential bourgeois- democratic constitutional movement challenging its authority, but also nationalist separatisms associated with it. The sources of a dispossession of the state class, – its removal by an internal bourgeois revolt, by separatisms, by its own reconstitution into a private bourgeoisie, or any combination of these – can be manifold. It has however included the downfall of the state class in the wake of war or otherwise, a lost contest as in the case of the Soviet defeat in the arms race with the West. All heartland/contender episodes so far have ended in world wars (in the definition of William Thompson 1988). The unstable sphere-of-influence of the contenders usually crumbled in these wars, also in the case of Soviet bloc, which collapsed as a result of the sustained arms race against it – a form of economic warfare which fossilised the Soviet Union’s state/society structure as well as those of its allied states, draining them of their vitality and creativity. The West on the other hand achieved its military pre-eminence on the basis of an initial advantage which made the military burden much easier to bear. England, like Holland before it, drew its naval strength (in terms of shipbuilding and nautical skills) from a burgeoning merchant marine; it improved on the Dutch experience by financing its wars by tapping into the savings of its citizenry. Ever since, the wider West has succeeded in synchronising private profit opportunities as well as employment and consumption, with its military build-up in ways a state-led society cannot match. With every round of epochal war with major contenders (the war that ended in 1713, the Seven Years’ War, and the Napoleonic Wars against France; the First and Second World Wars), the West emerged stronger, with a tighter grip on the global financial system, and with its access to raw materials consolidated further. The paradox is that the world-historic victory over the Soviet Union and its sphere of influence in Central and Eastern Europe, has weakened this advantage. After two decades of speculative globalisation of

5 capital cashing in on the new opportunities created by state collapse on a large scale, it has now itself collapsed into a severe crisis. This takes us to the position of capital within the territorial organisation of political power sketched above.

Capitalist Penetration of the Contender States Capital is a discipline over society and nature, and as we can see in the present epoch, it tends not be confined to the part of the world where it originated, in this case the West. Capital in that respect is an extraterritorial force, with an inherent tendency to become world-embracing, ‘global’. Whereas states demarcate legal spaces on the principle of territoriality, over which they exercise exclusive sovereignty, capital historically formed in the interstices between productive structures and political jurisdictions. For its operation it requires a field of operation free from state jurisdiction, and yet with the ability to move between such jurisdictions—as long as these are governed by broadly identical, liberal-constitutional rules; i.e., those indicated above, with the sanctity of private property and contract the key. Compared to the territorial organisation of space by states, capital therefore tends towards a ‘nomadic’ pattern of organisation, moving between different jurisdictions. It operates in an imaginary ‘smooth space’ that cannot be internalised by states. As Ronen Palan has argued, there is a structural incompatibility between the two forms of organising social space; ruling classes exploit this by organising their state power separately from economic power, which they bracket off from the political process through offshore and other forms of extraterritoriality (Palan 2003: 15). Of course there is a close imbrication between the globalising drift of capital, and the foreign policy of the states where it is headquartered, primarily the United States and its allies. The West exerts political pressure on other societies to open up and submit to capitalist discipline, probing for social partners inside the target state willing to complement this effort. This goes back a long way, to the armed interventions and support for

6 counterrevolutionary, opposition and/or separatist groups in contender states. Apart from covert operations, a landmark policy was the Jackson-Vanik amendment to the 1974 trade act, introduced ‘to provide an economic means of punishing authoritarian states’ by restricting the foreign economic relations of states which operated a ‘nonmarket economy’ with insufficient free movement (emigration) of its citizens (Breslin 2007: 93). Pressure by the West, coupled to the attractions of its way of life and the perceived dynamics of its economic culture, tend to activate, by the process that Gramsci labelled ‘passive revolution’, a proto-bourgeois element in the contender state context, to which the capitalist class in the West extends ‘a helping hand’. Condoleezza Rice, herself a Chevron director at the time, on the eve of her appointment as George W. Bush’s national security adviser saw her future job as ‘finding peace, security, and opportunities for entrepreneurs in other countries’ (quoted in the Financial Times, 25 July 2000, emphasis added). However, since these ‘other countries’, the primary and secondary contenders, or any society in which the state seeks to gain or retain the initiative in social development, have achieved their successes by confiscating and mobilising their social basis, it is not enough that ‘entrepreneurs’ succeed in rewriting the constitution to suit their needs. The long trajectory of state-led development impregnates the political culture of the non-Western societies, affecting every fibre of their social fabric. France, whose state-led challenge to England dates from two centuries ago, still bears the traces of this episode which have been reproduced ever since (Cohen-Tanugi 1987). Even the EU, therefore, which has been dominated by former contenders all along, has therefore struggled to adjust to liberalisation. As I have argued elsewhere (2006a), the EU in its pursuit of neoliberalism (with the free trade policies, privatisation, dismantling of social protection, and flexibilisation of labour it prescribes) creates serious imbalances within its own social and political structure. In the present paper I argue that a comparable destabilisation process is undermining the contemporary regional alternatives to English-speaking liberalism, and their multinational make-up only compounds that process,

7 especially since the policies favoured by the West, i.e., liberalisation of the economy and multi-party, electoral democracy, tend to crystallise inequalities along ethno-national lines. These states must therefore continue to rein in the usually highly destabilising social effects of the capitalist turn and its ‘market reforms’, and have done so, in a double movement of the type described by Karl Polanyi (1957; the introduction of liberal ’market reforms’ is accompanied, either directly or after a delay, by measures of social protection). But this has only produced the tortuous, and ultimately unstable forms of rule in the aforementioned regions. Especially after the collapse of the USSR and the proclamation of the ‘End of History’, the attempt to control capital has been half-hearted because the state classes that historically hold the reins in a contender constellation, after their embrace of, or capitulation before capitalism, cannot act against their own economic interests. On the one hand, respectful of private property and capital; on the other, maintaining state initiative to retain a measure of control. The result has been an exacerbation of class conflict often taking the form of ethno-national conflict, which none of the regional alternatives will in the end be able to contain especially since the West, for reasons given above, can support regional centrifugal forces at almost no cost; there is no way that, say, China, in retaliation for US support for Uighur separatists, can fund Californians for the same reasons because there are no Californians in this sense.

Multinational Contender States and the Double Movement The different regions facing the liberal West today share a common background in that they all have shifted from one form of state-led development effort to another, in which globalising capital has been allowed in, but with restrictions. In their earlier contender experiences—either as state- socialist formations (the USSR and the Soviet bloc, China, Vietnam) or under some form of nationalism (the import substitution policies of the Latin American states and the White Revolution of Iran under the Shah)—these

8 restriction were obviously much more rigid. But it is important to see that even after the ‘conversion’ to capitalism, transnational capital still operates under restrictions which prevent these regions from being fully integrated into the world market. This means that the respective states continue to provide a protective cover for their own capitals by limiting their exposure to global competition. Although it is perhaps never the case that capital operates in textbook fashion, without relying on a ‘home’ state, there is no doubt that there remains a qualitative difference between the liberal West, where the state guarantees private property and contract but otherwise allows competition to operate fully, and the others. In the EU, competition authorities must constantly intervene to curtail overt or hidden state support, but beyond Europe, the differences in the size, shape and strategy of companies ‘can be traced back to state actions that vary from direct and deliberate (as in prohibiting the entry of multinational corporations) to indirect and unintended (as in import substitution industrialisation) (Schneider 2009: 193). The reasons for this control are threefold. First, the aim of warding off the full competitive impact of capital from the English-speaking West, the EU, and Japan, and slip into a spiral of ‘underdevelopment’ in the classic sense of André Gunder Frank (Frank 1971). Secondly, to protect their societies from the centrifugal effects along ethno-national or religious lines, and the inequalities generated by unrestrained capitalist exploitation will tend to crystallise along these lines. This explains the ‘Double Movement’ characteristic of the current round of regional contender development. Finally, the regional aspect. On the one hand, this is purely defensive, for instance to deal with military pressure on the part of the West. On the other it is part of the Double Movement, in that is seeks to enlarge the scope of local capital in a protected zone. In the case of Iran, its energy income grants it an exception in this latter case. Let me look at these different aspects in some detail: a) the forces (both foreign and domestic) seeking to open up the contender societies to global capital; b) the effects (intended and/or unintended) on existing cleavages in

9 these societies; c) the attempts by contender formations to mitigate the impact of unrestrained capitalist exploitation and foreign influence, and d) the regional aspect. a) Forces behind the conversion to neoliberal capitalism. Latin America in many ways served as a laboratory for neoliberalism. In Chile, the US- supported coup against the left government of Salvador Allende in 1973 created the first testing ground for a shock therapy—applied simultaneously to the economy and in the torture chambers of Pinochet’s military. The recommendations of the founders of the neoliberal movement, Hayek and Friedman, in this context led to a radical demolition of social protection and a reign of terror both politically and economically. Argentina soon followed, and many other Latin American states fell in step later. There were also coups in Brazil and Bolivia (Banzer) that preceded the Chilean one (in 1964 and ’71, respectively) but lacked the specific connection with neoliberalism. In fact Brazil’s military dictatorship was meant to allow import substitution industrialisation to continue on the basis of a higher rate of exploitation of labour. There is no need to go into the reform policies pursued by China at any length here (I refer to my 2006b, chapter 9), except that the transition to capitalism, as in the USSR, was a revolution from above (preceding the Soviet turnaround by almost a decade). Secondly, it kept the party, as the vehicle of a state class in the contender tradition, firmly in control. However, in the course of the 1990s, the state class was expanded by new entrepreneurs who joined the party in growing numbers. This has resulted in a symbiosis between the state class and the new entrepreneurial element. Western policy, as elsewhere, seeks to link up to the latter with an eye to dispossessing the former; in the aforementioned statement by Condoleezza Rice, she claimed the policy towards China had to be guided by the fact that change in that country is being led by ‘people who no longer owe their livelihood to government.’ (quoted in the Financial Times, 25 July 2000). Through the National Endowment for Democracy, established in 1983 under

10 the Reagan presidency (cf. Robinson 1996), the United States in 2008, according to the NED website, www.ned.org, subsidised organisations aiming at non-ethnic opposition and alternative information providers in China to the tune of around 2.3 million US dollars, out of a total of 6 million dollars. Hong Kong based organisations received some 300,000 dollars. However, the Chinese capitalists have not been able to organise themselves outside the structures of the state, so that what has been termed a ‘nomenklatura capitalism’ has emerged as new entrepreneurs try to stabilise their positions by joining the party (Breslin 2007: 77-8). The collapse of the USSR, a decade after China’s turnabout, entailed the ascent of neoliberalism, which Gorbachev had still sought to avoid by an attempt to gear the Soviet and by example, the Soviet bloc, to a social democratic ‘mixed economy’; Yeltsin’s alternative soon evolved to a radical conversion to neoliberalism. Gorbachev’s policies were responded to favourably by the big industrial economies of continental Europe, first of all West Germany. The prize of German reunification, still in the balance, obviously played a huge role here; also the chances to connect European industry to Soviet resources, involving the main energy companies (Total, ENI…) but also West German steel and chemicals, or FIAT of Italy (one of the last plans involved the production of the Panda model in the USSR). The United States and Britain, the historic pillars of the liberal West, on the other hand supported Yeltsin, who early on committed himself to a neoliberal, free market capitalism. When the Soviet bloc began to unravel and the USSR itself seemed to be adrift, the voices to press ahead with a radical reduction of Soviet power and support the forces of radical market reform multiplied. At the May 1989 Bilderberg Conference, Timothy Garton Ash, urged the assembled businessmen and politicians not to allow West Germany to pursue a ‘Europeanisation of Ostpolitik’, since that might lock out the United States Ash, 1989). Many others spoke out in the same vein, and those in Europe continuing to bank on Gorbachev were marginalised or even silenced, such as

Olof Palme and the head of the Deutsche Bank group, Alfred Herrhausen (see my 2006b: 228-45). In the USSR itself, large fortunes were gathered by looting, privatisation of public assets, and exploiting the domestic/world market price differentials of strategic minerals (Kotz 1997). This provided Gorbachev’s rival, Boris Yeltsin, with a growing power base. Yeltsin’s chief of staff, G. Burbulis, visited Washington in October 1990, carried a letter from his boss (meanwhile elected to the leadership of the Russian Republic, then still part of the USSR), that stressed the aim of seeking ‘to create an economic system based upon universal market mechanisms and the sacred right of every person to property. The entrepreneur will become the chief actor in our economy’ (quoted in Bellant and Wolf 1990: 31). In return for the freedoms granted to them, the tycoons helped Yeltsin to be re-elected in 1996, thus avoiding that the mounting anti- Western mood in Russia would be reaped by the Communist Party of Zyuganov. Within two years, however, Yeltsin’s rule descended into a morass of corruption and financial collapse in August 1998. It is often overlooked that parallel to the collapse of the Soviet bloc, Iran, too, at the end of the war with Iraq, took a radical turn towards capitalist practices. The government of H. Rafsanjani exhorted Iranian businessmen in the diaspora to return, and become part of a society that was encouraged to ‘display its wealth’ (Motamed-Nejad 2009: 11). A wave of privatisations gave body to this policy, and inevitably produced a corollary tide of corruption. A parliamentary report in 1994 found that more than 50 major companies had been sold to their managements at sweetheart deal prices. This takes us to the destabilising consequences of the neoliberal turn. b) Centrifugal ethnic and/or religious tensions. Cutting up the USSR was openly debated in the West, not just by far right émigré groups on the margins, but by commentators with close links to key policy-makers. As one commentator put it in Newsweek, 24 June 1991, ‘some Western leaders’ still banked on Gorbachev, but Yeltsin would bring down the Soviet superpower for ever and create ‘a smaller, looser, more diverse association of free-market

12 economies.’ After Yeltsin and the leaders of Belarus and Ukraine had scuttled the Soviet Union later that year, ideas in the West about a further break-up of Russia itself were articulated by Zbigniew Brzezinski, Carter’s National Security Adviser and patron of Madeleine Albright, Secretary of State under Clinton. Brzezinski in 1997 advocated a loosely confederated Russia composed of a European republic, a Siberian and a Far Eastern republic, in order to create ‘a decentralised political system and a free market economy (quoted in my 2006b: 354). When the Clinton administration in 1994 launched its policy of NATO enlargement, whilst trying to cultivate Russia’s neighbours in order to create a pipeline system that would wrest the export of energy resources free from Russian control, Chechnya too became a target of Western interest, first when NATO secretary-general Claes declared that the ethnic conflict there could not be considered a Russian domestic affair, and also, by private operators including ex-prime minister Thatcher. The Chinese communist party in 2002 was redefined as a party of the ‘Chinese people and the Chinese nation’, no longer that of the proletariat (Breslin, 2007: 71). The problem is that as a multinational state, relying the theory and practice of national self-determination elaborated by Marx and Lenin, the concept of a ‘Chinese nation’ is problematic and in the circumstances of rapid economic change, activates rival nationalisms in the provinces historically dominated by minorities. Ethnic tensions have flared up recently in Tibet and in Xingjian, between Tibetans and Han Chinese and between Muslim Uighurs and Han Chinese, respectively. The West, the United States in particular, has not hesitated to seek to gain a foothold among these disaffected minorities. The aforementioned NED supports a range of Uighur, Tibetan and Mongolian organisations. In 2008 (source as above, www.ned.org), Uighur organisations received around half a million dollars, Tibet 100,000, Southern Mongolian 75,000. Iran’s ethnic composition (only half its population are Farsi-speaking Persians, important minorities include Azeris and Kurds) was not specifically affected by the disruptive effects of neoliberal policies because of the unifying

13 effect of religion. In Latin America, on the other hand, the indigenous movement has inspired the recent upsurge of socially progressive regimes – most emphatically in Bolivia but not restricted to it. The newsreader of Tele- Sur, an alternative TV network intended to create an autonomous Latin American voice, wears tradition Amerindian dress, to name but one aspect. In Bolivia, Amerindians they make up 65 per cent of the population as well as in the other Latin American countries (the other Amerindian majority countries are Peru, Guatemala, and Ecuador). Everywhere they belong to a huge underclass which only with the left regimes of Chávez and especially, the election of Evo Moráles, has found a voice (Chua 2003: 53, cf. 56). c) Mitigating unrestrained liberalisation. In all regions, the turn of the millennium was also the beginning of a trend towards limiting the disruptive effects of neoliberalism. After Vladimir Putin succeeded Yeltsin in August 1999, what has occurred in Russia is an (at least partial) restoration of a contender state configuration under a state class. Recruited to a considerable extent from the security services (an estimated quarter of the Russian bureaucracy, S. Kotkin in FT Magazine, 6 March 2004: 16), this new state class has sought to contain the destabilising effects of capital penetration by stopping privatisation and renationalising certain capital groups such as the Yukos oil conglomerate of jailed tycoon Khodorkovsky. Transferred back into state ownership through proxy constructions involving Rosneft and Gazprom, this has further reinforced the personal union between government and the top companies that is characteristic of a state class. Expelling the tycoons involved in media (Berezovsky and Gusinsky, both involved in engineering the re- election of Yeltsin in 1996), was also part of the restoration of the contender posture. In China, the state class as we saw retained its prerogatives all along, so for all the hype, there was never a Big Bang liberalisation of the political economy. Around the turn of the millennium however, and especially China joined the WTO in 2001, a clear ‘Double Movement’ consolidating and/or restoring this symbiosis between state and capital has occurred. Whilst the

14 country has opened up many industries in accordance with WTO obligations by new regulation, it has ensured that ‘often those regulations are accompanied by whole sets of new limitations that virtually reverse the promise of opening up’ (China Biz, quoted in Breslin 2007: 99). This brings the country into line with Japan, where only 2 per cent of sales are accounted for by foreign transnational corporations (Schneider 2009: 189). Indeed the Japanese model, which as Fingleton has argued (2008), in its postwar version goes back to the Manchurian model pioneered by the Japanese military in the late 1930s, is an important source of inspiration for the current Chinese state class. Under the postwar policy (unlike the piratical enrichment of the 1910s and 1920s), Japan has kept the inequalities produced by capitalist production relations in check, with a markedly egalitarian income distribution the result. China from the late 1970s has undergone a rapid widening of inequalities as capitalist market reforms opened up the egalitarian social structure to exploitation for profit, but as Fingleton argues (2008: 145), ‘the betting is that …as the Chinese version of the East Asian model matures, top Chinese leaders will steer the economy closer and closer to the egalitarianism of today’s Japan.’ In Latin America, Cuban state socialism has been allowed to escape its isolation with the election of Hugo Chávez in Venezuela, and Evo Moráles in Bolivia. In 2000, the attempt to deepen neoliberal capitalism in Ecuador provoked an Amerindian uprising that turned into a military coup, but nevertheless marked a step in the unfolding ‘double movement’ (Chua 2003: 73). The ascendant orientation is towards social protection, but the capitalist world economy imposes constraints by the need to find markets for raw material exports. Chávez in many ways is a traditional Latin American caudillo, albeit one with a social conscience and an unwavering commitment to disentangling the southern half of the hemisphere from the US empire. But as Martin Hart-Landsberg writes of the Venezuelan-sponsored alternative to NAFTA, its ‘top-down operation… means that there is often no opportunity for popular discussion over how best to implement [its] projects’, and this limits

15 participation, reduces the responsiveness of media, and leaves planning potentially unconnected to popular needs. (Hart-Landsberg 2009: 11). So even if it is obvious that social protection is the guiding principle here, its state-led format reduces the potential resilience of the experiment. In Iran, the election of M. Ahmadinejad to the presidency in 2005 built on resentment over the spreading corruption among large sections of the population. Ahmadinejad launched into a campaign against doubtful economic transactions that had enriched a new elite, singling out the Pârsian bank as his main target (Motamed-Nejad 2009: 11). He even threatened to make public a list of the beneficiaries of the sweetheart deals, who by now had become his enemies—including Rafsanjani, reputedly the richest man in Iran. These men as a result turned against him, along with a majority of Iranians disappointed over the absence of real alternative programme on the part of the forces associated with Ahmadinejad, a movement that would have removed him from power in 2009 had he not secured re-election by fraudulent means. Here, obviously, the double movement has resulted in a stalemate from which it is hard to imagine a way out at the current juncture, as Western pressure mounts, including a veiled threat (not so veiled in the case of Israel) of violence. d) The regional aspect. In the collapse of the USSR, the Anglophone West (and the transnational ruling class and cadre committed to its positions) was able to override European concerns to compromise with Gorbachev’s project. In the spirit of Lord Ismay, its one-time Secretary-General’s, famous dictum that NATO serves ‘to keep the Americans in, the Russians out, and the Germans down’, as much as out of straightforward arrogance towards the tottering former contender, US Secretary of State Baker told Gorbachev in February 1989 that a reunified Germany would have to be part of NATO. He eventually obtained Gorbachev’s agreement an express promise not to expand the organisation’s actual domain (‘not an inch’; cf. witnesses interviewed by the Financial Times Weekend Magazine, 11 October 2008). In the words of former US ambassador Raymond Garthoff, the Bush Senior administration ‘was unrelenting in pressing its advantage [and] little heed was given to the

16 broader consequences of imposing one-sided compromises on Gorbachev and [Foreign Secretary] Shevardnadze’ (Garthoff 1994: 423 note). The formation of GUUAM later in 1999 marked a tentative extension of NATO involvement on Russia’s southern perimeter. Under the auspices of the US, Britain and Turkey, GUUAM brought Georgia, Ukraine, Azerbaijan, and Moldova, and briefly, Uzbekistan too, into a defence arrangement, prompting Azerbaijan and Georgia to withdraw from the collective security treaty under the CIS states umbrella. Since NATO attacks against Serbia were in progress at the same time, this demonstrated that the cordon sanitaire around Russia would not stop at military engagement. Russia therefore moved to counteract NATO expansion by seeking a rapprochement with China, as a member of the Shanghai Cooperation Organisation founded in 2000 on the basis of a prior agreement four years earlier. In that same year the existing collaboration with Belarus, Kazakhstan, Kyrgyzstan and Tajikistan was transformed into the Eurasian Economic Community. Thus regionalism has been another route of neutralising the destabilising effects of Western pressure and capital penetration. This also transpires in the fact that Russia has switched the basis for WTO membership from a single state membership (for which it has been kept in the waiting room for 16 years), to joint membership for the customs union between Russia, Belarus, and Kazakhstan (Int. Herald Tribune, 3-4 October 2009). This will complicate and delay negotiations but also reflects an aspiration to balance economic development regionally first. Chinese development has a regional aspect right from the beginning of its ‘capitalist turn’. Over the decades, it has become the end-station of East Asian manufacturing chains, producing and assembling final products for North American and EU markets. Between 1992-3 and 2004-5, the Asian share of China’s manufacturing exports declined from around half to one-quarter, whilst the OECD share minus Japan and South Korea showed the opposite trend, from 29 to 50 per cent, turning the East Asian into a parts and components base for China’s final goods exports to the West (Hart-Landsberg 2009: 5). As the same author emphasises by way of contrast, the Latin

American countries that have established the Bolivarian Alternative for the Americas (ALBA)—Venezuela under Chávez, Cuba, Bolivia under Moráles, and others—also collaborate, but in a strategy of promoting social welfare. They have set up ‘Grand-National Enterprises’, not like the established transnational corporations of Latin America, the ‘Translatins’ which have their bases in the neoliberal countries (Cemex, Mexico; Falabella, Chile) or in Brazil, like Gerdau in steel (Schneider 2009: 193), but with a focus on domestic development in participating countries. Thus an ALBA supranational company has been set up to secure food sovereignty in the participating countries by technological cooperation, training, investment in rural infrastructure, and regional food distribution (Hart-Landsberg 2009: 9). Obviously the United States is concerned about what it perceives as the ‘loss’ of its traditional backyard. The hesitant response of the US to the military coup in Honduras against president Zelaya, a progressive who made the country a member of ALBA, is a sign of a resurgent imperialism, as is the agreement with right-wing ruled Colombia to make seven of the country’s military bases available to the US military. Significantly, the US, Chile and Peru, have rejected participation in the Bank of the South, which brings ALBA countries into a joint enterprise with moderate left countries Brazil and Argentina. The Bank of the South, a joint Venezuelan-Argentinian initiative of 2007, is not yet operational, but will be an attempt to create a development bank for the region that is not committed to the neoliberal principles on which the IMF and World Bank operate (Hart-Landsberg 2009: 12-3). In 2008, two critical events demonstrated to what extent Western support for client elites involved in ethnic-territorial disputes can be forthcoming. First there was the recognition by the United States, Britain and a number of NATO and EU states, of independent statehood of Serbia’s province of Kosovo in February. By this act, in clear breach of international law and with even several EU states dissenting, a situation deadlocked since the NATO war against Serbia which had not solved this issue, the West sent a signal to the signatories

18 of the Shanghai Treaty and many other states that the West would not recognise existing borders, whether in the Caucasus or elsewhere. The second event was the attempt by Georgia to reclaim the breakaway province of South Ossetia by force on the opening day of the Olympic Games in Beijing on August 8. As I had the opportunity to establish when I was an invited speaker at a conference in Tbilisi in March of that year, not only was there a marked Georgian impatience with Western support, voiced by a relative of president Saakashvili in the opening plenary. It was also reported by a NATO speaker that there was extensive coordination in communications and intelligence with the Georgian armed forces, albeit not through NATO but bilaterally. Russia’s military response however not only reduced the Georgian army but also activated long-standing disagreements between English-speaking West and the continental EU core. For all the expressions of support for Georgia, France concluded a commercial agreement with Russia in the weeks following the fighting, Italy openly rebuffed US pressure to downgrade its relations with Moscow, whilst Germany remains the key way-station for Russian energy supplies to the EU and its strategic partner in new pipeline projects. The West’s ability to move against Iran has been effectively suspended too. One consequence of the Russian riposte to Georgia’s attack on South Ossetia has been the dismantling of the Israeli infrastructure in Georgia that had been put in place for an attack against Iran. Georgian Defence Minister Kezerashvili, an Israeli citizen, was closely involved in the supply of arms. When the attack on South Ossetia had been launched, he declared that Georgia in its fight ‘against the great Russia’, was counting on the US. But as Arnaud de Borchgrave has reported, the two military airfields in southern Georgia that were earmarked for the use of Israeli fighter-bombers in the event of a pre- emptive attack on Iran (and for which they would have to fly over Turkey) were destroyed by Russian special forces and Israeli drones were captured (Middle East Times online ed., 2 September 2008).

Summing up, the neoliberal trend which between the mid-1970s has pervaded Latin America, China, Russia and Iran, by 2000 had provoked a countermovement that can be understood as the second leg of Polanyi’s double movement. Because all the regions discussed here, have a historical background (to different degrees) in a contender state experience, the fact that capitalist property relations remain in force, tends to reproduce crisis phenomena and instability in all of them. The ethnic dividing lines, exacerbated by neoliberalism, require meanwhile that the state maintains a confiscatory hold on society to prevent its collapse. In most cases this is producing an authoritarian trend, without really introducing a viable alternative economic system using continuing state control.

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