Germany, Japan reject Eurodollar bailout plan Moro trial confirms LaRouche's anti-terror method Interview: Argentine atomic energy chief

The future of Argentina: a first-hand report EIR

The special reports listed below, prepared by the EIR staff, are now available.

1. Prospects for Instability in the Arabian Gulf gence input, stemming from Qaddafi's training at A comprehensive review of the danger of instabil­ Sandhurst and his ties to the Senussi (Muslim) ity in Saudi Arabia in the coming period. Includes Brotherhood. Heavy emphasis is placed on con­ analysis of the Saudi military forces, and the in­ trol over Qaddafi exercised by elements of the fluence of left-wing forces, and pro-Khomeini net­ Italian "P-2" Masonic Lodge, which coordinates works in the counry. $250. capital flight, drug-running and terrorism in Italy. Also explored in depth are "Billygate," the role of Armand Hammer, and Qaddafi's ties to fugitive 2. Energy and Economy: Mexico in the Year 2000 A development program for Mexico compiled financier Robert Vesco. 85 pages. $250. jOintly by Mexican and American scientists. Con­ cludes Mexico can grow at 12 percent annually for 6. What is the Tr ilateral Commission? the next decade, creating a $100 billion capital­ The most complete analysis of the background, goods export market for the United States. De­ origins, and goals of this much-talked-about tailed analysis of key economic sectors; ideal for organization. Demonstrates the role of the com­ planning and marketing purposes. $250. mission in the Carter administration's Global 2000 report on mass population reduction; in the P-2 scandal that collapsed the Italian government 3. Who Controls Environmentalism? this year; and in the Federal Reserve's high A history and detailed grid of the environmen­ interest-rate policy. Includes complete member­ talist movement in the United States. Analyzes ship list. $100. sources of funding, political command structure, and future plans. $50. 7. The Global 2000 Report: Blueprint for Extinction A complete scientific and political refutation of 4. Prospects for Instability in Nigeria the Carter Administration's Global 2000 Report. A full analysis of Nigeria's economic develop­ Includes a review of the report's contents, demon­ ment program from a political standpoint. In­ �trating that upwards of 2 billion people will die if cludes review of federal-state regulations, analy­ its recommendations are followed; adetailed pre­ sis of major regional power blocs, and the envi­ sentation of the organizations and individuals ronment for foreign investors. $250. responsible for authorship of the report; analysis of how the report's "population control" policies 5. The Real Story of Libya's Muammar Qaddafi caused the Vietnam war and the destruction of A comprehensive review of the forces that placed Cambodia, EI Salvador, and Africa; analysis of en­ Qaddafi in power and continue to control him to vironmentalist effort to "re-interpret" the BitJle in this day. Includes discussion of British intelli- line with the report. 100 pages. $100.

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Make checks payable to: Executive Intelligence Review, Dept. MC·1, 304 West 58th Street, 5th floor, New York, NY. 10019 (212) 247-8820, �------Founder and Contributing Editor: Lyndon H. LaRouche, Jr. Editor-in-chief: Criton Zoakos Editor: Nora Hamerman Managing Editor: Susan Johnson Features Editor: Christina Nelson Huth Art Director: Martha Zoller Contributing Editors: Uwe Parpart, Nancy Spannaus, Christopher White Fromthe Managing Editor Special Services: Peter Ennis

INTELLIGENCE DIRECTORS: Africa: Douglas DeGroot Agriculture: Susan Brady Asia: Daniel Sneider Counterintelligence: Jeffrey Steinberg Economics: David Goldman European Economics: Laurent Murawiec Energy: William Engdahl Europe: Vivian Freyre Zoakos lbero-America: Robyn Quijano, Dennis Small Law: Edward Spannaus Middle East: Robert Dreyfuss Military Strategy: Steven Bardwell Science and Technology: Marsha Freeman Soviet Union and Eastern Europe: ur Special Report this week is a byproduct of recent visits to Rachel Douglas O United States: Graham Lowry Argentina, Venezuela, and Brazil by one of our Ibero-America Edi­ tors, Dennis Small. This exclusive assessment is shaped by his appre­ INTERNATIONAL BUREAUS: Bogota: Carlos Cota Meza ciation of the common roots of North and South American accom­ Bonn: George Gregory, Rainer Apel plishments in the Hamilton-Lincoln tradition which specified that Chicago: Paul Greenberg Copenhagen: Vincent Robson "mechanical improvements," not "natural resources," are the ful­ Houston: Harley Schlanger, crum of industrial development-in turn the prerequisite for the Nicholas F. Benton expansion and the moral and intellectual development of populations. Los Angeles: Theodore Andromidas Mexico City: Josefina Menendez Mr. Small was interviewed by, among many other media outlets, Stefania Sacchi, Marco Fanini Milan: the Argentine monthly journal an intelligence review for Monterrey: M. Luisa de Castro Bu.squeda, New Delhi: Paul Zykofsky the country's pro-industrial factions. Alongside the lengthy interview, Paris: Katherine Kanter, the July issue of Busqueda carried a report on the Club of Life, an Sophie Tanapura Rome: Leonardo Servadio institution which is in the process of being formed internationally by Stockholm: Clifford Gaddy Helga Zepp-LaRouche, Chairman of the European Labor Party and United Nations: Nancy Coker Washington D.C.: Richard Cohen, wife of EIR founder Lyndon H. LaRouche, Jr. The Club of Life, Laura Chasen, Susan Kokinda BUsqueda emphasized, is intended to act as a counterpole to the Club Wiesbaden: Philip Golub, Mary Lalevee, Thierry Lalevee, BarbaraSpahn of Rome, which continues to coordinate the effort to eliminate billions

Executi ve Intel Jigence Review of people from the earth over the coming two decades. (ISSN0273-6314) is published weekly!50 issues) except for the second Mr. Small and Mr. and Mrs. LaRouche are in Mexico, and we week of July andfirst week of January by expect some journalistic fruits of their visit. We also plan extensive NewSolidarity InternationalPres .• Service 304 W.58IhStreel.New York,N.Y.IOOI9. coverage this month of Spain and Colombia. EIR's European Editor, I" Ellrope: Executive Intelligence Review, Nachrichten Agentur GmbH, Vivian Zoakos, and Paris Bureau Chief Katherine Kanter amassed Postfach 2308. D. 6200 Wiesbaden Tel: 30-70-35 Executive Directors: Anno Hellenbroich. exclusive interviews-and judgments-during their recent visit to Michael Liebig Spain. Colombia has been the subject of a LaRouche-Riemann econ­ /" Mexico: EIR. Francisco Diaz Covarrubias 54 A-3 ometric model study, generating programmatic recommendations for Colonia San Rafael, Mexico OF. Tel: 592-0424. JIl""nslIbscription sllles: economic advancement. O.T.O. Research Corporation, Takeuchi Bldg., 1- 34-12 Takatanobaba. Shinjuku-Ku. Tokyo 160, And, from what we have already heard about Special Services Tel: (03) 208-7821 Copyright c 1982 New Solidarity Director Peter Ennis's current trip to Japan, we anticipate not-to-be­ I nternational Press Service missed political and economic reportage by that veteran of our Asia All rights reserved. Reproduction in whole or in part without permission strictly prohibited. desk. Second-class postage paid at New York, New York and at additional mailing offices. Subscription by mail for the U.S.: 3 months-$125, 6 months-$225. I year-$396, Single issue-$I 0 Academic library rate: $245 per year TIillContents

Departments Economics

16 Energy Insider 4 Central-bank bailout Nuclear power in the plan in tatters as Comecon. crash nears Japan and West Germany 26 Interview are refusing to go Admiral Carlos Castro along with London's Madero, chief of manipulations ofthe Argentina's Atomic Energy Euromarket crisis. Commission. Documentation: Interviews with bankers in London 42 Interview and Geneva. Dr. Philip Hemily, NATO's Assistant Secretary General 9 Currency Rates for Scientificand Environmental Affairs. 10 Compromise sought on the sanctions and the 45 Book Review problem of Polish debt Mountbatten and the New trade deals with the Partition of India. by U.S.S.R., and credit Dominique Lapierre and to Poland, from Larry Collins. West Germany.

48 China Watch 12 Penn Square: the folly Peking looks fo r a of Volcker's strategy "Third Way." He thinks he can let smaller banks go and paper over the 49 Inside Canada big ones' difficulties. "Feed Pepin to the Crow." 13 The IMF scurries to 50 Middle East Report fillpolicy vacuum IMF's man axed in Turkey. In South America and Mexico. 51 Dateline Mexico 14 Foreign Exchange European-style separatism in the works. The dollar and the banking crisis. 64 Editorial 15 Agriculture A diplomatic turning point? A statistical hoax.

17 Trade Review

18 Business Briefs

Hi Volume 9 Number 29 August 3, 1982

Special Report International National

32 Will the Middle East 54 Congress punts on the be thrown into flames? Volcker bailout issue Or will the U.S. When the Fed Chairman administration finally crack testified on the Hill down on Sharon and recently, no one was Begin? prepared to bring up the Euromarket situation. 34 Italian Socialist role in terrorism confirmed 56 When will the United

The Atucha II nuclear power plant under con­ by the Moro trial States launch a struction 100 kilometers north of Buenos Aires, A first-hand report productive policy Argentina. This photograph was taken from the site of Atucha [, the only operational nuclear from Rome. toward Asia? power plant in [bero-America. Patching over the Taiwan Dennis SmalljNSIPS 37 Banning the Greens question, and supporting In West Germany, the monstrous Khmer momentum is growing Rouge, hardly fulfill 20 Argentina's future: a against the America's mission there. first-hand appraisal environmentalist fascists, Ibero-America Editor thanks to the European 58 Aquarians brainwash Dennis Small on his trip to Labor Party. U.S. businessmen Argentina, where he A report on a recent discovered a hard-pressed 38 Soviet military chief: Tarrytown Group assembly but well-equipped grouping 'upgrade our defense' of spoon-benders who understand Defense Minist�r Dmitrii and futurologists. Hamiltonian economics. Ustinov declares that if the Documentation: Argentine United States wants to play 60 Congressional Closeup press coverage of military chicken games, the Small's visit. U.S.S.R. is prepared to 62 National News meet the threat. 24 Argentine sponsor of an American System 40 South Africa readies Corrections: The credit for EIR's A profile of Gen. Juan 'Israeli-style' moves July 27 cover photograph was Guglialmelli. Behind the facade of inadvertently omitted. The negotiations over Namibia. picture of fo ur giant U.S. 25 Why London fears the Steel blast furnaces being nuclear program in 52 International Intelligence demolished at Youngstown, Argentina Ohio on April 28, 1982 was Documentation: A brief look taken by Ken Mengay of UPI. at the fiscala nd other problems of the Mexican and Brazilian atomic-energy programs.

w. �TImEconomics

Central-bankbailout plan in tatters as crash nears

by Laurent Murawiec, European Economics Editor

The conditions that prevail on the world fi nancial mar­ highly liquid and reliable assets, it also generates a battle kets can only be described as the symptom of a pre-crash for the minds-whose political solution to the great debt period. That period will be short, highly unstable, and reorganization of 1982 will triumph? highly destabilizing fo r markets as well as for the actors and witnesses of the drama. The old, post-I97 1 system Advocates of the 'controlled collapse' built on the ruins of the Bretton-Woods institutions, is in Let us enter the conference room of one of the its turn dissolving, and the shape of the future is as yet world's most clandestine institutions, the Bank fo r unclear. International Settlements in Basel, Switzerland. On July The astonishing series of incidents, accidents, and 12 and 13, the world's leading central bank governors limited earthquakes that have hit the financial markets in were meeting, including, quite unusually, U.S. Federal the last two weeks bears witness to their fragility, to the Reserve Chairman Paul VoJcker, and, very unusually, imminence of their demise. Penn Square and its spillover IMF managing director Jacques de Larosiere. Main onto leading U.S. banks; Canada's Dome Petroleum's item on the agenda: how to face the imminent banking troubles and their implications for at least three top and financial crash. Canadian banks; the strained finances of Germany's A group of Fritz Leutwiler (BIS chairman and Swiss AEG Group and its creditors' accounts; the many and National Bank head), Christopher McMahon (Deputy troubled rescheduling processes affecting sovereign bor­ Governor of the Bank of England) and Henry Wallich rowers, from Eastern Europe to Latin America ... (number two on the Federal Reserve Board), led the pack The idea fo r which this journal and its founder have demanding the immediate establishment of detailed been notorious for many years-that the world's debt emergency plans, and of a "safety net" laid by central could not and would not be paid, that the Europmarkets banks. The Bank of England was the most insistent, and were bankrupt, and the day of reckoning was predictable its attitude verging on discourteous frenzy-because of within specific time brackets-has become universally the extreme fragility of the City of London, the world's known and accepted. biggest "offshore" center. "The Bank of England wanted But while the perception that the collapse of the $1.5 other central banks to sho ulder part of their responsibil­ trillion Euromarket is imminent is feeding a race into ity-they are very scared that a collapse will fall mainly

4 Economics EIR August 3, 1982 save U.S. industry and farms, make more liquidity .available! Volcker's congressional testimony on July 21 only confirmed this, when the Fed chief stated that "under special circumstances," money would be print­ ed. A Geneva banker explained the meaning of Volck­ er's views: "The Volcker-Wallich clique is all prepared to break U.S. industry apart, they don't care; but they won't let the banks go." Everything seemed to be in the best of all worlds for the central bankers, whose view it is that the world economy is inevitably headed for a "controlled col­ lapse," with increasing control, that is, for the BIS and the "elite" of financiers and banks that are its collabo­ rators. A monkey wrench was thrown into their game. Of the world's three largest and most powerful economies, two refused to play. If the United States, through the treasonous Federal Reserve, has agreed to place its economic might as the guarantor of the Euro-fortunes of continental European and British oligarchic finan­ ciers, Germany and Japan flatly refused to do so. Japan, whose leadership believes that only a general and order­ ly debt moratorium for the developing sector can avoid a total collapse and relaunch world economic growth, and Germany, which obstinately refuses to bail out the mistakes of others, simply refused to enter the "safety net." Without Germany and Japan, the virtues of any Paul Volcker "safety net" are dubious at best, nonexistant at worst. As a result, the communique, which as an unusual on them," a Swiss official commented, not without some measure had been prepared by the BIS, was not pub­ sarcastic pleasure. In truth, it was rather unusual for the lished. "Any preparation you make will be destroyed by Old Lady of Threadne edle Street to resort to armtwisting a collapse, you will be overtaken by events," the argu­ tactics such as leaks to the press to get its way. ment went. A leading London merchant banker com­ In spite of their differences, however, the Swiss, the mented: "The central bankers don't have much going. British, and the fo reign agents who run the Federal They might think they have something of a preliminary Reserve fell into basic agreement on the fo llowing plan: safety net, fo r some of them, but they are hopelessly each central bank would "take care of its own flock," behind events." its own banks and their offshore extensions, and provide liquidity to stave off a collapse in case of a crisis on the The homage paid by vice to virtue interbank markets. At first, each central bank would In times of crash and crisis, investors turn to what draw on its own dollar reserves to do so, then extend are the most liquid and trustworthy assets in the world. emergency help in its own currency to the banks, which The bills of the Treasury of the United States are that­ then would hav e to acquire dollars themselves. If that which demonstrates that it is nation-states, and partic­ did not suffice-and in a Euromarket panic, it certainly ularly the strongest of them that generates the most would not-normal swap lines with the Federal Re­ secure and best-backed financial assets. All the oli­ serves would be activated: the Fed would print billions garchs' financial managers who have been quietly con­ of cash dollars which it would swap against pounds verting their assets into U.S. T -bills recognize the fact. sterling, Swiss fra ncs, etc. Some sources even report In the last two months, portfolio managers through­ that special swap lines were arranged at the BIS meet­ out the world have started to switch their investment ing. from bank dep osits to U.S. Treasury bills. Geneva's In other words, Paul Volcker and Henry Wallich leading private banks, which manage much of the agreed that the Fed-to bail out the world's biggest world's largest fortunes (Lombard, Qdier; Ferrier, Lul­ casino and funny money establish ment, the Euromarket lins; Pictet; Hentsch & Co.; etc.), had completed this created by British and Swiss fi nanciers-would accept I"'{ocess before that. The drug-linked Hongkong and what it has brutally and consistently refused to do to gnanghai banking group is now starting to do the same.

EIR August 3, 1982 Economics 5 Only the extreme discretion and the gradual nature of approach of the continent to debt renegotiation, are the conversion, explain why there has not been an among the most positive signs of that bankruptcy, or of explosion on the markets: this is a slow-motion collapse. the efforts to overcome it. The financial scene is more "The switch fr om bank deposits to Treasury securi­ dominated, however, by desperate efforts to "pass the ties creates massive problems for the banks," a London buck" and ensure one's neighbor's demise rather than 1 percent over broker said. "Clearing banks pay /16 one's own. British bankers, for instance, are especially LIBOR, but merchant banks, which have no deposit keen on the destruction of the industry-oriented Ger­ base, have to pay percent already. The smaller the 3f16 man banking system, for which reason they spread no bank, the weaker, the higher the premium it has to pay. end of rumors (which they later delicately attribute to The differentials are already impressive, and they apply U.S. sources.) The BIS central bankers' own operation, to all non-U.S. banks." There, too, the command of the be it called "safety net" or "Basel Concordat" (a dollar deposit market-the continental United States document agreed upon in 1975 to define the areas of and its economy-is a principle of reality which even responsibility and the tasks of the central banks in case speculators are forced to acknowledge, even if only to of a global liquidity crisis), is commonly described as be better able to loot it. "full of holes," especially after the collapse of Italy's One schedule on which the best-informed London Banco Ambrosiano's Luxembourg holding. Italian financiers operate was summed up as follows by one of banks have rightfully refused to take responsibility for them: "If nothing happens before the end of this month, the losses of a holding company located in an offshore then August should be quiet. You never know, but it center, and whose demise does not endanger the liquid­ should be quiet, because people will be drawing their ity of any bank. The specter of "subsidiaries being battle plans. Then, the next deadline is the early autumn, dumped, offshore centers with no regulatory authorities when a lot of things cquld simply explode. And if the to control them being cut off from their sources of big crash is averted in September-October, then watch funds" is haunting the masters of the Euromarkets. the year-end closing of accounts of the banks. Banks LaRouche's (and Charles de Gaulle's economic adviser report only several months before, but shifts in their Jacques Rueffs) oft-repeated assertion that unregulated pattern of behavior will appear and be quickly spotted (Euro) markets are ruining the good currencies and the by the markets, like heavier than normal drawing on hard-commodity-oriented banking systems, is being credit and interbank lines ...." borne out with a vengence. Sources close to the Bank of England are circulating Now that the global financial crash that this journal rumors that Paul Volcker's more flexible attitude has has foreseen and analyzed in detail for many years is a been motivated by a run on "one major New York palpable reality, the point must be made that the holier­ bank, the week of the Penn Square collapse, which was than-thou central bankers are the ones who want to squelched quickly by the Fed which started pumping decide when and how the crash will occur. As a Brussels liquidity into the banking system." It is true that the financier commented, "A liquidity crisis can only devel­ Fed has been adding reserves to the system in the last op if one bank has been rebuffed by other banks and by fe w weeks, and even cutting the discount rate, in no its own central bank when it was in dire and urgent proportion that could be of any help to industry, but need of liquidity. A liquidity crisis will only occur if the simply to prevent an uncontrolled banking panic. central banks let it go." With all their protests of "The tension at present is worse than in 1974," prudent virtue, the BIS central bankers intend to do commented the chief economist of a Geneva bank. exactly that-and they cling desperately to their illusion Understandably. "The bankruptcy of the [Third World] that they will indeed be able to "control" what will be debtors has now become the bankruptcy of its [Western] the worst financial explosion since the 14th century! creditors," as EIR founder Lyndon LaRouche pointed There is very little time left for the world to escape out. The accumulaton of bad debts caused by the the tragic "choice" it is presented with, of surrendering Malthusian policies of the world's dominant monetary to the central bankers' "controlled collapse" or being and financial institutions, the central banks, the Inter­ precipitated with the sorcerer's. apprentices into the national Monetary Fund, the World Bank and the tempest. The fact that the Reagan administration, after private and commercial banks that go with them, has having "settled its fo reign policy problem," is now not only made the desperate debtors insolvent-it "focusing on economic problems" with a personnel threatens to blow away the whole system of their reshuffle being mooted, presents us with a desperately creditors. needed opportunity to be taken: even if President Rea­ The political fight in Brazil to oust austerity-minded gan has no articulate program to propose, the mid-term Planning Minister Delfim Netto, and reschedule the political reshuffle must be turned into the entry point country's $75 billion debt; the debate throughout Latin for the sweeping reforms of the monetary system pro­ America on the use of the "debt-bomb," or the common posed by LaRouche since 1975.

6 Economics EIR August 3, 1982 the short term, at any rate, the [central] banks would print money to cover their domestic problems, which would be highly inflationary. The result would also be a serious fall in stock markets. Recession would be sharp, So, a combination of high inflation and recession all depends on whether confidencecan be maintained. You told me some time ago that [Hitler and Schacht's] Ren­ tenmark was a spurious means to conceal a collapse, but it worked. The view from London If it won't work, then there will be defaults by all major sovereign borrowers. Their debts of course could be rescheduled, but new money-except very short-term 'The question is, can trade credits-would be nil. confidence be maintained?' EIR: How serious do you think the consequences of the Banco Ambrosiano bankruptcy will be? From a discussion with a top London investment banker on A: It is generally thought that the case is peculiar to that July 19: bank. It. would have gone under anyway, even without the present climate. The British banks called the default EIR: What are the prospects for a banking collapse? because Ambrosiano Holdings Luxembourg is not a A: If nothing happens before the end of this month, then bank, it is not covered by the lifeboat, lenders had no nothing will happen before September. August is a quiet reason to believe that there was any money in Italy month which people will spend planning things out (of earmarked for paying its liabilities. So they decided to go course they could choose to make the big announcements ahead with a freeze, a default would be safer. With the then on grounds that the markets would react less, but I freeze, assets are being checked into, there is time, credi­ doubt it). tors can agree whether to dismantle or reconstruct the U.S. banks, Canadian banks, and German banks are non-Italian assets of Ambrosiano-they don't want Am­ the most likely to be hit. So the banks there will hold brosiano Luxembourg to be able to go on wheeling and extensive talks with the banking and supervisory author­ dealing, and some more assets to disappear .... If lOR ities on writeoffs , reschedulings, and so on. The year-end [the bank of the Vatican] had guaranteed some of the closing of annual accounts is the next danger point after overseas loans, there might be something, but it really September. By then, national authorities will have to lies outside the lifeboat's scope. The Italians, and lOR, have consistent policies on writeoffs , what can be classi­ have no obligation to pay, a moral obligation perhaps, fied as recoverable assets and so on. or something to do in order to avert a crisis of confi­ U.S. banks report quickly, by January or February. dence.... Other banks are slower, but by February-April 1983, once the trend is apparent, the cat is out of the bag­ EIR: How do you see the Third World debt situation which banks are suffering strains on their cash-flow now? comes out quickly. Markets are very quick to spot out if A: It is quite likely that Brazil will go to the IMF, even you're make extensive, unusual use of short-term bor­ though the Brazilians did raise in the first half the rowing, if you overuse your credit lines on the interbank proportion of their borrowing requirement for the year market. ... that they needed. It is now getting stickier. They need My feeling is that the central banks have discussed more. If they go to the IMF (and there is only one thing that each would look after their own problems and their really that the IMF could tell them, to cut public spend­ own banks. For example, in Germany-where Dresdner ing, otherwise, their policies are such that there is little Bank is the prime candidate for crisis-the Bundesbank that could be asked that they have not done already), would sort it out. Of course there will be a chain reaction Brazil could then draw on the IMF, and tide themselves of some sort, but each central bank would handle their over for this year. But there will be a rescheduling of own areas, with the primary responsibility of being a some sort, just like Mexico . Even though the Mexicans lender of last resort for that area. have improved their situation since spring, when, as has The second stage is this: in the event of a liquidity been revealed, they had to draw on credit lines with the shortage, the central banks would presumably draw on Fed, they have pulled some money in since then, they'll the existing swap lines with the Fed, the Bundesbank, the have to. reschedule. Whether, in both cases, it is a fo rmal Banque de France .... It is possible that special swap rescheduling or rollovers is another matter. The Mexi­ lines have been established in anticipation of events. In cans have a worse problem, given the imbalances in their

EIR August 3, 1982 Economics 7 internal structure. Either they drastically reduce govern­ My first question about the BI S meeting is this: are ment spending, not easy, or get a major increase in oil there cat-and-dog fights among the central bankers? prices, which is beyond their control. ... Their grand plans are bunk in any case, but the key is A united front [on debt] cannot be held [in Latin whether some of them feel like opting out o f participa­ America]. The Argentine debt rescheduling will come tion. The BIS is concerned whether the Germans, the imminently anyway, they have no other choice. And Bundesbank, would participate.The Bundesbank is not lenders are not prepared to deal with ajoint approach by equipped and does not have the tradition for this kind of debtors. The method of rescheduling still uses very prim­ intervention, and they are the most susceptible to be itive methods-they deal with one year of maturities uncooperative at the international level. only; the mechanisms available are not sufficient or So the Bundesbank-and the Japanese, who want a appropriate. general debt moratorium, so that the Western banks [A debt moratorium threat] could be a fo rmidable chalk up the old debts, and they [the Japanese] can then weapon, but it will not be. The Latin Americans dislike sell their stuff throughout the world.It's their clients that each other too much. The Argentines have not coordi­ are indebted to us after all. And Bundesbank-Japanese nated anything with anyone. The Brazilians are a prag­ cooperation is totally open; they are now openly cooper­ matic race-ifit suits their purpose they would approach ating to manage the yen-deutschemark rate.... the Mexicans for talks and review of debt renegotia­ In the case of a run on a big bank, ifthere is will to do tions.... so, it is very easy to stave it off; other banks immediately I was discussing with a friend that private banks­ recycle the deposits lost by the bank under attack.And which have no exposure to the interbank markets-wiil the Fed can help at the [accounting] level. be immune fr om the banking crisis, or big Swiss banks It is very serious that the Banco d'Italia and so on are with their huge deposit base and tiny interbank exposure. not covering Ambrosiano losses-it will increase the Everybody is very jumpy. It is not clear to me that the spreads between deposits in subsidiaries and deposits central bankers have collectively taken a decision to with main offices.If banks start dumping the subsidi­ support those that will go under. I fear that the central aries.. .. banks would let go some "small banks," with the argu­ This period is more tense than 1974. The Basel Con­ ment that they reserve their ammunition fo r defending cordat is in bad shape-the Italians must cover Ambro­ the big ones-and thus start the chain reaction they want siano.Th e Banco d'ltalia, if need be, will be assisted by to avert. Maybe in some months we'll have a central the Bundesbank and the Fed, but they must support declaration about their plans of intervention. By that Ambrosiano Luxembourg. I have heard figures ranging time, they will have been overtaken by events. from $600 mn to $2.4 billion and even more for the liabilities. The markets are boiling hot. There is no m anaging committee in any banks that is not reviewing their loans and deciding to cut credits here or there.The The view from Geneva system could absorb 10 or 15 "Franklin National Bank" shocks-but not the refusal to lend, which turns into a default of payments on $400 billion of debt, especially 'The system can't absorb since there is no concerted protocol for a moratorium, not even the beginning of one. a refusal to make loans' Even the clique of Volcker and [Fed Governor Hen­ ry] Wallich, who're all willing to dump U.S. industry From a July 19 discussion with a top Swiss banker: without a blink, don't mean to let the banks go-they'll save the banks. The same with Bank of England.... I For a chain reaction to develop, there is a need for don't think that the Bundesbank has a mastery of the one central bank to have let it develop first. A bank turns juridical mechanisms that is required for the time of to its peers, and to the central bank, and it is rebuffe d­ crisis. In the U. S., when Penn Central went bust, the then it goes bust, because it was not helped. That's Constitution was violated by [Fed Chairman] Mc­ exactly what happened in 1974 with Herstatt, when the Chesney Martin.Th e Germans could not overrule regu­ banks to ld Herstatt to go· to hell and the Bundesbank lations.... Ce ntral bankers were fighting at Basel. The refused to lift a finger. The Bundesbank compelled Her­ Bank of England was trying to force the hand of some­ statt to declare itself in default. Then trouble started. one, to impose a detailed elaboration of emergency Now if there's an international agreement to allow "planning." the banks to keep assets on their books, even if these are Here [in Geneva], all precautions have been taken.In non performing, fo r the duration of a crisis, then a chain the portfolios, there are no bank deposits anymore.Only reaction can be averted. Treasury bills.

8 Economics EIR August 3, 1982 Currency Rates

STOPPING THE DEPRESSION AND The dollar in deutschemarks REBUILDING THE STEEL VALLEY New York late afternoon fixing A Conference on Economic Development sponsored by 2.45 1'- ""'- -,/ The National Democratic Policy Committee I( 2.40 -� r V VVednesday, Aug. 25 Marriott Hotel 2.35 l/_ I I 9:00 A.M. to 9:00 P.M. Monroeville, Pa.

2.30 CONFERENCE SCHEDULE

2.25 8:30 a.m. Registration 6/2 6/9 6/16 6/23 6/30 7/7 7/14 7/21 9:00 a.m. Welcoming Remarks 9:15-10:45 a.m. "High Interest Rates, Industrial Collapse and the Coming Monetary Blowout" The dollar in yen SPEAKER: David Goldman, Economics Editor, Executive Intelligence Review New York late afternoon fixing .- PANEL: - � Gene Mahoney; President, Central Labor CounCil, Fayette County � I'� Emil Dicembre, PreSident, Cement Masons Local 250 ..,.tfII" � --1"0 #56 I 10:45-11:00 a.m. Sreak _ - a.m p.m. 240' r-,/ 11 :00 .-12:30 "The 'Post-Industrial Society' Threat to the Steel Industry; the Causes of its Current Collapse" SPEAKER: 230 Richard Freeman, Economics writer, Executive Intelligence Review PANEL: 220 Jim Olson, Field Engineer, U.S. Tubing Specialties, Gary, Ind. John Baliant, USWA Local 1397 210 12:30-2:00 p.m. Lunch break 6/2 6/9 6/16 6/23 6/30 7/7 7/14 7/21 2:00-5:00 p.m. "Creating a U.S. Capital Goods Boom: Great Enterprises, City-Building and Trade Expansion in the Developing Sector," SPEAKER:

Uwe Parpart, Director of Research, Fusion Energy Foundation. The dollar in Swiss francs PANEL: Representatives from India, Latin �merica, and Africa New York late afternoon flxiDg 5:00-7:00 p.m. Dinner break 7:00-9:30 p.m. "Creating a U.S. Capital Goods Boom: Great Enterprises 2.10 ,...... ".". � �� and Infrastructural lmprovement Projects in the U.S.A." - .J ---- I � SPEAKER: 2.05 0- ..,., Paul Gallagher, Executive Director, Fusion Energy Foundation V PANEL: 2.00 Tom Shellerley, Vice President, Central Labor Counsel, Fayette Co�;;ty r' John Mcilvaine, Labor Arbitrator, Compensation CounCil, UMW District 4; farmer; 'and a director of the American Seefalo AssOCiation 1.95 , Organization affiliation for identification purposes onl�: 1.90 ...;;. 6/2 6/9 6/16 6/23 6/30 7/7 7/14 7/21 For more information contact the �ational Democratic Policy Committee The British pound indollars 2215 Arch Street. Philadelphia, Pa. , or Call (215) 561-5585 New York late afternoon fixing

1.85

1.80 - 1.75 � -- J,,"i- - � 1.70 �

1.65 6/2 6/9 6/16 6/23 6/30 7/7 7/14 7/21

EIR August 3, 1982 Economics 9 The East bloc question

Compromise sought on thesanctions and the problem of Polish debt

by David Goldman. Economics Editor

Highly placed adminstration sources July 2 characterized from his policy of the past eight years; alliance with the Polish Premier Jaruzelski's measures to ease martial law United States and correct relations with Moscow. West conditions as "a step in the right direction." indicating German banks July 12 signed their biggest loan deal that the administration saw the measures as the basis for ever, lending OM 4.5 billion to the Soviet Union for a re-evaluation of the sanctions against exports directed completion of the pipeline project. toward Soviet energy development. "We will not jump In addition, the West German government has into anything, and we are still waiting for details," said provided the troubled AEG corporation, severely affect­ one ranking official. "But it is certainly the basis for a ed by sanctions which forbid it to use General Electric review of the policy." license to ship turbines to the Russians, with a special Other Washington sources expected that the firststep $250 million export bond, in conjunction with a $110 of any administration retreat on trade sanctions would million bank loan-which will keep AEG out of trouble involve the elimination of "extraterritorial" sanctions, until at least year's end. i.e., the ban on use of American-licensed products in At the same time, the West German, Japanese, and exports related to the Soviet-European natural gas pipe­ Italians appear to have had a role in Jaruzelski's deci­ line or the Japanese-Soviet plan fo r development of the sion to moderate the martial law situation in Poland; oil potential ofthe Sakhalin Islands. the announcements July 21 were more than fortuitously timed with three European-Japanese initiatives relating Tensions among allies to the sanctions program. First, Chancellor Schmidt It is much too early to predict the lifting of sanc­ and his Economics Minister, Count Otto Lamsdorff, tions, which have become the potential casus belli for arrived in the United States on July 20, with one major trade war between the United States and its Western purpose, to eliminate the sanctions disaster. Lambsdorff European and Japanese allies. As EIR reported in some is working in Washington, while Schmidt is scheduled detail July 20, the administration became victim of a to spend a week at the home of his old friend, Secretary nasty judo trick played by certain British and Central of State George Shultz, apart from speech-making stops European circles already committed to a "Third Way" in Houston and San Francisco. approach toward the Soviets; through spurious intelli­ Meanwhile, Italian Foreign Minister Emilio Col­ gence and strategic estimates supplied to the adminis­ ombo arrived in Washington July 21 for an unscheduled tration by these circles, the White House elected to fo ur-day visit, the principal announced purpose of shoot itself in the fo ot over the unenforceable and which was to persuade the administration to drop the divisive sanctions policy. pipeline sanctions. Colombo is scheduled to meet with Despite the strident refusal of any of the Europeans President Reagan, Secretary Shultz, and Commerce to abandon the pipeline project, and continued Japanese Secretary Baldridge. commitment of the Sakhalin development, the adminis­ Finally, the Japanese Ambassador to the United tration has fo llowed its regrettable profile on the matter, States, Yoshio Okawara, delivered a verbal and written and held fast to a clearly self-defeating posture as a protest note July 20 to the State Department against the matter of fa ce-saving. exercise of the sanctions against the Sakhalin Islands Although the allies are not willing to bend to project-extraordinarily forthright behavior for the Washington, only the French Mitterrand government Japanese. These three countries' actions appear well has actually taken steps to make relations worse. West coordinated, and there are strong indications that both German Chancellor Helmut Schmidt has not budged the West Germans and the Vatican made representa-

10 Economics EIR August 3, 1982 tions to the Poles and Russians that now might be a and Japanese have delivered a clear political message to good time fo r a good-will gesture from the Polish the East bloc: it is in the latter's interest to take no government. "If Schmidt had a role in this," conceded drastic action on the debt issue at this time. What an administration hard-liner, "it is welcome." further may have been aired during the intense mid-July Among other things, the West Germans have made Vatican-Polish diplomacy remains a matter of specula­ clear to the East bloc that they are prepared to provide tion. additional fi nancial aid to Poland, whose de facto The results of the European effort in Washington bankruptcy on fo reign debts has prevented her from will not be known for some weeks. Much depends on purchasing needed raw materials and spare parts, and the reaction of the new Secreary of State, whose views crushed the national economy. are known only to himself. The administration has To a certain extent the Germans have little choice in continued to play rough. Japan's Kyoto News Service the matter; fo llowing the renewal of sanctions decisions cited official American warnings to Japan against vio­ and the July 15 passage of the Kasten-Moynihan bill by lation of sanctions procedures in a July 21 dispatch; Congress, which gives the President a mandate (which according to Kyoto, it is not to be excluded that firms he need not immediately exercise) to declare Poland in violating the sanctions against use of American technol­ default, the Polish government has been deliberating on ogy in goods directed towards prohibited Soviet proj­ the possible merits of straight-out debt repudiation. ects might face seizure of their assets in the United Polish action of this sort would leave the West Germans States. with the unpleasant choice of suffering a banking crisis, which the German banks already suspect the United The Mitterrand flap States of wishing upon them, or splitting with the Also disturbing is the July 21 action of the French Americans and setting up a separate deal with the Poles, government which ostentatiously announced that it further undermining European-American relations. would order commercial firms engaged in the pipeline project to make good on their projects. Foreign Minis­ West Germany's and Japan's viewpoints ter Claude Cheysson lamented the fact that the United Low-keyed but important financial ties between States and France "no longer speak the same lan­ West Germany and the Poles have survived the debt guage," in the bitterest public criticism of the adminis­ crisis. The Poles have been careful to pay their West tration yet directed from a European government. The German corporate suppliers, even though they are in no French have played the provocateur since the Versailles position to pay the bankers. Poland still has about $800 summit meeting; allegedly, a motivation of the Reagan mil1ion in foreign deposits, and most of this is in West administration in making the pipeline sanctions extra­ Germany; against the German portion, West German territorial was the sense that Mitterrand had played banks have continued to make available a small but Reagan false at Versailles, promising strictness on So­ significantvolume of trade credits. viet credits, and then turning around immediately after­ According to well-placed German industry sources, ward to extend further loans to the Russians. negotiations are underway to expand the existing vol­ The fanfare about France's decision to flout the ume of trade credits by the following ruse: German sanctions in the American press is suspicious, particu­ banks will lend the Poles the wherewithal to pay their larly as the British had made an identical announcement 1 982 interest payments (at least to West German, and two weeks prior, which went entirely ignored in Ameri­ probably to Swiss and Austrian banks), and then use ca news reports. By the typical standards of the East the repayment as leverage to extend additional trade Coast media, it is one thing for the "good" British to credits. According to a Japanese wire-service report order American firms in the United Kingdom to make July 2 1, Japanese banks have also been approached, good on contracts to the Soviet Union despite the and are equally concerned to avoid debt repudiation, instructions of the American government-which the which they fe ar the Americans are moving toward, Thatcher government has-and another thing for the Perhaps more important is a proposal now under "bad" French to do the same to French firms! discussion, according to Viennese banking sources close The administration's querulous eye towards France is to the negotiations, to put off the entire Polish interest not unjustified; the Mitterrand government is an instru­ and principal for an 8-to lO-year period, in order to give ment of the same oligarchic circles in Europe who the economy a chance to get back on its feet. This is the plotted U.S. embarrassment in the first place. Whether approach overwhelmingly favored by the Germans and President Reagan will be baited into an aggravation of the Austrians; how the American and other Polish his original blunder is not clear. What remains certain creditors will respond is not yet known. is that the West Germans and Japanese, with apparent While the principals in these negotiations have with­ Vatican support, have given him a face-saving means of held details, it is nonetheless clear that the Europeans stepping out of a trap before it closes fo r good.

EIR August 3, 1982 Economics 11 The U.S. bankingsystem failing banks in the coming period. Although since the 1930s not a single American bank had been allowed to fail without action being taken to cover all its deposits­ even in the case of the 1974 failure of the scandal-ridden Penn Square : the fo lly Franklin National Bank-Volcker, Isaac, and Todd agreed to let the holders of the $190 million of uninsured of Vo lcker's strategy· deposits at Penn Square to take their lumps. A source close to the Bank of England stated July 22, "What the Fed did at Penn Square was good. Most by RichardFreeman of the U.S. banks, with the exception of the large ones, will not be bailed out. This will cleanse the American On Friday, July 9, the Federal Reserve had to intervene banking system." and pump large masses of funds into the American Thus the Fed's action in pumping emergency liquid­ banking system to prevent a generalized banking col­ ity into the American banking system July 5-15 was not lapse. Just four days earlier, the insolvent Oklahoma motivated by concern fo r the majority of the banks, but Penn Square Bank had been shut down. In Europe that only the top 50. day, investors dumped the bonds and certificates of Volcker may think he can let smaller banks go by deposit of American banks. Simultaneously, a spokes­ the board while propping up the biggest ones through man for the London Financial Times reported privately liquidity injections and book manipulations. The fact is July 19, "there was a run on one of New York's largest that the largest banks are so vulnerable that if he were banks." to bail them out it would be a matter of covering billions A Federal Reserve bailout procedure continued for in assets. the entirety of the following week. The Fed's brush with Let's look again at the Penn Square case. First, catastrophe subsided, but no one knows for how long. while several top banks are wailing that they got The failure of Penn Square is termed by Federal Deposit "taken" by Penn Square, that is most emphatically not Insurance Corporation head William Isaac an "aberra­ the case. One source noted July 18, "Continental Oil tion." But only two months ago, the same people were ran Penn Square. Conti wanted oil loans and used Penn explaining away the case of Drysdale Government Secu­ Square as a funnel." It is well known that since early rities, a firm with a mere $35 million in capital that was 1980, the Controller of the Currency had placed Penn allowed to trade $6 billion a day in government securities. Square on its "to be seriously watched" list. After Drysdale Government folded, and stuck Chase Of course it is true that Penn Square ran a sham, Manhattan with over $300million in losses, it was said profiling itself as a banker to independent Oklahoma that the Drysdale case was likewise one of a kind. Perhaps drilling rig and exploration firms. Eightypercent of its the St. Valentine's Day massacre was really a series of loans were to the energy industry. As is well known, it muggings? resold $2 billion of these loans, based on inflated estimates of suspected oil reserves, to Chase Manhattan A decision on bailouts ($200 to $300 million), Continental Illinois ($1 billion), "There are lots of potential bankruptcies out there, and Seafirst of Chicago ($400 million), as well as some name institutions and some surprises," said a Northern Trust Bank of Chicago and Michigan Nation­ former high-ranking Federal Reserve Board official al Bank of Bloomfield Hills, Michigan. All of these July 19. "Many of these corporations will go, and this banks are on the list of America's 50 largest. will mean that there are many more Penn Squares about The energy loans brought down Penn Square. About to occur in the banking system. The decision was to let $600 million worth of the total Penn Square energy Penn Square go under, and not bail out some of the loans the above banks took down have turned bad. depositors, because there will be other banks in that Now consider that Fed Chairman Paul Volcker has situation and the Fed wants to get the right kind of rigged the American banking system so that bank precedent for not bailing out every failing institution." lending predominated in precisely such unsecured areas Of the $450 million of deposits deposited at Penn as energy lending, real estate speculation, commodity Square, $190 million, or 40 percent, were not insured by futures trading, lease-back agreements, etc. How many the Federal Deposit Insurance Corporation (FDIC). An of these loans do large American banks have on their intense debate occurred at an emergency meeting on books? Plenty. Volcker may believe that he can quar­ Saturday, July 3, at which the fate of Penn Square was antine the largest banks in America from disaster while decided. Fed Chairman Volcker, FDIC head William letting the rest go under. While he is showing where his Isaac, and Controller of the Currency C. Todd Conover loyalties lie, he is also showing his incompetence, at the discussed policy for what they knew would be a wave of expense of the survival of the U.S. economy.

12 Economics EIR August 3, 1982 bomb"-the threat of debt moratorium unless the debt is Latin Americandebt reorganized on terms favorable to economic growth­ proposed by EIR founder Lyndon LaRouche, "it would be a fo rmidable weapon," he said. "But it will not be. The IMF scurries to The Latin Americans dislike each other too much. Ar­ gentina isn't coordinating anything with anyone .... A fill policy vacuum united front cannot be kept together."

'They have no choice' by Cynthia Rush This source went on to predict that Argentina, Brazil, and MexicQ will all eventually end up at the The last-minute postponement of the meeting of the IMF. With more belt-tightening, Mexico might be able Latin American Economic System (SELA}, the Latin to hold off for a while, but "the Argentinian debt American-wide organization fo unded in 1975, does not rescheduling will come imminently, anyway. They have augur well for the future of the continent. This is not no other choice." because SELA itself was expected to produce spectacular In the absence of coordinated resistance from Ibero­ results.EIR 's sources reported a few weeks back that the America, the IMF has intensified its assault on the group's leading members did not see it as the most continent, clearing away the debris from the collapsed appropriate vehicle through which to forge the economic smaller nations and sending missions to the larger ones and political unity of the continent sought in the after­ to deP1andtheir capitulation. math of the Malvinas crisis. In the case of Brazil, the fear of the international Now postponed to Aug. 25 from its original July 19 oligarchy is, as EIR's London source reported, that "the . date, the meeting would nonetheless presumably have Brazilians are a pragmatic race-they would approach served as a useful forum for discussion of such questions the Mexicans fo r talks and review of debt renegotiation as fo reign debt and the reorganization of the inter-Amer­ if it suits their purpose." To ensure that doesn't happen, ican system. Our sources in Caracas and Washington the IMF had a mission scheduled to arrive in Brazil the report that the postponement was attributed to the need week of July 19-24. There are already signs that the for "more preparation" and requests from other member government may be preparing to scrap its decision not governments for specific proposals from Venezeula to go to the IMF, despite the sensitive political situation based on the recent speech by its Ambassador to the created by this year's elections. Organization of American States, Hilari6n Cardozo (see In the past the Fund was content to let Brazil EIR, July 20). In that speech, Cardozo identifiedthe role implement what were in fact IMF austerity measures of the International Monetary Fund (IMF) in impeding without making the relationship official. But the gov­ the sovereign economic development of Ibero-American ernment's recent reassessment of its borrowing needs nations and made several proposals for coordinating the for 1982-up from $14 billion to $19 billion-with no economic self-defense of the continent. willing lenders in sight, may change all this. Planning . . EIR suspects there may be something more adyerse Minister Delfim Netto was in New York and Washing­ '·than the need fo r "more preparation" behind the post­ ton in early July meeting secretly with the IMF as well ponement, particularly since the host country, Venezue­ as with New York bankers to try to raise money. He la, has been the most aggressive in demanding Latin will return again before the end of July. American coordination. An IMF mission is also in Argentina, and the line The delay in putting together a post-Malvinas eco­ from the international banking community is that nomic and political strategy for the continent gives the "sooner or later" the country will have to resort to a British the freedom to move ahead with plans for picking standby loan. Japanese financial circles told the Jiji wire off every nation on the continent-one by one-and service that Argentina has ceased servicing at least 10 fo rcing them to surrender to the IMF's "conditionali­ fo reign loan syndications since June 30. ties." The collapse of the Chilean, Bolivian, and Costa A standby loan "is tHe only way Argentina can Rican economies offers irrefutable evidence of where improve its credit standing in the international commu­ adherence to IMF policy leads. nity," one banking source reported. The IMF visit takes But, as a British aristocrat who acts as chairman of place in the midst of a brawl between the backers of one of the City of London's most important investment dirigist economics and the crowd around Swiss-tied houses explained to EIR, Britain's major concern is the former finance minister Roberto Alemann, who predicts bigger fish like Mexico, Argentina, and Brazil, whose that the current program will produce the results pre­ foreign debt collectively amounts to close to $170 billion dicted by Alemann in order to justify a return to IMF dollars. If several of these debtors were to drop the "debt policy.

EIR August 3, 1982 Economics 13 Foreign Exchange by David Goldman

The dollar and the banking crisis ------_------\ fo llowing a banking crisis. Such a Th e key to the u.s. currency'sfortunes is not interest-rate contraction cannot last for many margins but the possibility of a debt blow-out. weeks or months before it is finally established which dollar-denomi- nated paper will remain good and which will go through the banking equivalent ofthe shredder. There are three possible end­ Some well-placed money-market "reverse multiplier" for total Euro­ states, with respect to the future operators at New York commercial dollar credit. value of the dollar, of a banking banks are projecting a 40 percent That is to say in plain terms that crisis: devaluation of the American dollar many banks, mostly non-American 1) In the event of a major cen­ over the next 12 to 18 months, to ones, cannot refinance their liabili­ tral-bank bailout of the Eurodollar about OM 1.50 against about OM ties at any price. Therefore they market, which amounts to replac­ 2.47 now. have no choice but to convert non­ ing bank money with Federal Re­ Presuming that the Federal Re­ dollar currency deposits into dol­ serve money, the deposits left in the serve and the administration do lars in order to repay their skittish system would constitute the reserve nothing to alter the present disaster depositors. base for a credit expansion many course, such expectations are well That creates a powerful, but times in excess of the pre-crisis situ­ within the range of reason. temporary, source of support for ation, and the foreign liabilities of Nonetheless, these currency the dollar. The situation thus has the U.S. authorities would have ris­ specialists caution that no gradual less to do with the price of credit en spectacularly; that is to say that decline is to be expected in the near than the absolute availability of the dollar would be a drug on the term; on the contrary, it would be credit (see article, page 4). market, and collapse. possible for the dollar to rise anoth­ As the crisis worsens, the de­ 2) The Eurodollar market er 10 percent before sinking like a mand for dollars might also be­ would be left to its own fate, and the stone toward the end of the year. come stronger; one New York bank demand for dollars occasioned by Far too much attention has economist, analyzing the interbank the dollar's role as international been focused on the relation of market contraction, thinks the dol­ lending currency would no longer American interest rates to the ex­ lar may peak at OM 2.80. exist; the demand for dollars would change rate. In fact, the failure of Since the banking crisis is likely then dry up and the dollar would hit the dollar to move more than mar­ to coincide with a renewed rise in bottom. ginally when Eurodollar three­ interest rates by early fall, there 3) The American authorities, month deposit rates fell from nearly may be a double impetus for a either alone or with the cooperation 163/4 percent on July 1 to below 14 stronger dollar. of America's allies, would institute percent on July 20 should indicate None of this has anything what­ a gold-backed reorganization of that something entirely different is ever to do with perceptions or what the international markets to dry out at work. economics mystifyingly call "ex­ the Eurodollar mess and substitute, The real mechnism has to do pectations." It is all sheer necessity, in its place, new institutions for with the implications of the fact the rip-tide of credit flows. No low-interest hard-commodity in­ that the dollar is the currency of economist at any institution in the vestment and trade finance. denomination of most internation­ world, whatever his glaring faults, Under these last mentioned al debt-in a period when it is un­ would disagree that the dollar is conditions, presuming that Ameri­ certain debts will ever be paid. ridiculously overvalued in real ca took suitable steps at home to The Eurodollar market is now terms. outfit the American economy for undergoing a rapid phase of con­ However, a world in crisis does aggressive exporting, the dollar traction, in which portfolio man­ not behave by the normal rules would no longer be overvalued in agers dive for safety, i.e., into based on re al terms. real terms, and would be pegged at Treasury bills, and this acts as a The dollar's problems emerge approximately the present value.

14 Economics EIR August 3, 1982 Agriculture by Cynthia Parsons

A statistical hoax rose 400 percent. Interest on that Th e U. S. Agriculture Department has braked the decline in debt rose 24 percent in 1981. Thus the amount of debt rose fa rm income-on paper. Th e real situation is devastating. three times as much as income. The Oklahoma State economist has cal­ culated that, in 1950, for each $1 of debt there was 70 cents of net farm income for consumption, expendi­ For the past two months or so, the Let's say that income was $19.9 tures, capital investment, or debt Reagan administration has been billion; the decline fr om the unrev­ support. In 1980 there was only. 7 saying that the only way to turn ised 1979 high of $32.7 billion in­ cents left to spend. around the farm crisis is to increase come would be almost 40 percen t. It The debt burden is currently be­ farm income. The data released is probably safe to say that between coming unbearable because of the July 21 by the Agriculture Depart­ 1979 and 1981 farm income fall in prices paid to farmers relative ment go a long way towards doing dropped by that magnitude. Even to the cost of production. Farmers just that. When all previous data with the new methods, the slide get $3.42 per bushel of wheat; it back to 1978 are revised, it appears from 1978 to 1981, measured in costs them $7.30 to produce. Rice that farm income has not taken the consta"n t dollars, is 30 percen t. brings $8.21 cwt, yet costs $21 .20 to precipitous collapse from 1979 to A March 1982 Federal Reserve produce. Soybeans and sorghum 1980 which was confirmed by the report on farm income claimed that are paying 50 percent below the old figures. contrary to all scare stories, fa rmers cost of production. I do not take issue with the fact were very prosperous. The picture For the past five years, farmers that USDA withheld these figures was distorted because the number have been borrowing money on the fo r six months, nor that they chose of fa mers had decreased greatly value of their equity, mainly land, an election years to revise the data since the Depression years, said the which has skyrocketed because of to reflect the 1978 census. I do, Fed. speculation in most parts of the however, take issue with the meth­ Prepared for an uproar from country. That speCUlative bubble is od used for these revisions. farmers who, the USDA believed, being deflated. Land values The USDA calculated their new would ridicule these new methods, dropped 4.4 percent in the first figures by the same unscientific calculations have been provided quarter of this year. Lending insti­ means as GNP, which counts as showing a net cash income, i.e., tutions are beginning to demand income recipts from bingo halls and excluding inventories. Though the stricter conditions for such loans. brothels. The department now dubs revised figures change the picture "You have a sitution," ex­ "income" all unsold inventory such slightly, the 1981 income was $31.5 plained an economist at the USDA, as grain sitting in reserves. billion, down from $35.8 billion in "where current income is cut off These reserves are overflowing 1980, or a mere 12 percent decline. from cash receipts, and loan income because exports are declining, and Then there is the debt question, is also cut off. It is not that there is farmers prefer to pay to hold their which the USDA's focus on income no money out there, but that bor­ grain in storage until prices rise omits to address. rowers aren't qualifying ...." rather than lose money. Debt payments, in the words of This overall situation of "non­ According to the revised fig­ an agricultural economist from qualifying" farmers is exactly what ures, net farm income fo r 1981 was Oklahoma State University, "for the Federal Reserve predicted to me down to $25.1 billion from a high­ some farmers is taking almost every back in April-that some 10-15 point of 1979 at $32.4 billion, a penny they have just to pay on their percent of farmers will go out of decline of 22 percent. Many USDA loans, leaving little to live on." To­ business by the end of the year. The and private economists' own calcu­ tal farm debt rose 11.5 percent dur­ exit is planned to be very selective, lations had set the 1981 income be­ ing 1981, the fastest rate since the so that the banks do not get into a tween $23 billion and $16 billion, a Great Depression, to $200 billion. 1930s situation of wild defaults, fo­ total I think is more realistic. During the past decade, total debt reclosures, panic, and failures.

EIR August 3, 1982 Economics 15 EnergyIn sider by William Engdahl

Nuclear power in the Comecon l With the advantage of central­ Installed capacity is certainly greater in the United States- ized planning, whatever the Soviet problems in that sphere, it is clear but we have fa llen behind the U. S. S.R. in every other respect. that the situation is primed for ex­ ponential growth. "Constraints will be only such factors as the rate of increase of electricity produc­ tion," Davey concludes. So, with 14 It is fa shionable these days espe­ complacent, especially if we consid­ GW nucle�r electricity today, he cially in certain corners of the De­ er problems with ongoing con­ calculates that by the year 2000 they fense Department to argue for struction. (Thus a Radio Free Eu­ will have an exponential tenfold in­ withholding certain technologies rope press wire from Jun 23 was crease to approximately 150 GW from the Soviet Union as a way to titled, "The [Soviet] plan for con­ nuclear. At the present rate, the put economic pressure on that par­ struction of nuclear power plants U.S. will do well to complete 120 ticular part ofthe world. falls behind schedule.") GW by then. While a convincing case can be I asked Davey to comment on In the United States, the most made that the sum of all our "sanc­ this. He pointed out that "it funda­ advanced method for assembly-line tions" since Jackson-Vanik and mentally is not a race, or should not production of nuclear plants, the Jimmy Carter have been to shoot be, but a question of what they are Westinghouse Offshore Power Sys­ ourselves in the foot, I want to focus actually doing. The Russians are tems floating nuclear plant facility attention on a little-known aspect quite open and public about the in Jacksonville, Florida, has been of Comecon nuclear power devel­ problems in the nuclear program. scrapped. The U.S.S.R. is within opment. But one conclusion I found ines­ months of completing the Atom­ Most of what fo llows is based capable, they are going like hell to mash plant on the Volgodonsk Riv­ on Western sources. The most com­ build up their nuclear-power gener­ er which initially will be able to prehensive unclassified review has ation, and that's a fact." mass-produce three of the 1,000 been done by the Los Alamos N a­ Until now, as Davey's analysis MW nuclear plants per year, reach­ tional Laboratory in New Mexico shows, the overall Soviet nuclear ing a finalcapac ity of eight per year by William G. Davey. program has been characterized as by about 1990, according to Overall, Davey concludes, "the testing and sorting the optimal re­ Davey's conservative calculations. inescapable conclusion is a major actor design from several different Simultaneously, the U.S.S.R. is commitment by the Soviet Bloc to types and sizes, starting with a proceeding aggressively on a liquid the widespread use of nuclear ener­ smaller 440 megawatt size in the metal fa st breader reactor program gy whenever and in whatever form 1960s as it spin-off of their nuclear similar to the stalled Clinch River is advantageous. It is not viewed as submarine experience, much as we program in the United States. The an energy form that must be used did. Now, 1,000MW is the average­ Soviets intend to thereby increase reluctantly, but as a well-proven sized unit as in the United States useable uranium by 20- to 60-fold. boon that can be used to replace with plans clearly indicating the Since 1980, they have had a 600 more expensive and depleting ener­ conclusion of a 1,500 MW stand­ MW prototype in Beloyarsk oper­ gy from other sources." ardized pressurized water reactor ating successfully. In addition, Right now, the U.S.S.R. itself design in the next several years. The since Jimmy Carter's psychotic nu­ has somewhat more than 14 giga­ Soviets do not suffe r the need to clear "nonproliferation" policy be­ watts of installed nuclear capacity. make certain political concessions came law in 1978, the United States Eastern European Comecon coun­ to an hysterical anti-nuclear lobby. has refused 'to enrich uranium fo r tries have about 3 GW more for a As a result, as Davey points out, other countries such as India, but total of some 17 GW of nuclear "nuclear plants not only have no the U.S.S.R. now enriches about 50 electrical generation. Compared separate containment structure, but percent of all Western European with some 55 GW of nuclear power are situated where needed, and not, uranium fuel, mainly French and for the United States, we might fe el fo r example, remote from cities." German.

16 Economics EIR August 3, 1982 Trade Review by Mark Sonnenblick

Cost Principals Project/Nature or Deal Comment

NEW DEALS

$35 mn./ Spain from Colombia has signed its first export contracts for coal Carbocol is engaged in yr. Colombia from the EI Cerrej6n pit, which goes on stream the week big coal exploration pro- of July 19-24. First contract is for 350,000 tons by gram; it plans to supply December to Spain's Carboex. Second contract, also 10% of world's 600 mn. with Carboex, is for 600,000tpy for 10 yrs., starting 1986 tpy coal trade expected in when 2nd phase of pit is completed. El Cerrej6n is joint year 2000. venture of Exxon and Colombian state-owned Carbocol. S47 mn. Australia from Coal-handling system for new coal port at Newcastle, Broken Hill Property's Japan New South Wales, ordered from IHH and Mitsui & Co. port will ship 15 mn. tpy Consists of two 8,000ton per hour rec1aimers and four coal, starting 1984. 6,600 ton per hour stackers. China from Ja- Shanghai University has ordered a sophisticated robot pan with a microprocessor for a brain from Dainichi Kiko of Japan. Shanghai University is zealous to use robots to relieve human beings of dangerous jobs. $45 mn. Jamaica from Cable Belt Conveyors won contract for nine-mile single- Kaiser-Reynolds-Ana- U.S.A. drive conveyor system to carry bauxite from the Manch- conda partnership devel- ester plateau to refinery. oping new bauxite pit. S3 mn. Nigeria from Nigerian Agricultural Ministry has ordered 250 rotary For irrigation wells in U.K. drilling rigs from Duke and Ockenden. dry northern Nigera. S66 mn. Egypt from Buildings and other installations at Shoubrah-El Kheima Egyptian market is re- Spain thermal electric plant were contracted to Dragados and turning to normal, after Entrecanales y Tavora, two Spanish construction com- disruption by Sadat mur- panies. der. SI.2 bn Bahrain from A consortium of Bahrain and Kuwait govts. plan a SI.2 Lummus Co. is making U.S.A. bn. plant to convert 80,000bpd of heavy oil into fuel. feasibility study. West Ger- Volkswagen and Nissan are beginning integrated oper- Also considering joint many/ Japan/ ations with Nissan's producing and marketing VW's ops. in Mexico and Bra- Mexico/Brazil "Santana" compact car in Japan in late 1983. zil.

UPDATE

Venezuela Venezuelan Air Force has reaffirmed its order for 24 fr om U.K. British Sky hawk jets. Order had been suspended to protest British aggression against Argentina. S30 mn. Nicaragua French Socialist govt. reaffirmed cofitracts to sell San­ Part of Socialist Inter­ from France dinista regime SIS mn. in arms. French made new SIS national political offen­ mn. credit offer for paper plant and cocoa coop. ma­ sive to "take over" Ib­ chinery. ero-America after Haig scuttled U.S. influence in region.

EIR August 3, 1982 Economics 17 BusinessBriefs

Foreign Exchange Ekman boasted. up a budget now for fiscal 1983 based on A source close to the Swedish banker a general cut of 5 percent for most min­ said in a July 22 interview in Stockholm istries, excepting defense, energy, foreign Ye n-deutschemark link that the system is endangered by "Banco aid, and science and technology. under consolidation? Ambrosiano, Penn Square Bank, and Political observers in Tokyo have in­ other bankruptcies where the banks are formed visiting EIR correspondent Peter extremely exposed." The source added Ennis that Suzuki could fall if he is un­ Japanese and West German central that Poland, Rumania, Argentina, and able to resolve the budget crisis. banking sources are giving suspiciously many more nations are "on the verge of evasive answers to inquiries concerning a actual bankruptcy." Now, however, reported link between the yen and the some bankers are talking of cutting off Agriculture German mark on international markets. credits until they demonstrate their abil­ According to well-informed and usually ity to manage their economies. "This is FAO head : Stop exports reliable Swiss banking sources, the two really the most dangerous of all ideas," central banks are jointly intervening to of farm commodities the Swedish banker continued. "This stabilize the values of their currencies would really trigger an international col­ with respect to each other on the inter­ lapse. Those who want to order such Edouard Saouma, Director General of national market. strong medicine would kill the patient." the U.N. Food and Agriculture Organi­ The reason for the action, the Swiss zation, speaking at the June 14-16 Gen­ sources said, is that there is a growing eral Conference ofthe International Fed­ volume of trade financing in the two eration of Agricultural Producers in currencies for third-country purposes, London, told the predominantly farm­ and the central banks wish to facilitate Fiscal Policy organization audience that he hoped that the growth of such financing. farmers in the industrialized countries Since the Japanese central bank re­ Japan budget crisis forces would a.void producing commodities laxed its rules against yen-denominated produced more cheaply in the Third loans three months ago, a huge volume suspension of bond issue World, but denied equitable access to of export financing, estimated at $750 markets by tariffs and other barriers. million to $1 billion per month, has The Japanese government was forced to "In the short term these adjustments emerged from the Japanese market. suspend issuance of deficit-covering could cause local hardships, but in the Some central bankers speculate that the bonds in July because the banks refused long term, widespread benefits," he said. Japanese and West Germans are prepar­ to buy the low-interest notes, report Jap­ Saouma's call for the destruction of ing a fallback option in case of a crisis in anese banking sources. The banks were advanced-sector agriculture, which is es­ the dollar-based international market; afraid to purchase their alloted share of sential for maintaining and increasing should the major sources of dollar lend­ the bonds for fear oflosing money. world consumption, has been the long­ ing dry up, then at least yen and mark The reason is that: 1) interest rates on term goal of the U.N. and was outlined financingwould be available for a certain government bonds are usually set up to in the FAO's Agriculture: To ward 2(}()() volume of international trade. 0.5 percent lower than commercial rates; document. and 2) at this time it is hard for the banks to resell the bonds because interest rates Banking in Japan, now averaging 8 percent, have Export Strategy risen by 0.5 percent in the past month Swedish banker: scrap and are expected to rise further. There­ Brazil's trade with the fo re the margin between the rates on second-tier banks these notes and commercial rates would Third Wo rld declines expand even further. Svenska Handelsbanken chairman Jan Beyond that, the banks, along with A year ago, Planning Minister Delfim Ekman, speaking for Sweden's largest other institutions, have accused Prime Netto and other clever pragmatists in bank, recently told the Stockholm daily Minister Zenko Suzuki of failing to exe­ Brazil argued that Brazil would gain Svenska Dagbladet that "banking col­ cute his plan to balance the budget by markets for its exports at the expense of lapses lie ahead, but major banks are 1984. Due to miscalculation of economic smaller developing countries. They have strong enough to survive and even growth, the tax revenue in the fiscal year been proven dead wrong. strengthen themselves." The present sit­ ending March 1982 was approximately Brazil's first-half export performance uation would "lead to a triage of banks, $12 billion less than the budget had was 8.5 percent down from last year. In in which only the strongest will survive planned. order to meet promises to bankers to run and grow," Handelsbanken chairman The Suzuki administration is drawing a trade surplus, imports had to be cut by

18 Economics EIR August 3, 1982 Briefly

13.4 percent, at the expense of a continu­ firstqu arter of 198 1 and the first quarter ing economic recession and resurgence of 1982. By contrast, the IMF tables, of inflation. relying on incomplete data for Third • BUNDESBANK officials qui­ Some of Brazil's losses come from World nations, which report more slowly etly support Italy's decision not to falling commodity prices as millions than the industrial nations, projected bail out the Luxembourg branch around the world can no longer con­ growth in Third World imports in 1981. of Banco Ambrosiano. "It's not sume. But the most dramatic collapse has really a bank, just a holding com­ been in the exports of Brazilian manufac­ pany, so the central bank has no tures to other LDCs. Exports of consum­ Public Policy obligation," one officialsaid . er durables and capital goods to coun­ tries like Argentina, Mexico, and Nigeria Schmidt in Houston : U. S. • THE U.S. NATIONAL For­ not only permitted 20-30 percent export eign Trade Council has warned its growth annually from 1979 to 1981, but must act as a superpower members to expect an administra­ kept Brazilian industry going even as tion embargo on grain sales to the localconsumpti on was repressed. West German Chancellor Helmut Soviet Union. Argentina's imports from Brazil are Schmidt addressed 1,000 Houston busi­ running at far less than half the rate nessmen July 22 on the topic of "The • POLAND'S DEBT will be the before the 1980 Argentine peso devalua­ Atlantic Alliance in the Fourth Decade." subject of a July 27 meeting of tions and economic bubble bursting. In covering both the East-West crisis and American banking creditors in Mexico and Nigeria, struck by oil market New York City. shrinkage, have banned many imports. the world economic crisis, Schmidt hit the U.S. hard on its responsibility to Brazil may save some dollars by buying solve its economic problems: "The U.S. • DENMARK'S cheap oil on the Rotterdam spot market, bond market may deny the global consequences of its collapsed after a parliamentary but it loses the ability to export to the oil economic behavior, but it will not escape committee July 23 recommended a producers. responsibility fo r those consequences," long-term consolidation of the na­ Schmidt concluded. tional debt. World Trade The way to stop war is by solving the economic crisis, he repeated. If the reces­ • CANADA'S banking system A global contraction in sion is not stopped, it will become a will experience a major liquidity world depression. problem in the fall, which will 1981, reports the IMF The Chancellor began by attacking "spread like brush-fire into the the high interest rates as the highest real U.S. and the rest of the world," The International Monetary Fund's Di­ interest rates in the U.S. since the Civil Richard Coughlin, editor of the rection of Trade yearbook confirmed a War, although he fallaciously cited the Toronto-based Bank Credit Ana­ reduction of world trade during 1981 by cause of those interest rates to be the lyst. reported July 23. 2 percent, measured by exports. The ma­ huge federal budget deficit. jor factor in the decline was a major In dealing with the pipeline issue, • THE COMMERCE Depart­ contraction of industrial countries in Schmidt stressed the minimal depen­ ment engaged in a deliberate sub­ trade with each other, reflecting growing dence which the deal would create fo r terfuge July 21 when it reported world depression. Industrial countries' Germany on the Soviet Union, and then that the U.S. GNP had grown by a exports to each other fe ll by $44 billion, reiterated his attack on the U.S. fo r inter­ 1.7 percent annualized rate in the or 5.2 percent. fe ring with European national sover­ second quarter. According to Fed­ In addition, imports from the oil-pro­ eignty by extending the embargo abroad. eral Reserve Board figures, indus­ ducing countries into the industrial Following the speech, EIR bureau trial production fell at a 9.6 percent countries fell by 8 percent. Most signifi­ chief Harley Schlanger attended the press annualized rate in the second cant, however, is that basic industries' conference, and asked Schmidt about the quarter. Aside from interest in­ exports fe ll by almost as much as oil, recent BIS decision to bail out the Euro­ come nothing grew in the economy which has fa llen steadity since the dou­ dollar market. Schmidt insisted that in the �cond quarter. EIR predicts bling of oil prices in 1979. there was no immediate crisis in the Eu­ that in two months, the Commerce More recent data than the IMP's in­ romarket, but also he elaborated the dan­ Department will note its fraud by dicate, however, that the actual decline in gers of the $1.8 trillion dollar "artificial issuing a "revised" figureshow ing trade may have been steeper. According market" with "no reserve requirements," second quarter GNP to have been to Chase Manhattan Bank's Internation­ which is "80-90 percent denominated in negative. al Finance newsletter, developing na­ dollars"-a fact that could be a cause for tions' imports fe ll 7 percent between the real concern.

EIR August 3, 1982 Economics 19 ITillSpecia1Report

Argentina's future: a first-hand appraisal

by Dennis Small, Ibero-America Editor

The third week in July marked 30 days since Argentina lost the battle for the Malvinas Islands against Great Britain, and two weeks since President Gen. Leopoldo Galtieri paid the price of defeat by ceding the reigns of power to Gen. Reynaldo Bignone. These events ushered in the most profound crisis in Argentina's post-war history. Inflation has skyrocketed by 40 percent in the past two weeks. Despite a 25 percent officialdeva luation, the black market U.S. dollar has soared from 24,000 pesosone month ago to an astounding 48,000today. Capital is fleeing the country, and there are reports that up to half of the peso savings in the banking system have been withdrawn in favor of real estate and other speculative activity. A strike wave is widely expected, with port workers already hitting the streets last week to protest inadequate wage increases to compensate for the stunning inflation. Worst of all, there seems to be no force on the political scene capable of rallying the nation to stop the downward spiral. This fo rced descent into chaos is no "sociological phenomenon." It is the precise policy objective of the British. Having militarily defeated Argentina, the British have now shifted into the second stage of their war to destroy that nation. As EIR reported from the very beginning of the Malvinas crisis, and as this writer explained personally to many top Argentine leaders during a recent visit to that country, the British objective was never that of merely retaking some God-forsaken pieces of rock in the South Atlantic, as they so piously proclaimed. Rather it was to use the Malvinas battle as an excuse to strategically reorient NATO's deployments as a whole toward militarily defending the City of London's crumbling financial empire. With hundreds of billions of dollars of non-performing debt sitting on the shoulders of Third World nations, a precedent had to be set: the British, with the pliant United States in tow, was prepared to employ bald-faced gunboat diplomacy to enforce the repayment of their debt-regardless of the cost in lives to the

20 Special Report EIR August 3, 1982 A Buenos Aires crowd during the Malvinas crisis: Argentina's battle now is against the British monetarist economics that are destroying its labor fo rce and industry. unfortunate nations who are to be forced to pay. to pay this debt by the fall of 1982, at which point the . With such strategic objectives guiding their actions, International Monetary Fund (IMF) will step in to offer it was evident from the start that the British would not a "standby credit" of about a billion dollars-with content themselves with merely retaking the Malvinas. strings attached. The IMF, which, as reported in this Now they are out to shatter Argentina internally and week's Economics section, is heavily pressuring other make it ungovernable, to humiliate it strategically. They governments on the continent (see page 13), will de­ want to make of Argentina a "horrible example," so no mand of Argentina sharp austerity and reduction of Third World nation will ever dare challenge Britain's industrial output, which is in turn calculated to lead right to exact debt tribute. Should any try, they will be into another round of social explosions and the eventual threatened: "Remember Argentina." disintegration of the country in the same fashion as Iran. Britain's IMF strategy The IMF and their British allies hope in this way to It is this which is behind Britain's current campaign, finish off the job begun by former Finance Minister executed with the aid of a local Argentine oligarchy Jose Martinez de Hoz, whose monetarist policies suc­ which has always been pro-British, of fi nancial warfare ceeded in wiping out whole chunks of Argentina's to blow out the peso. Despite the current government's relatively advanced industrial base between 1976 and attempts to halt the speculative tide, the Journal of 1981. Commerce reported laconically earlier this month, "the system will be subverted by Argentina's exporters and Argentina's other option importers." Roberto Alemann, Argentina's outrageous­ Britain, however, has a problem in putting Argen­ ly pro-British Finance Minister until July I, 1982, was tina through the wringer: the social chaos they them­ even more explicit: "The country will first experience an selves have unleashed could well boomerang against initial hyperinflation; then the rate of inflation will them. At the height of the Malvinas crisis in late June, diminish; and finally it will worsen and provoke a great this writer fo und in Argentina a nation in profound economic explosion." ferment, whose every institution had cracked under the The club that the British wield is Argentina's foreign weight of the crisis. Countless Argentines told me that debt. Currently topping $35 billion, over $8 billion is they were admittedly at war with Britain, but that they owed in debt service payments alone this year. Argen­ were far more profoundly hurt and outraged at the tina is expected to use up its available credit lines to try "treacherous" behavior of the United States in backing

EIR August 3, 1982 Special Report 21 the British. Their contempt for the duplicitous former potential. Despite the country's deep historical econom­ American Secretary of State, Alexander Haig, frequent­ ic ties to Great Britain (Argentina has on occasion been ly approximated my own. referred to as "The Fifth Dominion"), the British know Under these conditions, there was scarcely an Ar­ that it is also a nation with enormous potential for gentine I talked with whose mind was not open to new, industrial development. As recently as the 1960s, Argen­ and even radical, solutions to their national problems. tina was a nearly industrialized nation, with a per capita All were thinking about how to build the necessary new GNP, and per capita domestic steel production equal to institutions to accomplish these goals; they were seri­ Japan's. Even today, it has levels ofliteracy (93 percent) ously evaluating Argentina's fundamental options. and of protein consumption (99 grams per day per This was the case, for example, with the "Multipar­ capita) that are higher than those of most industrialized tidaria" umbrella grouping of the country's five main nations. political parties. In conversations with representatives of these parties, including the Peronists and the MID An 'American System' tradition party, two central concerns were repeatedly raised: first, But perhaps most offensive of all to the British is the the need to end the country's six-year-old military fact that there is a historical tradition in Argentina of a government, and return to democracy; and second, the faction committed to modernizing their nation-a fac­ urgency of jettisoning Martinez de Hoz's disastrous tion which has always despised the British colonial economic policies and rebuilding Argentina's industry system of economics. and labor force with a dirigist program. The same At the end of the 19th century, for example, Presi­ sentiments were expressed by literally every industrialist dent Pellegrini fo ught to apply in Argentina what he consulted; by important leaders in the Navy and Air termed "American System economics," and cited the Force; and only to a lesser degree by those I spoke to seminal works of such repUblican economists as Alex­ within the Army. ander Hamilton, Henry Carey, and Friedrich· List. Today, this orientation is very much alive, through the Nationalists' push for dirigism influence of outstanding individuals such as Gen. Juan It was this loose coalition of interests which in early Guglialmelli whose views on the necessity for a strong July pushed the caretaker Bignone government to adopt national industrial base are quoted below, and like­ a dirigist package of economic measures. Authored by minded thinkers in the country's military and political Central Bank President Domingo Cavallo, the packet parties. was designed to end Martinez de Hoz's speculative binges, and reassert the primacy of productive economic The nuclear issue activity. One of the strongest redoubts of Argentina's devel­ It is this laudable policy which is now under attack opment tendency is that nation's decades-old nuclear by the IMF and the British. The international financial energy program. This program is the pride of Argen­ offensive is succeeding so far due to two principal tina's nation-builders, as Admiral Carlos Castro Mad­ weaknesses of Argentina's pro-development forces: ero, the chief of Argentina's nuclear program, makes 1) Because the caretaker Bignone government itself clear in the exclusive interview included in this Special is an uneasy coalition of pro- and anti-development Report. Mexico and Brazil, two other nations of Ibero­ forces, the nationalists have not put adequate domestic America which stand with Argentina on the threshold political muscle behind what are otherwise technically of urbanization and industrial development, have also competent economic measures. To succeed, the local placed nuclear energy at the center of their plans fo r oligarchy would have to be crushed; their speculative national economic growth. assaults rewarded with stiff jail terms; and their defend­ It is the nuclear development plans of these nations ers in the military (who reportedly had much to do with which most antagonize the International Monetary Argentina's poor battle performance in the Malvinas) Fund and its City of London representatives. As the tried for treason. fo llowing reports on recent setbacks to Mexico and 2) Argentina has also refused to attack the British Brazil's nuclear programs attest, the British have deter­ internationally on their weakest strategic flank: the mined to use Ibero-America's growing debt burden, vulnerability of the bankrupt pound sterling. Argen­ which is now approaching $200 billion for Brazil, tina-in concert with its allies in Ibero-America and Argentina, and Mexico, to destroy these programs elsewhere-could bankrupt London overnight by wield­ before they can get off the ground. Let London beware. ing its fo reign debt like a weapon, along the lines urged The "debt bomb" proposal to collapse the bankrupt by EIR founder Lyndon H. LaRouche. pound sterling with a united front refusal by Ibero­ The British are less concerned about what Argen­ American creditors to honor their debts to the British is tina's nationalists are doing today, than about their on the agenda, and the tables may be turned .

22 Special Report EIR August 3, 1982 in Pennsylvania, the fifth state of that country, the grouping's candidate won 20 percent of the vote." But the press coverage which caused most political commotion in the course of Small's tour was a lengthy story which appeared in the June 24 issue of the Caracas, Venezuela daily, El Universal, one day before Alexander Haig was fired. The prominent article was headlined: "Reagan Must Fire Haig or Lose Latin America." Excerpts from the article follow: "Dennis Small, spokesman for the LaRouche cur­ rent [in the Democratic Party-ed.], arrived in Cara­ cas trom Buenos Aires ...because their view is that Venezuela has led the Latin American movement in support of Argentina in its battle against Britain .... "Small believes that Great Britain has unleashed a EIR's Dennis Small continuation of the Malvinas war, in two regards: first,by internally destabilizing the Argentine govern­ ment in order to provoke a maximum of institutional tours Argentina chaos in that country; and second, by seeking to disunite Latin America, so that the support Argentina and Ve nezuela received from a unifiedLatin America throughout the war will not continue. This they are trying to do, he EIR 's Latin America Editor Dennis Small recently re­ continued, by provoking long-standing border con­ turned from a two-week visit to Argentina and Vene­ flicts among the Latin American nations .... zuela. Small was in these countries at the height of the "Small argues that, before anything else, 'the first Malvinas crisis, and used the occasion to inform his essential step to reconstruct relations between the U.S. hosts that a strong fa ction exists in the United States­ and Latin America that Haig has destroyed, is that the centered around EIR founding editor Lyndon H. Secretary of State must resign from his post. It is LaRouche-opposed to Secretary of State Alexander impossible to improve relations between North and Haig's support fo r the British in the Malvinas war. South America if this is not done.... In addition, Small explained that Haig had violated basic Ameri­ medium and long term measures are required to solve can law, such as the Monroe Doctrine, by backing the the economic problems between North and South British colonial expedition, and called for Haig's res­ America. LaRouche has proposed the creation of a ignation from office in order to restore good U.S. Latin American Common Market to cooperate to­ relations with Ibero-America. wards the most rapid possible industrialization of the The receptiveness to these ideas is best indicated region. We believe that this must be not only a com­ by the broad media recognition granted to the EIR mercial matter, but must have a credit aspect as well: editor's visit in both nations. Small was on various that is, that new long-term low-interest credits must television and radio talk shows in Argentina, and was be issued, with gold backing. We also recognize the covered in the major daily press of both countries. urgency of renegotiating the astounding quantity of The Buenos Aires daily La Nacion, for example, foreign debt that the Latin American nations hold­ reported Small charging that "U .S. foreign policy more than $300 billion.' today is totally manipulated by Great Britain." The "Small made reference to the economic forecasts June 14 issue of Conviccion of' Argentina quoted Small that Mr. LaRouche has issued fo r many years, and as asserting that the United States "needs a strong asserted that they have been largely correct. They Argentina and a strong Brazil; otherwise Latin Amer­ currently forecast fo r the end of 1982 and early 1983 a ica is going to go the way of I ran." The Conviccion profound crisis in the fo reign debt of the developing article explained who LaRouche is to its readership: sector, which 'urgently' requires renegotiation: 'there "The National Democratic Policy Committee is a will be a collapse of the foreign debt of the developing sector of the Democratic Party headed by Mr. Lyndon sector, there will be a collapse of U.S. corporate debt; LaRouche, who was a presidential precandidate in and there will also be a collapse of the New York City 1980. In the recent Democratic gubernatorial primary real estate market.' "

EIR August 3, 1982 Special Report 23 A country that has no basic industry is a castrated Profile: Gen. Juan Guglialmelli nation .... We cannot hope to resolve the problems of the economy in the long term, nor problems of security, nor problems of our relative weight in the environment that is familiar to us here in the Southern Cone of Latin America if we don't have this [basic industry] .... As a priority, we must rapidly develop all of the country's natural resources: mining, industry, especially basic industry (steel, iron, petrochemical, heavy chemi­ cals, cellulose, etc.) .... Argentine sponsor of We should further [develop] the entire area of ser­ vices, principally energy and roads. It is for this reason an that I warn against any solution that seeks to reduce American System investment in the public sector. It comes as no surprise that the Argentine economy is Th e fo llowing remarks were made by Gen. (Ret.) Juan E. in a recession ... and, what is worse, that unprotected Guglialmelli during a roundtable discussion on June 15, Argentine industry, especially small- and medium-sized 1970. At the time, Guglialmelli was the director of Argen­ and not a few large national industries, have fallen into tina's National Development Council (Conade), the gov­ the hands of those who are not Argentine, those who ernment agency responsible fo r fo rmulating economic de­ have taken advantage of the recession, of the lack of velopment policy, and a strong critic of the monetarist credits, of tax pressures, etc., etc. policies espoused by then Finance Minister Moyano Ller­ In these three years, we have witnessed the decapital­ ena and his predecessor Adalbert Krieger Vasena. Guglial­ ization of the national productive sector; our industries melli directed his remarks to the tasks fa cing the new have fallen into the hands of foreign capital that bought government of Gen. Roberto M. Levingston. up healthy businesses because they were in a badfinancial Because he fo und the monetarist economic policy to be situation, not a bad economic situation; this happened in inimical to the goal of making Argentina a strong, sover­ the banking sector, in industry, it has happened for eign, industrialized nation, Guglialmelli resigned his post example in the wine industry, and we are also witnessing at Conade in November of 1970. Since that time he has it in the agricultural sector, where today large foreign served as a leading spokesman fo r nationalist military and firms come in and, taking advantage of the [depressed] political layers through his magazine Estrategia. Many of situation, buy out those old agricultural leaders who the writersfor Estrategia share Guglialmelli's view that the have for so long really defended a national industry .... development and protection of national industry is vital to Progress and development awaken the realities of life the defense of national sovereignty. and the potentialities of each individual. Undoubtedly in the Middle Ages it was only the rulers who had aspira­ [Orthodox liberal economic policy] in the medium or tions, but today one cannot prevent the rest of the long term cannot resolve the fundamental problems of population from having them. the popUlation; it creates substantial vulnerabilities fo r I address you economists. I am not one; I love my national security, in addition to affecting in a preponder­ country; I love it based on what I am-a man of this ant manner the future destiny of the Argentine nation as nation-and on what I have here, and have not resorted a power, even though it be only in the Southern Cone. to Switzerland or to anywhere else. I speak in the name, I'm going to give you an example. AfterWorld War not of those who take their dollars from one place to II, the great powers of the West met to decide on Ger­ another, but of those who have to live and die here and many's future. The punishment they imposed on Ger­ have established their industries in the Republic of Ar­ many's aggressiveness translated in what was called the gentina .... Morgenthau Plan ....Wha t was the essence ofthe plan? If the new government wants to develop the country, To "ruralize" Germany, to leave her as a producer it will have to adopt basic measures for the protection of primarily of raw materials and foods, and possessor of national industry, and fo r stimulating the agricultural only light industry ....As it was explained to Churchill, sector; it will have to fix wages at the levels of the real [Germany] would remain dependent on England to pro­ cost of living index ... and above all, it will have to vide it with capital goods in exchange for fo od and raw approach these problems with the new and imaginative materials ....Th at is, they subjected her to a neocolonial criteria indicated by the Holy Father [Pope Paul VI in his system, permitting her to survive to produce raw mate­ Populorum Progressio] who has charged us with the task rials for the economies of the developed nations, and of development and who has shown us which measures above all to shut her off fr om a future as a great power. can solve them.

24 Special Report EIR August 3, 1982 the end of this century with the capacity to construct Argentine Energy Policy her own nuclear plants and to fuel them herself. ... In this way, we will be relatively free from possible pres­ sures in the political field which would restrict our access to nuclear technology." Why London fears Castro Madero's fe ars of foreign intervention to sabotage Argentina's nuclear development are well­ the nuclear program founded. During the Carter administration, Argentina's alleged "violation of human rights" was repeatedly cited as justification for American attempts to stop the by Dennis Small country's nuclear industry. During the same period, and surely inspired by Carter's antics, the Canadian sup­ On June 19 I was invited by Argentina's Atomic Energy pliers of the CANDU technology for Argentina's sec­ Commission (CNEA) to tour their 335 MW nuclear ond plant at Embalse, unilaterally and illegally embar­ facility known as "Atucha I," located about 100 kilome­ goed shipments of heavy water until political changes ters north of the capital city of Buenos Aires. Atucha I is to their liking occurred on the domestic Argentine the first, and currently the only operational, nuclear scene. And most recently during the Malvinas war, the plant in all of Ibero-America-and has been functioning pro-British media in the United States resurrected a without any significant problems since 1974. hackneyed propaganda campaign to convince the world It today produces 10 percent of the country's energy that Argentina's only interest in nuclear energy was in output. Argentina's nuclear project dates back to the order to build an atomic bomb. Argentina's refusal to immediate post-war period, but it began to be imple­ sign the Non-Proliferation Treaty, on the grounds that mented only under the stimulus of Eisenhower's 1950 it was an excuse to delimit the country's nuclear devel­ "Atoms fo r Peace" program. Now the country has an opment, was repeatedly cited as "proof' of these ambitious nuclear project stretching fo rward to the year charges. 2000, whose mere mention raises the hackles of anti­ On top of these political operations, Argentina has development oligarchs far and wide, especially those been placed under economic pressure to abandon or cut based in the City of London. back on its nuclear program. Budget reductions-the What is more significantabo ut the Argentine nuclear result of international and domestic monetarist poli­ program is not its quantitative features-in fact, it envi­ cies-have led to significant delays. The real reason that sions the construction of only six plants by the year 2000 the British and other oligarchs so hate the Argentine producing 3,400 MW-but its commitment to procure nuclear program is that they correctly view it as the for Argentina the fu ll fuel-cycle in order to guarantee keystone proj ect around which all of the country's pro­ national self-sufficiency. Thus, the CNEA has opted fo r development fo rces are rallied-most especially includ­ the heavy water/enriched uranium technology for all of ing a powerful nation-building faction within the armed its plants; has a heavy water plant of its own under forces. These layers are convinced that Argentina must construction, slated for completion in 1984; and is also have nuclear energy, in the words of Castro Madero, building a reprocessing facility in order to recycle spent because "Argentina necessarily will need a sustained nuclear fuel. growth in electricity demand because it is a country with lots to do, with some very unpopulated areas ... Increasing national participation Argentina is going to need energy for its development." Another top priority of the Argentine nuclear pro­ There is another feature of the Argentine nuclear gram is to achieve increasing participation of Argentine approach which has earned it London's hatred. The national capital and technology in nuclear plant con­ CNEA maintains a large and growing program of struction. Thus at Embalse, Argentina's second plant nuclear cooperation with the other nations of Ibero­ now 85 percent complete, Argentine participation in America. Peru, fo r instance, recently received its first ' design engineering was 40 percent, in civil engineering nuclear test reactor from Argentina, and is also receiv­ 100 percent, 95 percent in assembly, and 40 percent in ing invaluable assistance in manpower training. Brazil the provision of electromechanical equipment. In Atu­ and Argentina have similarly embarked on a nuclear cha II, the third plant slated for completion in the late cooperation program which promises to qualitatively 1980s, Argentine participation is expected to increase improve both nations' efforts in this direction. And in significantly. the Non-Aligned movement as well, Argentina has led As the President of the CNEA, Admiral Carlos up a campaign fo r the right of all developing sector Castro Madero, told EIR in an exclusive interview on nations to have nuclear energy, and for the transfer of June 16: "We hope this will enable Argentina to reach nuclear technology from the advanced sector.

EIR August 3, 1982 Special Report 25 Interview: Adm. Carlos castro Madero

�tomic energy is the motor for oureconomic growth'

Th e/ollowing interview with Admiral Carlos Castro Mad­ cated process of uranium enrichment, but which will give ero, the President 0/ Argentina's National Atomic Energy Argentina access to the fu ll fuel-cycle. Thus this nuclear Commission, was conducted by EIR's Latin America Edi­ program also provides both Argentine industry and tor Dennis Small on June 16, 1982 in Buenos Aires, engineering, which are two fundamental pillars for Argentina. achieving self-sufficiency, a future and a continuity of action which are invaluable fo r these two private sectors Small: Admiral Castro Madero, what are the basic ele­ to determine their own necessary levels of investment. ments of Argentina's nuclear plan? All this, then, we hope will enable Argentina to reach the Castro Madero: The nuclear plan was established in end of this century with the capacity to construct her own February 1979 and included construction offour heavy­ nuclear plants and to fuel them herself. Regarding the water nuclear centers of 600 MW each, using natural construction of nuclear plants, we believe we can achieve uranium. The first would go into commercial operation 100 percent capability in engineering, 100 percent in site in 1987, the second in '91, the third between '94 and '95, preparation, 90 percent in actual construction, and 65 and the fourth in 1997. The plan also included installing percent of the required electromechanic components. In all the facilities, or fa ctories, needed to control the full this way we will be relatively free from possible pressures fuel cycle. These fo ur nuclear centers would be added to in the political field which would restrict our access to the Atucha I nuclear center of 368 MW which has been nuclear technology. in operation since 1974, and to the nuclear center in Embalse which we hope to put in operation between the Small: There are people who say that the countries of end of this year and the beginning of the next. the developing sector don't need nuclear energy. There With this plan we hope, on the one hand, to comple­ are people who say that it is a luxury, that Argentina has ment our hydroelectric development. There is presently oil and so doesn't need nuclear energy. Nonetheless, an underutilization of hydroelectric potential, and we Argentina was the first country in Latin America to enter hope to substitute the consumption of hydrocarbons the nuclear age. Why? with hydroelectricity and nuclear energy. At the moment, Castro Madero: In Argentina we have given great im ­ conventional thermal power accounts for 59 percent of portance to nuclear energy since this energy fo rm first total "installed capacity, which includes primarily oil, gas, appeared . Recall the year 1955, when the fi rst conference and also coal. We hope to reach the end of the century was held in Geneva, and where Argentina participated with a proportion of70 percent hydroelectric, 15 percent with various studies. There was at the time great opti­ conventional thermal, and 15 percent nuclear. mism that nuclear energy could advantageously replace The nuclear plan also serves to prepare the nation so the traditional energy sources that had been used until that, by the end of this century-when it is expected that that time-oil, coal, gas. With the passage of time this the principal hydroelectric sources will already be under idea was confirmed, such that it motivated Argentina to exploitation and we will have to turn to nuclear electric continue developing her capabilities in the nuclear field. generation as the only alternative to continue to promote Then in 1968 we decided to install our first nuclear plant . development-then these installations, which we hope That plant, which is Atucha I, has been fu nctioning will reach between 600 and 1200 MW a year, will enable normally since June of 1974 and has demonstrated, first, us to face the new century with .a high proportion of how economical energy produced by nuclear means is, to national participation in our nuclear industry. the point that it is the plant that generates the cheapest The nuclear program also aims at maximum self­ electricity of all the installations in the country. There­ sufficiency in our use of nuclear energy. That is why we fo re, to say that nuclear plants are a luxury for develop­ have chosen to use the natural uranium and heavy-water ing countries is, I would say, a mistake. process, which does not require the costly and sophisti- I believe that the countries of the Third World have

26 Special Report EIR August 3, 1982 an important responsibility to reduce consumption of Castro Madero : Yes. We have a very modest nuclear hydrocarbons, since they are running out and are now fusion research program. We recognize that a huge going to cost more, and to utilize them instead exclusive­ quantity of money would have to be invested to play a ly for irreplaceable functions, such as in the petrochemi­ relevant role in this. But we have experience in fission cal industry. On the other hand, nuclear energy, beyond reactors; we have already trained teams of professionals cost comparisons, has significant other advantages in so that, when fusion power becomes commercial and can terms of developing human resources: it fosters a very be efficiently introduced as an energy source in Argen­ large number of disciplines at the highest level, with tina, then we will have the specialists so that the country which we can answer the training needs of our youth. At can make decisions based on its own criteria, adaptable the same time, the nuclear sector enforces higher quality to Argentine needs. Just as we chose the natural uranium standards which will improve industry generally, which route, which I consider a correct decision, will we also be in turn is being translated into a greater reliability of the able-through this group of professionals-to make different components produced not only for the nuclear similar decisions advantageous to the country. fieldbut for other applications as well. Small : There is a theory which surfaced in the U.S. and Small : Argentina, then, by committing itself to a nuclear has been widely circulated, stating that energy growth plan for the future of the sort you have described, is can be "de-linked" from economic growth generally. asserting that its economic growth will move forward. It Castro Madero: I believe, and all past experience proves is saying that Argentina's idea is to industrialize and this, that there is a direct correlation between economic modernize itself for the 21st Century. growth and the consumption of electrical energy.... Castro Madero : That is the fundamental objective. A few years ago we fo recast a to percent annual growth in Small : In the U.S. we have several serious problems in demand for electrical energy. Those predictions were not the nuclear field. One of these is the high interest rates fulfilled; we entered a recession. But I believe that period and economic recession that have seriously damaged will reach its end and that Argentina necessarily will need sectors such as nuclear. Another problem is the failure to a sustained growth in electricity demand, because it is a export nuclear plants. And a third problem, which I country with lots to do, with some very unpopulated would like you to comment on, is the ecology or environ­ areas. And I believe that to become a nation ofrelevance, mentalist movement, the "green" movement. of weight in this world, Argentina is going to need Castro Madero: Fortunately, we have no such move­ energy for its development ments in Argentina, although we don't lack ecology groups per se. As far as I know, in Argentina we have Small : Then what do you think of neo-Malthusian the­ had no problems with these groups, and I attribute this ories such as those of the Club of Rome? to two fundamental factors. One is that our nuclear plan Castro Madero: I understand that that study is a very has become a question · of national pride, and people pessimistic one. It is precisely technology which can understand that this enables us to project ourselves to­ provide solutions to many of these questions, that it is wards advanced levels of technological development. going to solve the problems that the book Limits to And the second very important factor is that the National Growth poses. Atomic Energy Commission, aside from its regulatory functions, has maintained permanent contact with the Small : In other words, there are no real limits to growth? ecology groups, with scientific groups, with groups of Castro Madero : I, at least, don't see such limits. I cer­ citizens in the areas where we installed the nuclear proj­ tainly don't see them with the gravity they are posed ects. And those groups have participated in ecological there. studies on how the nuclear installations affect the envi­ ronment. Far from having them in the opposition, these Small : Besides, after nuclear fission development, there groups support the development of nuclear energy. will follow thermonuclear fu sion power, the next techno­ I think that in other countries there is a component of logical leap fo rward. the left in the ecology movements which is out to stop the Castro Madero : Of course. Nuclear fusion seems to be growth of the West, and by presenting this in ecological the definitive solution to the electricity problem, since its garb they have achieved a certain success in turning fuel source, isotopes of hydrogen, is fo und in infinite public opinion against nuclear energy-which, among quantities in sea-water. all the energy sources, is the least contaminating.

Small : Does Argentina have plans for fusion? Is research Small : What can you tell me of the nuclear waste ques­ under way? tion, which has caused so much alarm, and what are the

EIR August 3, 1982 Special Report 27 plans to solve this here in Argentina? for producing uranium dioxide is also of German origin. Castro Madero : Regarding the venting of radioactive We have been faced with difficulties in developing an wastes into the atmosphere, we do this at such diluted independent nuclear program without getting tied up in levels that they actually fall well below the minimally treaties which we consider discriminatory, such as the acceptable levels. Regarding highly active radioactive Non-Proliferation Treaty, or which deprive us of free­ wastes, as you know they are handled through fuel dom of action. reprocessing, or stored in underground containers. We We truly believe that the policy fo llowed by the think the most adequate means of treating radioactive industrialized countries-of denying technology transfer wastes is, first, through reprocessing, and then vitrifica­ in specific areas such as reprocessing, or in demanding tion, storing them in stable granite fo rmations which are conditions beyond the normal safeguards that should not affected by radiation. We have done studies through­ accompany all transfer of technology-works against out Argentina and have discovered some 200such likely the very objectives they seek to achieve. Our position is zones, of which we have chosen one in the province of that the best means to avoid proliferation is through the Chubut. There we have already begun drillings to deter­ intensification of international trade, such that technol­ mine if the place is truly appropriate for storing highly ogy transfer is intensified, andthat this technology trans­ active radioactive wastes. The moment we can set up a fer should be accompanied by safeguards of the Interna­ reprocessing plant in Argentina, the wastes can more tional Atomic Energy Agency, creating a network of conveniently be dealt with, again without any danger safeguards on all installations under development. Thus either for the population or for the environment. all the nuclear activities of a country would have great transparency. Small : What are thesereprocessing plans, and where do All these restrictions and additional demands, what you hope to obtain this technology? do they produce? That countries, like Argentina, must Castro Madero : We are in an advanced stage of con­ then decide to develop on their own account and at their struction of a reprocessing plant, I would say a pilot own risk, certain technologies that escape the network of plant, through which we hope to acquire all the "know­ safeguards. This in turn shrouds the nuclear activities how" required for reprocessing. It will perhaps be ready that develop in such countries, and thereby works against to enter into "cold" operation by next year, and into the very objectives pursued. Soon many countries will "hot" operation by the middle of 1984. With it we will begin to build plants outside of all safeguards, and one reprocess the fuel elements ofthe firstnuclear plants, and will be unable to determine what they are up to. this will give us the basis, when the moment arrives, to build a larger plant. Reprocessing is what is called a Small : In other words, the non-proliferation movement "sensitive" technology, which no advanced-sector coun­ leads to proliferation. try will offer, and which we have therefore faced with our Castro Madero : I think that it leads precisely to prolif­ own capabilities. eration. You can see that Argentina has its reprocessing We will continue going fo rward ourselves, given that plant, which is not under any safeguard, when, had it it is a technology which has been available since 1955. received aid from abroad, it would undoubtedly be under Our country conducted its own study; we built an exper­ safeguards. imental plant and reprocessed some plutonium; and all this laid the basis for today facing the task of construct­ Small : Then what is the motivation of those people who ing this more significantpilot plant. use the argument of non-proliferation? Could it possibly be the same as the ecologists? Small : What type of technological assistance has Alrgen­ Castro Madero : I think there is a general idea shared by tina received for its nuclear program, and what do you all of humanity, which is to avoid nuclear proliferation think of the international environment regarding the because it undoubtedly increases the risk that the world development of nuclear energy? will be involved in nuclear war. But behind this idea, Castro Madero : We have basically received technology which I think the entire world shares, some hide their from two sources. One is Canada, by which means we are goals of political, military, and economic domination. constructing the nuclear plant at Embalse; and the other Therefore by denying technologies, a gap in technologi­ is Germany, through its KWU [Kraftwerk Union] com­ cal development between the developed and developing pany, which built Atucha I and is. now jointly building countries is maintained. Therefore, we developing coun­ Atucha II with us. tries are suspicious of the true motives behind the anti-­ We have another source in the field of heavy water, proliferation measures. which we get through the company Sulzer Suisse. Re­ garding the fa brication of fuel elements, we have a Small: I would imagine that fo llowing the Malvinas factory operating with German technology. Our plant crisis, this orientation of Argentina's has been strength-

28 Special Report EIR August 3, 1982 ened, in the sense that it wants to be truly self-sufficient does not imply in any way that there is going to be because it is not going to receive help from where it had [military-ed.] nuclear development; just that we will hoped to receive it. consider the possibility of developing a greater use of Castro Madero : Of course. In the light of this Malvinas nuclear propulsion. war-which has put an entire system of concepts and But with respect to the bomb, the Argentine position international relations, as well as our internal ideas with is clear. Our objective is a united America, an integrated respect to industry, in crisis-we have proven that our America. And if a Latin American country develops a nuclear policies have been the most appropriate. Thus, a nuclear bomb, a nuclear artifact, this will undoubtedly nuclear industry has been developed which has practical­ produce suspicion or distrust among the countries of ly made the embargo measures taken by the European America, that would in turn lead to an arms race among Community against our country useless. Being able to the countries of Latin America. This arms race would produce fuel inside the country is also comforting in that only aggravate the problems of Latin American under­ it cannot be used for political ends to pressure Argentina development. Thus we firmly believe that [military-ed.] to subject its will to others. The fact that we have been nuclear development would be totally negative for Latin very open about transfering nuclear technology to Latin America. It would give only an ephemeral advantage to American countries, means that we have in turn received those having nuclear development; because in two, three, strong solidarity. The same has been the case regarding or four years it would be progressively matched by the our role in promoting nuclear energy in the Non-Al­ other Latin American countries, and would truly go ligned group. The fact that we did not sign the treaties to against our development and would annul something which so many countries of good faith adhere, has also which today is a privilege for this continent, which is the proved us right, because signing such treaties would have total absence of nuclear weapons. prevented us, for example, from ever using nuclear sub­ marines, as Great Britain did against our country. All of Small : When you referred to the kind of international this shows clearly that this non-proliferation policy agreements that should exist to have technology transfer leaves the developing sector nations dangerously unpro­ and transparency as well, this reminds me very much of tected. Eisenhower's "Atoms for Peace" program. Are you referring to this? Small : What did you say in Vienna on this subject? And Castro Madero : Of course. It was a golden era, Atoms how do you respond to the charges that you are devel­ for Peace, until India's explosion in May 1974. Then oping the atomic bomb? there was the promotion of commercial interchange in Castro Madero: In Vienna I said that all the countries the nuclear field which helped all countries to have the meeting there had formed the International Atomic En­ possibility of access to a more rapid development of ergy Agency whose objective was to accelerate the con­ nuclear energy by sharing their experiences. Starting in tributions of nuclear energy to the peace, well-being, and 1974, when they had the explosion in India, which was progress of humanity. That Argentina had fully adhered not an explosion for bellicose ends, all sorts of restric­ to this policy, in that all its relevant institutions are tions began: the creation of the London Club, secret submitted to safeguards which obligate us not to use meetings in which they took measures of technology them for military purposes. That is to say, we cannot transfer to the detriment of the developing countries; and develop a nuclear submarine. Nonetheless, Great Britain the creation of sensitive areas, where there is practically did not hesitate to use nuclear energy to fuel submarines a ban on transfer of technology. And I reiterate that this which gave them a significant war-fighting superiority­ translates into an increase in the technology "gap" which such that we have not been able to use our fleet. separates us from the industrialized countries. Thus, this disadvantage is a consequence of the policy of non-proliferation. Therefore, I believe that what will Small : Do you have some message, some last words, to happen is that the developing nations will grow increas­ direct to the United States? ingly skeptical, since non-proliferation measures are not Castro Madero: I think that the role of the United States intended for the stated high ideal of avoiding holocaust, in nuclear development is relevant. I wish that the United but rather for the preservation of military, political, and States would reassume the leadership in the nuclear field economic domination. And I therefore explained that which it once had, but that it has lost today. I believe that Argentina maintained its assumed commitments to not this loss will not only reflect on the United States, in use nuclear energy [for military ends-ed.] in those terms of its own economic development, but will un­ installations where the commitment has already been doubtedly also reflecton all the developing nations, who made; but that in the future we will feel free of all will not be able to count on the possibility of scientific commitments to not use nuclear energy for so-called and technical advances that they could have made with permitted military ends, such as that of propulsion. This the capability the United States has.

EIR August 3, 1982 Special Report 29 of London financial district, immediately began agitat­ Mexico ing against the Mexican program, and took only three months of intense financial squeeze to force Mexico to give up its nuclear plans. In May, rumors began to . circulate that a devastating maxi-devaluation of the peso would come just before the July 4 national elections. Mexico was simultaneously going into the market fo r a Why nuclear bids desperately needed "j umbo loan" of $2.5 billion. The pressure was unbearable for Mexico to make a substan­ were suspended tial demonstration of its willingness to cut back its development efforts. On June 10, Finance Minister Jesus by Timothy Rush Silva Herzog made the announcement that the financial bids on the nuclear deal were being handed back to the bidders unopened, and the bidding put off indefinitely. On June 10, 1982, Mexico's foreign creditors killed the The only hope that the Mexican nuclear program can next phase of the Mexican nuclear program. The govern­ be revived in less than three to fo ur years' time-at best­ ment announced that due to financial pressures, bidding is if coordinated programs of debt relief are put through fo r the next 2,400 MW of nuclear energy is being can­ across the continent. EIR has received indications that celed. some of the nuclear supplier companies are looking into The cancellation of the bidding sets back by a mini­ possibilities of barter deals-oil for nuclear-with Mex­ mum of two years completion of the second reactor ico. This is a promising possibility if the overall debt complex in Mexico-the first, Laguna Verde's 1,300 pressure can be lifted. MW, is now due for completion in 1985-86-and makes it virtually impossible to meet Mexico's goal of 20,000 MW nuclear by the year 2000, as put forth in the 1980 National Energy Plan. No technical problems, or domestic environmentalist opposition, killed off the program. It was Mexico's debt, which is heading toward $60 billion on public account and some $20 billion on private account, by the end of the year. Mexico is currently facing gross borrowing needs of $2 billion per month; except for a small portion that will go to meet a $2-$3 billion trade deficit,the rest is going into debt financing and re-financing. Mexico 1.t 'I- III- ."n /UI was told by its creditors that this minimum borrowing MEXICO need would not be met unless it took a hatchet to its principal capital-intensive development programs, and nuclear was at the top of the list. Three V.S. companies, General Electric, Westing­ house, and Combustion Engineering, had stood near the top of the ranks of the bidders. The immediate contract lost was worth some $2 billion to a contract-starved V.S. Ibero-America's 1980 plan nuclear industry. for nuclear power plants The bidding process for the now canceled 2,400 MW in new nuclear power was suddenly put in gear by Nuclear plants now completed or likely to be completed by 2000. President Jose Lopez Portillo in a Sept. 22, 1981 cabinet if} meeting of his economic ministers, including the current Nuclear plants planned. but which will not be built under present conditions. president-elect, Miguel de la Madrid. It was a period of Q51j major decisions. The bottom had fallen out of the oil Maps show nuclear-powered electric facilities planned by govern­ markets three months before. Lopez Portillo wanted his ments as of 1980 to be on-line in 2000. The symbols In the box are those not yet sited. Under fierce pressure from International cherished dream of a major Mexican nuclear energy bankers, these plans have been scaled down. Currently, only one program to move ahead while there was still a chance; plant is completed in Argentina and another in Brazil. Unless world economic conditions improve, EIR estimates that Mexico, Brazil, and he wanted his chosen successor, de la Madrid, to be and Argentina will each manage to complete their single plant In lined up behind it. advanced stages of construction, but will be forced to abandon Malthusian enemies of Mexico's modernization the rest. drive, particularly the branch headquartered in the City

30 Special Report EIR August 3, 1982 percent of the nuclear stations by its completion. Brazil The nuclear program, however, has been stretched out-first to a 1995 deadline and then to 2000. Brazil is suffering a sharp recession as a result of high U.S. An array of problems interest rates. International bankers and local leftists are demanding that Brazil abandon its commitment to be­ come an advanced industrial nation by the end of the by Mark Sonnenblick century. "If Brazil is not to continue rapid industrial growth, why should it invest in electricity?" the bankers Brazil entered the nuclear age when the Angra I power ask. station achieved critical mass on March 14, 1982. Yet the On March 3, 1982 the government announced a new future of nuclear energy in Brazil is quite uncertain. energy-investment plan which scrubbed the schedule of Angra I was built by Westinghouse under the Atoms Nuclebras, the state nuclear energy company, fo r 14 for Peace program. Then in 1975, Brazil signed "the plants by 2000. Under the government's new Plan fo r nuclear deal of the century" with the Kraftwerke Union Meeting Year 2000 Energy Needs, only eight new plants run by West Germany's Siemens. That contract provided will be built by the year 2000. Angra II, presently under for eight nuclear plants, and enrichment and reprocess­ construction, will be finished in 1987. Only one other ing facilities to be built by 1990. Brazil is using the plant will be started before President loao Figuereido world's most modern nuclear engineering facility to leaves officein 1984, while the fate of the others. make components for this program and for export to One of the reasons why the Brazilian government countries such as Argentina. The objective of the pro­ insists it will eventually build the eight contracted plants gram is to develop in Brazil the capabilities to make 100 is that the West Germans have repeatedly stated that the enrichment and reprocessing facilities come only with the full package. Wall Street bankers, however, claim confidently that no additional power stations will be

NOR T H started, and they hold up the steady erosion of the nuclear budget as their evidence. ,ATLANTIC Despite this pressure, Brazil's pro-development spokesmen remain committed to the necessity of nuclear­ o C E A N energy development. Such is the case, for instance, with Dr. Shigeaki Ueki, the President of Petrobnis, Brazil's state-owned petroleum company, who in a recent exclu­ sive interview with EIR (see Special Report, May 18), stated the following: "Since it is a form of energy that demands profound BRAZIL technological knowledge and requires high rates of cap­ ital investment, we have to prepare ourselves intensely for the use of nuclear power. Even with our ample supply of hydroelectric energy-and we still have many hydro­ SOUT H electric sources to take advantage of-there is always the necessity of a thermal complement. Before nuclear ener­ gy became commercial worldwide, Brazil based its elec­ PACIFIC trical system on hydroelectric and thermal derived from

SOU T H either coal or oil. ... [Now] we are going to have more thermal energy based on coal and nuclear power, and less on oil, which has become the most expensive energy ATLANTIC o C E A N source in the world . "Brazil must immediately begin to not only invest in o C E A N new nuclear plants as a complement for the electrical system, but also to develop its technicians so that when we have finally taken advantage of all our hydroelectric potential-and this, of course, depends on the [rate of] development of our country-we are going to have to intensively use the uranium deposits that we have in the country through the construction of thermonuclear plants. "

EIR August 3, 1982 Special Report 31 Will theMid dle East be thrown into flames?

by Robert Dreyfuss, Middle East Editor

The Israeli military under General Ariel Sharon and returning to Israel on July 21. Prime Minister Menachem Begin will destroy Beirut and It was, of course, the attempted assassination of the then move into Syria and/or Jordan, after an act of terror \ Israeli ambassador in London on June 3 that gave Shar­ blamed on Palestinian guerrillas but staged by the Mos­ on his long-sought excuse to carry out the Lebanon sad, Israel's secret service, according to intelligence invasion. That terrorist assault was run by renegade sources. The Begin-Sharon regime intends to seize what Palestinian terrorist Abu Nidal, an Israeli agent in Syria. it views as the existing opportunity to transform the "We have been warning for a long time about links Middle East for several generations to come, and it will between Abu Nidal and the Mossad," said Issam Sartawi not be stopped by the United States-unless the Reagan of the PLO, at a Paris press conference on July 20, in administration is prepared to play rough. response to a question from EIR . "This group has spe­ Issam Sartawi, a top PLO officialand a leader of the cialized in going after PLO targets, and they also attack PLO's moderate wing, charged in Paris that renegade Jewish religious institutions in Europe. We refer to the Palestinian terrorist Abu Nidal was an agent of the cowardly attack on the Vienna synagogue and on Jewish Mossad. Meanwhile, from several world capitals, EIR children in Antwerp." Noting that the PLO had warned has received information to indicate that Jordan-a key that "as early as January of this year" Abu Nidal would ally of Iraq in its war with Khomeini's Iran and a be used by Sharon in this manner, Sartawi added, "Abu moderate Arab voice-is slated for invasion by Sharon. Nidal struck two or three days after Haig and Sharon According to intelligence sources, Israel's secret ser­ made a deal for Israel to invade Lebanon. I will tell you vicee, the Mossad, and David Kimche (Director General people in the press that Abu Nidal used his own nephew of the Foreign Ministry and General Sharon's candidate in the attack, because he did not have his usual two weeks to head the Mossad) are planning to stage an act of notice!" Less than 48 hours after Sartawi made these terrorism inside Israel, to be blamed on the PLO, that startling charges, one of his aides in Paris was killed in a would serve as a pretext fo r an invasion of west Beirut. grenade attack on a Paris steet. Kimche, according to these sources, is shuttling back Sartawi continued: "I welcome with particular relief and forth into Lebanon to arrange with Lebanese and and pleasure the letter of the Iraqi Ambassador to France Palestinian mercenaries to carry out the attack. Kimche in Le Monde affirming that the attackers of Argov are a and Foreign Minister Yitzhak Shamir made a quick trip Mossad-connected group. This shows an Iraqi govern­ to Europe for secret talks in London and Switzerland, ment recognition of the true identity of Abu Nidal, and

32 International EIR August 3, 1982 that measures are being taken to win Iraq to liquidate the to establish a "Palestinian state" in Jordan. Inside officers and secret headquarters of the criminal gang. I Israel, there are reports that Sharon plans to inaugurate hope that the government of Iraq will announce this act a reign of terror on the West Bank tha t w ould send to the world. I also hope that the Abu Nidal branches in thousands of refugees into Jordan and destabilize things Damascus will be dismantled. There is no lo nger any there. In an interview, Menachem Milson, Sharon's excuse for any Arab government to harbor this criminal. West Bank overlord, announced plans to exterminate In the same way that certain Arab government ask for the PLO in the West Bank, including total controls over help when they are in need, it is necessary that these the press and elimination of all officials and aides who governments cease harboring the Mossad agent Abu support the PLO. Israel has already banned the ship­ Nidal. " ment of fruits and vegetables grown in the West Bank and Gaza on Israeli markets. Israel tightens squeeze Joining Sartawi at his press conference in Paris, Following President Reagan's meetings with Arab Israeli General Matti Peled warned: "Sharon now says foreign ministers from Syria and Saudi Arabia on July that he wants to depose King Hussein, and displace a 20-talks which reportedly did not go well-the Israelis large number of Palestinians to Jordan, to create a began to set the stage for new attacks into west Beirut. Palestinian state there under Israeli tutelage. I advise Amid a number of warnings from Israeli officials that everybody to believe this as a very serious intention," the time for diplomacy was running out, Shamir said: said Peled. "All the terrorists are going to be finished off and nothing can change that." Will Reagan act? The mood in Israel is edging toward an eerie replay The fate of the region now rests on whether the U.S. of Adolf Hitler's Nuremberg rallies. Speaking to a administration decides to challenge the Israelis' evident fanatic crowd of 250,000 supporters of the war who belief that they can emerge as the "superpower of the gathered under the stars in Jerusalem on July 18, Begin Middle East." said that he has killed or captured "90 per cent of the In his talks with Saudi Foreign Minister Prince Saud terrorists, and we are not going to let the other 10 per and Syrian Foreign Minister Abdel-Halim Khaddam cent get away." In open defiance of Secretary Shultz's President Reagan reportedly did not budge on the issue remark that Habib's diplomacy might take 30 days, of the PLO. Although key PLO officials had signaled Begin stated, "The murderers in Beirut do not have 30 their readiness to accept Israel, and although Sartawi days to leave." As he spoke, the crowd chanted: "Begin, announced this as the official position of the PLO, Begin, King of Israel!" Reagan stuck to the Kissinger-era U.S. view that the Even more ominous, Begin and Sharon began talks United States will not talk to the PLO until the PLO to bring Yuval Neeman's fascist Renaissance renounces "terrorism," recognizes Israel unilaterally, ("Tehiya") Party into the government coalition. Nee­ and supports U.N. Resolution 242 of 1967. But almost - man, one of Israel's top intelligence czars, opposed both no one believes that the PLO will do that without U.S. the return of Sinai to Egypt and the Camp David guarantees of support for a Palestinian state. accords, and his official party position is that the In fact, according to several sources, the U.S. stub­ occupied West Bank and Gaza be annexed as Israeli bornness on this issue has strengthened the hand of land. In agreeing to join the coalition, the Neeman PLO radicals like Abu Nidal and George Habash of the party declared that southern Lebanon up to the Litani PFLP, who have reportedly joined fo rces to demand and Zahrani rivers, is also integrally part of "Eretz that PLO Chairman Yasser Arafat take a hard line. An Israel." Neeman is also the architect of the Israeli Israeli diplomat in Washington said smugly, "We are nuclear weapons strategy and father of the Israeli not afraid of any U.S.-PLO dialogue, because the hydrogen bomb. Through his connections to the pro­ radicals, the Syrians, and the U.S.S.R. will sabotage it." Dark Ages Muslim Brotherhood secret societies Nevertheless, there are hints that international forces throughout the region-including in Iran-Neeman is are pushing fo r a Washington-Moscow dialogue on the committed to "defending" Israel by destroying the Middle East. In an interview with Time magazine, King nations around Israel's borders. Hussein called fo r an "international conference" bring­ Israel has put out several signals that it intends to ing together all parties to the conflict, including the open a second front, after Lebanon, against King PLO. That statement was endorsed by the USSR, and Hussein's Jordan. During his secret trip to Europe, then, on July 21, Soviet President Brezhnev gave an Shamir reportedly held a meeting with Hussein to issue interview to Pravda in which he called for a Geneva­ an ultimatum to the king: either join Camp David's style conference sponsored jointly by Moscow and discredited bloc or Israel will activate the "Sharon plan" Washington.

EIR August 3, 1982 International 33 PAR T I

Italian Socialist role in terrorism confirmed by the Moro trial by Fiorella Operto

Th e Secretary-General of Italy 's European Labor Party We are convinced that out of the papers and testimo­ (Partito Operaio Europeo) filed this eyewitness report ny of the Moro Trial must emerge the truth about those fr om the ongoing trial of Aldo Moro's killers in Rome. A days: not only the revelations, always partial and "inter­ collaborator of EIR fo und�r Lyndon LaRouche, Fiorella nal," of the so-called repentant terrorists turned inform­ Operto and her party have earned the respect of Italy 's ers-although these are always useful and interesting­ anti-terrorist magistrates and law enforcement community but the Truth with capital T, which can explain why and fo r their precisely targeted investigations of terrorism since how international centers with supranational structures the mid-I 970s. and capabilities and complex networks should have tar­ geted Italy. The Truth that will explain why they chose, " 'Honorable,' you had better stop pursuing your with great political intuition (certainly more acute than political plan of bringing together all the fo rces of your many politicians around at the time) their victim in Aldo country in direct collaboration. See to it that you stop, or Moro, the "political personnel" who would have re­ you will pay dearly. You will see how you want to sponded not to the narrow interests of cliques and fac­ understand this." tions, but to those of the State, in the words ofthe State's These words, reported by Aldo Moro's widow Eleo­ star witness, "repentant" terrorist Antonio Savasta. nora Moro, were hissed by a very famous American We are convinced of this not only because terrorism political figure to the Christian Democratic Party presi­ has by no means been vanquished, even though some of dent during Moro's last trip to the United States. There its networks have been severely damaged, but also be­ is no doubt that this political figurewas Henry Kissinger. cause, while the republics and nations of the world are A few months later, on March 16, 1978, Moro was quivering under the blows of the economic crisis or the kidnapped by the terrorist Red Brigades and his body­ "mass terrorism" represented by Khomeini's human · guards assassinated. Aldo Moro was put on "trial" and horde, or are threatened by the resurgence of British finally, after 52 days of captivity, assassinated atrocious­ colonialism, the Italian government, magistrates, law ly. All this occurred on the eve of consolidation of that enforcement officials, and intelligence services have a government of "national unity" which Moro and others unique opportunity to denounce those centers anq forces had projected, to reinforce the Italian State in the face of that planned that "attack on the heart of the State" a series of international threats and the great, urgent task which was intended to be fatal. of development the Mediterranean region. Through their courage and competence, Italy's mag­ These and other crucial bits of information and evi­ istrates and police have already contributed decisively dence are today among the thousands of pages of acts toward cutting off many tentacles of the terrorist mon­ and documents that make up the trial record of the ster. We can mention the exposure of the Propaganda-2 "Moro Trial" which opened in April in the gymnasium lodge, Judge Imposimato's revelations on the role of converted into a courtroom in the Foro Italico of Rome. Israeli intelligence in the international terrorist network For Italy, it is the trial of the century. There have been last January; Judge Calogero's probe of the "Autono­ other major terrorism trials in recent years, the trials that my," the above-ground arm of the Red Brigades, in brought up the bombers of Piazza Fontana in Milan in Padua, Italy; Judge Pierluigi Dell'Osso's investigation of 1969, which inaugurated the "strategy of tension"; or the the drug trafficking networks and P-2 dirty-money op­ promoters of the 1974 coup attempt of the "Black erations; and so many other cases, conducted by magis­ Prince" Junius Borghese; or the perpetrators of the trates and police who often, themselves, became victims Bologna train station bombing which claimed 80 victims. of terrorism. But this trial should bring to light the truth about the Not only have these operations resulted in the freeing strategy that shook Italy and all Europe in spring 1978. of General Dozier (Savasta confirmed that Moro would

34 International EIR August 3, 1982 \

stili be alive had the same actions been taken in 1978) but Rome, closes the investigative circle. in a partial defeat for the centers of "destabilization" in Moro's project fo r a government of national unity the world. Now we must aim higher, liftmor e of the veils would also have ended the illusions of taking power of that cover the structure of terrorism, and as we shall try London's chief political asset in Italy, the Italian Social­ to indicate, completely master the "LaRouche method" ist Party (PSI), which scraped by each election with a against terrorism, the method that enabled the American scant 10 percent of the vote. The PSI banked on political leader to know precisely, without ever having parlaying the U.S. prohibition on the Communist Party witnessed the "scene of the crime," what has since been into a revolution in which PSI leader Bettino Craxi confirmed by the investigations and the revelations of would seize the reins of an "ungovernable" Italy from the terrorists who have turned state's evidence. the weakened, disoriented Christian Democrats. No sooner had Moro been kidnaped on March 16, Why Kissinger hated Aldo Moro 1978 than Franco Piperno, a radical protege of the PSI, At the time of his death Aldo Moro was working on wrote an editorial hailing the "geometric perfection" of an effdrt sponsored by Pope Paul VI to stabilize Italian the ambush in Metropoli, a magazine fo unded with politics after nearly a decade of upheaval. He proposed money from the Socialist Party's Senate leader, Sen. a relaunching of the Christian Democracy, the party Antonio Landolfi. During the long months of Moro's which had ruled Italy for 30 years but was wracked by captivity, the Socialist Party leaders, including Secre­ scandal and internal factionalization, and a progressive tary-General Bettino Craxi personally, had been in democratization away from Marxism of the Italian constant touch with Piperno and the Metropoli group. Communist Party, the largest in the West. It would This only came out after Moro was already dead. have been a historical precedent of the greatest impor­ Craxi asserted that he had tried to mediate with the tance. terrorists for "humanitarian" motives, and accused Henry Kissinger, the fo rmer U.S. Secretary of State, those Christian Democrats who opposed negotiations had already made it clear he did not approve. of "insensitivity." The Red Brigades demanded that the Kissinger is not known for his subtlety in commu­ State surrender and free imprisoned terrorists in ex­ nicating disapproval. In 1976 he had warned Zulfikar change for Moro's release. But a surrender would have Ali Bhutto, the President of Pakistan, that he would signaled internationally that "terrorism pays," setting "make a horrible example of him" if Bhutto persisted in off new acts of violence. For this reason, Pope Paul VI developing Pakistan's independent nuclear capability. himself opposed negotiations. Bhutto was overthrown in 1977, and judicially murdered in April 1979 by the military dictatorship that took his The accused at the bar place. It was in this same period that Moro and others, Among the 58 defendants at the Foro Italico are not among them the Prime Minister who was inaugurated only the 23 who must answer for the slaughter in Via the day Moro was kidnapped, Giulio Andreotti, began Fani, when Moro was taken, but all those accused of public preparations for gradually bringing the Com­ the crimes committed by the Red Brigades' "Rome munists into a responsible role in the Italian govern­ Column" since 1977. These crimes include the assassi­ ment. During the Moro Trial, Eleonora Moro has nation of Judge Riccardo Palma and magistrate Giro­ specified that it was her husband's determination to lamo Tartaglione; the assault on Christian Democratic include the Communist Party that led to his ordeal at Party headquarters in Piazza Nicosia, where two police­ the hands of the Red Brigades. men were killed; the murders of police Colonel Varisco, When· Henry Kissinger boasted to a London audi­ and of magistrates Vittorio Bachelet and Girolamo ence on May 10, 1982 that he had been an agent of Minervini. Two days before the trial opened, a com­ British interests throughout his career as a/U .S. public mando squad of the Red Brigades attacked the bunker­ official, he was confirming the charges made by the like courtroom set up in the stadium. European Labor Party (POE) during and immediately Seated in white cages on the left side of the court, after the Moro kidnap and mu�der. Four years earlier, until they are ej ected by presiding magistrate Severino while Moro was still languishing in the hands of his Santiapichi, are the "Executive Committee" of the Red Red Brigades captors, POE members carried a banner Brigades. They are Moretti, Micaletto, Azzolini, and in the May Day parades of Milan and Rome charging Bonisoli, who according to Antonio Savasta-the ter­ that Kissinger and Gardner (then the U.S. ambassador rorist turned state's evidence after he was captured in to Rome) had kidnapped Aldo Moro. Later, the POE's the liberation of NATO Gen. James .Dozier last Janu­ dossier on the crime pointed to the British monarchy as ary-selected their victim by the principle of "demo­ the controller of Kissinger, Gardner, and the terrorists. cratic centralism." There are Prospero Gallinari and Kissinger's self-incrimination, delivered almost simul­ Barbara Balzarini, the actual killers of Moro. There are taneously with the testimony of Eleonora Moro here in Valerio Morucci and Adriana Faranda, who "left" the

EIR August 3, 1982 International 35 Red Brigades after the Christian Democratic Party Often in these four years of war against terrorism in president was kidnapped, and whose position as "dis­ Italy, it has been proven to me that without the POE senters" allowed them to function as an indispensable dossier, the POE campaigns, and LaRouche's interna­ link in 'the chain of negotiations; there are Bruno tional political operations, the discoveries and revela­ Seghetti and Luca Nicolotti of the "Naples Column," tions which have enabled Italy to make progress against and others. its enemies in these past two years would not have been The Moro trial had been long awaited and opened possible. in a climate of tension, owing to the assault on the courtroom that preceded it. Meanwhile, on April 27, Why Moro? the city commissioner of Naples, Raffaele de Cogliano, The question which the presiding judge, Severino was assassinated, and defendant Luca Nicolotti claimed Santiapichi, kept putting to Savasta was: Why the the hit in the name of the "Hards" of the Red Brigades Christan Democrats? And why Moro? At first, Savasta military wing. On April 30 in Sicily Pio La Torre, answered. Then, as the judge's questions because more parliamentary deputy and leader of the region's Com­ precise, he stonewalled. Either he knows no more, or he munist Party, who had spearheaded the anti-Mafia does not want to say. But what he said is already very offensive, was killed together with his bodyguard . useful: "The Christian Democracy retains political and The words shouted by Luca Nicolotti, who had economic power. It is the party that forms the State. hurled dark threats days before the murder, made it This party must face a great crisis which would call into clear that the fi ght against terrorism was by no means question the nature and form of its power: Only a over, even though the "chiefs" of the Brigades were certain type of political personnel, typified by Moro, sitting in the dock of the accused, inside cages and could respond not to the particular interests of the behind bulletproof glass. various cliques but the higher ones of the imperialist State of the Multinationals." Moro trial confirms POE dossier The language is contorted, not unlike the style of How many in that courtroom and outside it must many contemporary journalists; the tone of voice ex­ have thought back to the POE dossier, Who Killed A/do presses not the slightest emotion. It is the voice of Moro. as they listened to the monotonous sequences of someone so "programmed" that the "decoding" pro­ the informer Savasta, phrases scanned with the tones of cess does not make a dent. But in Savasta's words a being that has ceased to be human? They must have resound the echoes of the U.S. political figure, Henry been thinking of it, not only, I believe, because of Kissinger, who threatened Aldo Moro that he should Savasta's fa cts and references which confirmed in large not carry out any function which would go beyond the part the PO E's analysis, but above all because out of "cliques." Savasta's colorless phrases emerged confirmation of the Moro was killed, as the POE dossier said, because hypotheses which Lyndon LaRouche and the POE were he was the author of a design of national harmony for the first to elaborate on the how and why of the Moro Italy's development. affair. Who opposed it? Th e Red Brigades? The POE dossier, published in October 1978, with Hearing Savasta in this courtroom fortified to the more than 100 pages of text, maps, and organizational teeth, and reflecting on his colorless confession full of charts of the terrorist networks, was the result of a bloodcurdling references, no one could maintain that summer's intense work by a group of party investigators "those" Red Brigades projected the plan for kidnapping led by Leo nardo Servadio. The dossier had taken its Moro, the negotiations, and the complicated game of point of departure from Lyndon LaRouche's leaflet, terror which held Italy for 52 days on the brink of the "Now Is the Time for Justice," dedicated to the memory abyss as a nation, to then feed the remains of the nation­ of Aldo Moro and issued the day Moro's body was state to the very same party-eminently the PSI-which fo und. LaRouche had outlined the method of combat­ had woven the "political" threads of that game of terror ing terrorism at every level; the dossier backed up in a complex and elaborate scenario. LaRouche's detailed outline with fa cts, leads, and sug­ Neither Savasta, a member of the leadership of the gestions related to the Moro case. This dossier sent Roman column who did not join the action against tremors through the various "forests," from self-styled Moro, nor those who participated, Balzarini, Gallinari, terrorism expert Claire Sterling to the Italian journalist or the so-called stage director Moretti, are the authors Mario Scialoja of Espresso weekly (could he be the of this plan. As Eleonora Moro said, we must findthe contact between the Red Brigades and Espresso cited by true "stage director" behind the "strategic leadership," another terrorist-turned-informer, Cianfanelli, in the the Red Brigades "executive." The investigation must go trial?), to the oligarchical Pallavicini fa mily, and many beyond the creatures in the cages. other "interested persons" who read it with suspense. To be continued.

) 36 International EIR August 3, 1982 Banning theGreens

Susan Welshre ports on the West German effort to declare the neo­ fas cists unconstitutional, and the Christian Democrats' cowardice.

The political life of West Germany has become increas­ which ideas the Green Party shares in an even more overt ingly polarized around the issue of the Greens since the and radicalized way. radical environmentalist party won nine seats on the City Council in Hamburg on June 6. This party, which goes 'A new Sturmabteilung' under different names from one state to another, calls Only the European Labor Party (EAP) in West itself the "anti-party party." The Greens have organized Germany is demanding an alliance of all parties to violent demonstrations against nuclear power plants, combat the Green danger and to declare the Greens against construction projects like the expansion of the unconstitutional. The Greens are a fascist party, like the Frankfurt Airport, and against President Reagan's visit shock troops of Hitler's Sturmabteiling (SA), whose to West Berlin in June (the violence generally attributed ideology was a similar blend of "back to nature" after the fa ct to "fringe elements." Yet leading officials communalism and political violence, declares the EAP. of the left wing of the Social Democratic Party (SPD) While courageous individuals from the other political from Chairman Willy Brandt on down are mooting parties have stepped forward to demand action against electoral alliances or unofficialcoll aboration with them. the Green fascists, the party hierarchies remain commit­ Even the firebombing July 20 of construction com­ ted to one version or another of an appeasement policy. panies involved in the Frankfurt airport expansion has The EAP's campaign on this issue has begun to apparently awakened no second thoughts in Brandt et draw blood; sources report that Petra Kelly, national aI., since they are committed to using the Greens to head of the Greens, is preparing a lawsuit and a topple the government of Chancellor Helmut Schmidt defamation campaign against the EAP. and to purge the SPD of Schmidt's supporters, i.e., An SPD member of the European Parliament, Fritz advocates of economic growth. Up-and-coming SPD Gautier, has filed a complaint against Kelly with the leftist leader Oskar Lafontaine, mayor of Saarbriicken, European Commission in Brussels. Kelly is an employee went so far as to denounce Schmidt in an interview in of the EC, yet "she doesn't seem to work very often in Stern magazine dated July 15, saying that the Chancel­ Brussels," he said. "I would like to know whether Ms. lor's so-called virtues of "calculability and constancy" Kelly's continuous travels around Germany are known are "virtues which would also allow one to run a concen­ about in Brussels and why they are tolerated." Kelly is tration camp." in fact campaigning for a parliamentary seat in Bavaria While Brandt, Lafontaine, and other leftists are in upcoming elections. courting the Greens because they share their zero-growth A Christian Democratic (CDU) Senator in West ideology, there are others in the SPD who have convinced Berlin, Rupert Scholz, has issued a call for an investi­ themselves that alliances with the Greens are necessary gation of the legal basis of the Alternative List (AL), to keep the SPD in power, now that the party's Bonn Berlin's version of the Greens. Referring in an editorial coalition partner, the Free Democratic Party, is making published in Die Welt newspaper July 10 to the riots overtures to the Christian Democrats and has disap­ against President Reagan which the AL helped organ­ peared from several state parliaments. As for the Chris­ ize, Scholz questioned the right of such a party to keep tian Union parties, they too are refusing to forthrightly its seats in the city council. "If parlimentarism means . attack the Greens. The Christian Democratic Union recognizing the priority of parliamentary democracy," (CDU), ostensibly the conservative opposition party, is he said, "and the acceptance of parliamentary codes of becoming more and more a vehicle fo r the anti-technol­ conduct, we can say that no such values are held by the ogy, genocidal zero-growth ideas of the Club of Rome, Alternative List."

EIR August 3, 1982 International 37 The West Berlin Small Shopowners 'Association (AGS) of the SPD demanded the expulsion of the AL from the city council, since "the Alternatives are neither mature [enough] for democracy, nor are they acceptable as a coalition partner." The AGS demand was blocked, however, by West Berlin SPD chairman Hans-Jochen Vogel, who insisted that the SPD must become "a party of emotions, of a policy which moves with the main­ stream of the masses, and the masses are afr aid of technology. They want conservation of nature." Vogel subsequently indicated his agreement with Lafontaine's drive to topple Schmidt and "strengthen" the SPD in the opposition. Soviet military chief:

The enu punts 'upgrade our defense' Leading spokesmen for the Christian Democrats have refused to make more than token attacks against by Rachel Douglas, Soviet Union Editor the Greens. Alfred Dregge'r, the CDU's candidate fo r governor in the state of Hesse, where elections are set for Sept. 26, called fo r all parties in the state parliament In a 5,OOO-word Pravda article published July 12, Soviet to make a pact against the' Greens, allOWing whichever Defense Minister Dmitrii F. U stinov gave a view of the party has the most votes to fo rm a government, even if danger of nuclear war and of strategic doctrine in which it does not have a majority (Dregger naturally expects he identifiedan upgrading of Soviet military posture that this tactic to yield him the governorship). Yet when may be said to "tighten the hair-trigger" on nuclear war. interviewed in Der Spiegel magazine July 19 on this Ustinov drew a strategic line on which all Soviet subject, Dregger indicated that his proposal was not factions converge, upon perceived threats to the existence "anti-Green," but is a temporary measure to bridge the of the Soviet state. It dictates not only a war-fighting time until the Greens become mature enough to be strategic doctrine that rejects every version of "limited treated with respect. nuclear war" cooked up by NATO, but-under condi­ "I do not want to put the Greens in quarantine," he tions of world economic collapse and brushfire wars in said, "I am not the one to keep the doors closed to the underdeveloped sector-a global attempt to expand them. They are the ones to lock themselves out from the Soviet power at every point of opportunity, at the ex­ fo rmation of a government .... I do not want to ally pense of the United States. with the other parties against the Greens. . .. I have If the countervailing political impulse in the West and always been much more moderate toward them than the developing world, a drive for a growth-centered new anyone else. 1 do not want to lock them out; they are world economic order, were to defeat the collapse, there not extremists; they are not Nazis; they are, apart from could still be a Soviet response of detente. But neither the a few exceptions, not Communists." Asked whether the military message or the political narrowness of Ustinov's Greens are enemies of the constitution, Dregger replied: survey pointed that way; rather, he conveyed the Soviet "No, not at all. They adhere to a conservative utopian­ command's assessment that the world is in a pre-war ism with an essential concern which I share, namely, to phase. protect nature and the landscape. I love nature like 1 Ustinov set about to justify, in military terms, the love the arts." pledge made by Leonid Brezhnev in June never to use Christian Democrat Walter Leisler Kiep' from Ham­ nuclear weapons first. Alluding to possible objections to burg also refused to attack the Greens in an interview this pledge from within the U.S.S.R., he asserted that with Der Sp iegel. CDU demands for nuclear energy even if the United States struck first, the Soviet armed development have anyway been "too undifferentiated" forces would be capable of a full nuclear strike-back. in the past, he said, so it is not surprising when the Ustinov linked a U.S. effort to achieve a "first strike" Greens capitalize on popular discontent. capability to the installation of new medium-range rock­ Lother Spaeth, the CDU Minister President of the ets in Western Europe, the Pershing lIs that have a five­ state of Baden-Wiirttemberg, declared that among the minute flighttime to Moscow. Greens are "young people with good ideas," and that The Defense Minister's words about an "all-crushing the Green deputies in Stuttgart, the state capital, are retaliatory strike" referred to a Soviet Politburo decision "especially joyful individuals who are doing their jobs, that "countermeasures" against the Pershings, already sometimes badly, sometimes well." threatened by Brezhnev months ago, will consist not in

38 International EIR August 3, 1982 a fi rst strike'capability, reducing the distance fr om which it would be inflicted, and removi ng the nuclear danger created by this policy as fa r as possible fr om U.S. terri­ tory .... This arrogant imperial policy built-as the present American leaders stress themselves-on the unpredicta­ bility of Washington's actions, naturally destabilizes the situation ....

Military actions beyond NATO's sphere President Reagan directly states that U.S. military might remain the main, and practically the sole "pre­ condition fo r peace." As President, he is prepared to use that might without wavering. It is asserted that reliable security is impossible without a reorganization of the soci o-economic systems in an American ·way . And under this pretext, a "crusade" is declared against Defense Minister Ustinov (I) with the late Mikhail Suslov. communism, against social progress on Earth, against social revolutions, which are defamed as "international merely matching the United States in existing technolo­ terrorism." ... gies (e.g., by placing missiles in Cuba), but rather in In their entirety, U.S. actions are directed at creating increased readiness /or total war. At the fi rst detection of preconditions for a struggle "to annihi late socialism as a Pershing launch fr om Western Europe, there is a fu ll­ a socio-political system" (so the Pentagon writes ...) scale strategic strike against United States weapons and ....Ac cording to Defense Minister Weinberger, in the territory. event of war arising in any region of the world, the In his political summary, Ustinov allowed very little United States and its allies ought to be prepared for room fo r war-avoidance as it might emerge from coun­ military actions outside their limits and fo r extending tries other than the United States. Sounding like the wars to other regions of the world, where the enemy "two camps" rhetoricians ofthe Cold War, Ustinov said, may be dealt the greatest injury. "There sue two lines in world politics-the U.S.S.R. and In other words, the new strategy of so-called direct the U.S." And the latter, he concluded from President confrontation has not only subsumed all the extremes Reagan's speech to British parliament in June, seeks "the of previous military tenets of the "balancing on the annihilation of socialism as a socio-political system." brink of war" type, but sharpened them still more .... This analysis provides theoretical justification fo r In light of the growi ng aggressivity of U.S. and Soviet backing of all sorts of wrecking operations in the NATO policy, it was not easy fo r the Soviet Union to developing sector-as long as they appear to set back assume the unilateral obligation not to use nuclear American interests. Th us Ustinov pointed to the Iranian weapons first. And it is entirely natural that Soviet and Nicaraguan revolutions-extremely destructive for people, our friends, and progressive people of the world those countries-as thorns in the side of U.S. policy and are asking themselves whether or not the right moment hence, according to his demarcation, "on the Soviet side was chosen fo r such a step and whether we will not of world developments." subject our people, our homeland and the cause of socialism and progress in the whole world to excessive Excerpts/rom De/ense Minister Us tinov's Pravda article. danger with this unilateral obligation. translated by EIRJo llow. Subtitles have been added. After all, we have had difficult historical experience with an aggressor who stopped at nothing and launched The absence of real results in curbing the arms race at his destructive arsenal at us fu ll tilt. Can we ignore all the end of the 1970s and beginning of the 1980s was that? conditioned by the latest review of U.S. military policy in Indeed, the above-listed fe atures of U.S. doctrine favor of greater reliance on fo rce, and cruder and more and U.S. actions on the international scene are compo­ varied use of it even in peacetime. The United States nents of the present dangerous tension in the world. We moves nuclear war into the category of the possible, and soberly evaluate both the adventurous thinking of the under certain circumstances the expedient, and prepara­ Pentagon and the combat readiness and capabilities of tions for it are carried out, proceeding from the task of the U.S. strategic offensive fo rces. 'If the aggressor "taking the upper hand," i.e., gaining victory. makes first use of nuclear weapons, this will inflict From this flows a special emphasis on the creation of incalculable calamities on our peoples.

EIR August 3, 1982 International 39 However, the aggressor too should know that the advantages accruing from the first use of nuclear weap­ ons will not lead him to victory. Committing a crime against humanity, he will not obtain tangible spoils. With modern detection systems and the combat readi­ ness of Soviet strategic nuclear forces, there will be no disarming strike against the socialist countries. The aggressor will not escape an all-crushing retaliatory strike. He who invents a "flawless recipe" for waging nuclear war victoriously and counts on ..."d ecapitat­ ing" the enemy with one knock-out blow, condemns himself.... Washington and the capitals of NATO countries should understand clearly that the U.S.S.R., in rejecting South Afr ica readies the first use of nuclear weapons, also rejects all those who harbor plans of nucle;:trattack , counting on victory 'Israeli-style' moves in nuclear war. The status of military potentials and military-technological capabilities of the sides is such, by Douglas DeGroot, Africa Editor that imperialist fo rces will not succeed in achieving military superiority, neither at the stage of preparing for nuclear war, nor at the moment when they try to The government of South Africa appears to be scuttling begin this war .... the U.s.-led negotiating process over the independence While assuming the unilateral obligation not to use of Namibia and is opting instead for an Israeli-style nuclear weapons first, we, of course, will take into military policy against the rest of the nations in southern account that there are aggressive forces in the world, Africa. prepared to gamble with the vital interests of humanity What the Israelis have gotten away with in Lebanon fo r the sake of their narrow, mercenary goals and to has encouraged the South Africans to devise pretexts for embark upon nuclear adventures for this. Therefore our military action to establish control of the entire mineral­ state will continue to construct its policy and maintain rich region of southern Africa. "There is tremendous its defenses, taking into account how the United States admiration for the Israelis' mode of operation in South behaves .... Knowing the habits and character of the Africa," said one Washington-based Africa expert, and aggressive forces, the U.S.S.R. will maintain high vigi­ added: "Now more people in South Africa are saying lance and constant combat readiness of its armed forces 'We're going to do it too, and what are you going to do on the level of current requirements. about it?' " A British source predicted that "in three to Our defensive military doctrine, intended exclusively four months the South Africans will go to war" from to repulse an external threat, will not be passive in Namibia into Angola, and "clean the whole thing up." nature. As always, it will rest on the inviolable fo unda­ The British intelligence-run Heritage Foundation in tion of Lenin's teaching about the defense of the Washington is putting out the line that no face-saving socialist fa therland. In the event of aggression, our deal for the mutual withdrawal of Cuban troops from armed forces, together with the fr aternal socialist arm­ Angola and South African troops from Namibia is pos­ ies, will defend socialist achievements without wavering sible, because the South Africans won't go with such a and with all decisiveness, making use of the entire deal. Heritage's scenario calls for the blame to be shifted defense and economic might of our states. to the Angolans fo r rejecting immediate withdrawal of At the same time, the adopted obligation objectively all Cuban troops, expecting the Reagan administration imposes stiff demands for further raising the combat to "quickly point the finger at the Angolans." South readiness of our armies, their technical equipment, Africa hllSover 20,000 troops in Namibia to counter the perfection of command and communications, reinforce­ activity of the SWAPO liberation group, whose goal is ment of the troops' moral and political steeling. It is the independence of Namibia. SWAPO's members seek necessary that the factor of surprise be reduced to a refuge in Angola and operate from there. minimum, so that the aggressor not be seduced into the "Then we will see," said a Heritage spokesman, "an first use of nuclear weapons with impunity . ... independent Namibia under Dirk Mudge, with South The peoples of the world can convince themselves African military support, and the end of SWAPO. If that there exist two lines in world politics-the U.S.S.R. there is no agreement, there will be no SWAPO." Mudge, and the U.S.A .... a member of the 10 percent of the I million Namibian

40 International EIR August 3, 1982 population that is white, is closely allied to South Africa. operation gets dismantled or is left in place in Angola." Unless the Reagan administration pressures South Jonas Savimbi, who runs an extensive counterinsurgent Africa to abandon its hopes of regional military domi­ operation inside Angola against the government, is nance, South Africa is likely to become a marcher-lord supported by South Africa as one of their "cards." on behalf of the Global 2000 outlook: securing raw materials fo r the Anglo-Saxons and depopulating the Mass murder Southern Hemisphere of dark-skinned "useless eaters." In Mozambique, South Africa is sponsoring an U.S. endorsement of this policy in southern Africa armed operation of about 5,000 tribal members. 80 would be a disaster for both Africa and Washington, percent of Zimbabwe's fo reign trade passes through D.C. Africans have always considered the United States South Africa, and the disturbances in Mozambique the only hope for the development of Africa, since the prevent Zimbabwe from increasing the amount that Africa policies of European countries have rarely chal­ could pass through Mozambique, thus giving South lenged policy guidelines established by the anti-develop­ Africa more leverage against Zimbabwe. ment "Empire Faction." What is needed is an economic­ Southern Mozambique has been described by Wash­ development commitment as the basis of U.S. foreign ington sources as the most likely target for a southern policy in the region. That would entail an end to aparth­ Lebanon-style attack by the South Africans. An earlier eid. attack into this region by the South Africans in early 1981 drew no comment from the Reagan administra­ Namibia talks tion, prior to Crocker's confirmation. A group of five Western countries-the United According to African sources, there are 5,000 elite States, Britain" France, West Germany, and Canada­ Selous Scout counterinsurgents from Rhodesia prior to has been negotiating with SWAPO (which is recognized that country becoming independent, that are now in by the U.N. as the official representative of the Nami­ South Africa to be used in countries in southern Africa bian population) and SWAPO's African backers on the by the South African government. In addition, recruits one hand, and with South Africa on the other. The for South Africa have come from Angola, Zambia, negotiations have proceeded by fits and starts; the U.S. Zimbabwe and Mozambique to carry out dirty tricks administration should not have included the colonially­ and chaos operations in their countries of origin. minded British and French, or the duplicitous Trudeau Internally, South African policy has become equally government, while Bonn is irrelevant unless it returns to vicious. South Africa has just announced its intention the African economic development plans of Jurgen to give a few strips of land to a tiny neighboring Ponto of the Dresdner Bank, who was murdered in country, Swaziland. This will serve as a pretext for the 1977. P. W. Botha government to expel nearly a million For the United States, Assistant Secretary of State people of the reputedly same ethnic origins as the fo r African Affairs Chester Crocker and roving ambas­ people of Swaziland. In the words of the South African sador Vernon Walters continue to be the central figures Minister of Cooperation and Development (which deals in the Namibian negotiations. with policy for the black part of the population), Dr. But Crocker avowedly espouses the Global 2000 Piet Koornhof, this is only a policy of "bringing policy line. British policy conduits such as the Heritage together people who belong together," and he has Foundation are hoping that the new Secretary of State, reportedly announced intentions of carrying out similar George Shultz, "will leave Africa policy up to Crocker, kinds of activities inside South Africa, forcing people as Haig did." As for Walters, who has criss-crossed not essential fo r the economy as presently constituted to southern Africa in recent months, returning to Luanda be dumped in what the South Africans call homelands July 21, he is reportedly closely connected to the Euro­ or bantustans, which are reserves for the black popula­ pean neo-fascist monarchist circles who fo rmulated tion. The homeland population has grown by 3 million Global 2000 and run the Tradition, Family and Prop­ in the last decade, and there is almost no prospect of erty butchers in Ibero-America. employment at all. Crocker has been putting out the line that a negoti­ South Africa is currently in its deepest recession ated settlement will lead to elections in Namibia by since the 1930s. The slump in gold prices and the March 1983. A South African delegation was in Wash­ highest inflation in 50 years have lead to record central­ ington in late June, and discussions began July 6 in bank borrowing to meet balance-of-payments deficits. New York between the five Western nations and This will certainly lead the South African government SWAPO. The only real issues involved, according to a to speed up the process of pushing blacks out of white Washington-based Africanist close to Crocker, "are the South Africa into the impoverished, disease-ridden Cuban troops in Angola and whether the Savimbi homelands.

EIR August 3, 1982 International 41 Interview: Dr. Philip Hemily

NATO science andenv ironmental official lauds the 'greening' of the alliance

In the June 15 issue of EIR , European Economics Editor Hemily : The focus of Harlan's remarks was only implic­ Laurent Murawiec demonstrated how NATO created itly the NATO Science Committee; in fact he addressed environmentalism and the peace movement. Speeches himself very much to the NATO governments. But a and policy documents by NATO's "movers and shak­ good deal has happened. We have seen the end of a cycle ers"-including fo rmer U.s. ambassador to NATO and of 20 years during which we built a good base of support Aspen Institute executive Harlan Cleveland, NATO Sec­ fo r basic sciences, especially with our [NATO] exchange retary-General Joseph Luns, and Club of Rome founder programs. After the Sputnik, there had to be a lot of Aurelio Peccei-revealed that NATO's major objective science and technology; our programs provided a unique is to control and contain the development of technology. basis for transatlantic interaction. NATO is only secondarily concerned with military mat­ In the latter part of the 1970s, with the economic ters. downturn, the slowdown of the growth period had its The redirecting of NATO into an instrument for consequences. Questions were asked about new needs steering members into a common post-industrial future and new priorities .... took a giant step fo rward in 1969 with the.creation, by The conference demonstrated the third dimension of Henry Kissinger and Daniel Patrick Moynihan, among NATO. We're picking up that thrust: in fact, the fo un­ others, of the NATO Committee on the Challenges of dations of the Atlantic alliance are much, much broader Modern Society (CCMS). They sold President Nixon on than usually portrayed; they're economic, they're politi­ adding "a new social dimension" to NATO, concerned cal. They must be taken one step further: We are peoples with "the degradation of national environments under that share a common heritage, a common patrimony. the impact of technologically based industrialization." We want to stress this ingredient of the alliance. The role of NATO's non-military adjuncts, such as We propose-and it will be accepted in the next few CCMS and the Science Committee,· are a theme of the months by the North Atlantic Council, the highest body interview Murawiec conducted on · June 15 with the of the alliance-to create a Foundation for Science, the NATO Assistant Secretary General for Scientific and Environment, and Culture, as an umbrella, a general Environmental Affairs, Dr. Philip W. Hemily, who ex­ mechanism fo r all the non-military aspects of the alli­ plains the symbiotic relationship between NATO "tech­ ance, an umbrella under which the Science Committee nology assessment" projects run by those committees, will continue, the Committee on the Challenges of Mod­ and peace-protest/terrorist movements such as the ern Society (CCMS), etc. In fact we already have inside Green Party in West Germany. The interview took place NATO a small cultural committee, working under the at NATO headquarters in Brussels. Excerpts fo llow. information department, which deals with ... people who research the political-economic aspects of defense Murawiec : At the end of the April 1978 NATO confer­ and security pQlicies. It is a nucleus from which we can ence commemorating the 20th anniversary of the NATO build. Science Committee, Harlan Cleveland demanded that The Foundation will group the existing institutions. the committee provide "more policy input" to NATO Its board will be the North Atlantic Council. It will activities in general. What has happened since then? provide the basis for establishing an endowment, much

42 International EIR August 3, 1982 like the U.S. national fo undation for the arts and human­ Lyndon Baines Johnson School of Public Affairs of the ities.... It will permit us to bring in private funds, new University of Texas at Austin), at Columbia University funds from the outside. and the National Science Foundation, and the president of the New School for Social Research. He will be Murawiec : Back in 1978, what did the ad hoc group you coming here early July to critique our wisdom . . .. referred to work on? So, we're reinventing parts of Futures Research here, Hemily : We did two things to promote interaction, with in the social-behavioral field-like our human factors a new option of addressing social problems, and success­ panel working on ergonometrics, the man-machine rela­ fully so . We became concerned with the welfare of the tionship, how to civilize the machines .... We've done developing countries who belong to the alliance, and studies on the adjustment process fo r Turkish workers their scientific institutions. In spite of some resistance, by returning from Germany to Turkey, to their village. 1 980 the North Atlantic Council endorsed the program. The distinguished member of the Club of Rome who Murawiet: What about demographic studies? is also on the board of the [NATO] Science Committee, Hemily : It's come up very much recently. Welook more former minister Eduard Pestel, pushed a lot for this. at the popUlation problems within the alliance, since the We changed the Science Committee, made it more Club of Rome is looking at the worldwide trends. We're operational. It now sends an annual message, for exam­ looking at the current resource assessment. The [NATO] ple to the political, economic, and scientificco mmunities economics directorate has examined East bloc demo­ of the alliance. The first message was on the management graphics, but the panel on eco-social sciences will be of research systems in a period of zero growth. examining the demographic analysis. The Global 2000 We need to maintain a healthy system of industrial Report of the Carter administration has been discussed research, without isolationism. We're a forum for that, here a great deal under CCMS especially. and we work with the European Science Foundation, But there's a problem with CCMS. At the beginning, which is based in Strasbourg. It's sponsored by the in 1969, when Nixon gave his speech in Washington European Community, so with them and the U.S. Na­ which called for establishing this "third dimension of tional Academy of Science, the Academy of Engineering, NATO"-the speech had been written by Moynihan and we-the NATO Science Committee-did a lot of work his staff-CCMS had a broad-based perspective. on this quarter. We concluded that interaction must be [Now) it's really looking for a role. Of course, CCMS promoted, especially for industrial researchers. did great work on energy conservation, and solar ener­ We decided to choose those areas which were not a gy-they were real pioneers, but the International Ener­ priority elsewhere. Nuclear physics, fo r example, was a gy Agency has picked up the work of CCMS where preferred area: well covered, well funded by govern­ CCMS had leftit. 'Wecelebrated the tenth anniversary of ments, by other institutions, so there was no point in our CCMS in \¥ashington in 1979, and some countries were supporting nuclear physics; medical research is a low very reluctant to�g.et into politically sensitive areas. priority for us too. In the past, the French had been very reluctant but Until quite recently, we still devoted some effort to recently French inlerest has increased enormously . Think basic science, but there has been a shift. We looked into how significant it is that the Deputy Secretary General of what one could call "science, technology, and zero NATO fo r Scientific and Environmental Affairs is a growth." We looked at new areas of science and engi­ Frenchman now! neering, especially what we call "oriented research," a targeted area of interest for an industry, a product. So Murawiec: What issues should be tackled by CCMS? you'll have NATO Advanced Studies Institutes [ASls] Hemily: issueS such. as terrorism. It's sensitive, sure, but on the designing and manufacturing of microcircuits, questions should be raised: What are the experiences of chips .... various couniries? Another subject that ought to be discussed is drugs. That's a worldwide problem. Murawiec: What about social sciences? CCMS meetings are now at a very senior level, at a Hemily: Ah! These sciences are commonly looked at as political level. if you wish. Our annual "roundtables, " "soft," but Pestel and others have always insisted that like the 1980 roundtable on technology assessment, have without much more input from the social and behavioral turned out to .be quite controversial. At first, European sciences, many of the problems posed by technology governments are very reluctant to go into this-and then cannot be understood, like unemployment. ... One the [West German} Green Party, the environmentalist should not take the social sciences as "instant social party, put pressure on the governments and forced them sciences" like you make instant coffee, as Dr. Henry to establish units that will assess technological develop­ David said at the 1978 conference. David is a very good ments. So we outlined the manner of doing it. man. He was at Cambridge, at the LBJ school [The To comeback to the Global 2000Report; it was good,

EIR August 3, 1982 International 43 comprehensive; it invited stimulating criticism . As Peccei [International Federation of Institutes for Advanced had said for Limits to Growth. it was a good commando Studies], all work together, without any of the con­ raid. The time had come for the ideas that are in it. What straints and formalisms. There is a network of like­ was needed was to make outrageous statements, to get minded people that are interacting together-there is a people concerned. Not that Global 2000 was outrageous­ symbiotic relationship among these organizations. ly wrong, but it got people arguing the right way. Global 2000 was a result of the process initiated by Murawiee : Is there work with the Soviets on these issues? Limits to Growth. and it stimulated the debate afresh "emily : Yes, through UNEP [the U.N. Environmental throughout the world. There has been a difficultproblem Program] in particular, and through ECE [the U.N .'s with the new [U.S.] administration, which either had a Economic Commission on Europe]. The Russians had a different approach or rejected initially that of Global hard time admitting it at the beginning; they said there is 2000. Now they reassessed Global 2000.... no pollution here, only capitalism produces pollution. Then, last fall, we decided to start working on an Then they were hit by this Lake Baikal affair [the pollu­ assessment of the assessment. In November, CCMS will tion of the world's largest fresh-water lake by paper hold a roundtable discussion on the real challenges fac­ mills-ed.] and then they saw good reasons for collabo­ ing the Western societies that can be coped with in a rating. A lot of bilateral agreements of cooperation on ' short time-frame. We don't want to look at problems of ecology were signed between the U.S. and the Soviet the oceans in a, bundred years, but at problems posed Union during the detente years until 1978. There was right now. :.'. [Club of R,ome collaborator] Jacques extensive interaction with the Soviet Union, through the Lesourne has helped us a lot. U.N., ECE especially. Now it's at a standstill. Sadly enough, IIASA is in trouble. What stupidity to have put Murawiee : What questions will you address? a KGB man [Djermen Gvishiani] at the helm there! Such "emily : Questions like the atmosphere at work, tech­ an amateur spy! It's sad. It has given a pretext for the nological unemployment, demographic trends in an ag­ U.S. to cut offits participation, the British are withdraw­ ing population, the bankruptcy of social security sys­ ing too ....This network of communications, my God, tems, the work ethic, the peace movement-certainly the we've got to keep it alive! And the Soviets, they have peace movement! Apart from the efforts by the Soviets problems, they must deal with these: they have aliena­ and the extreme left to manipulate it-the rest, many tion, youth alcoholism .... people in that movement, are very sincere. We must [In a 1981 interview with EIR . Club of Rome co­ deal-that's one theme-with the youth movement, the fo under Alexander King revealed that he had collaborat­ alienation of the young .... • ed with IIASA head Gvishani since the fo unding of the Club in 1969. Gvishiani officially joined the Club of Murawiec : So now NATO's priority goes to "out-of­ Rome in 1981-ed.] area" deployments in the social-cultural field? This relationship between King and Gvishiani, how "emily : That's exactly right, I could not agree more. close! CCMS has links with the East bloc countries. In Those are the really serious problems facing mankind in our [NATO] advanced science institutes-there are 80 a the longer term, barring the risk of nuclear war, and they year, with 10-15 percent of the attendees not coming represent a worldwide bomb with a slow fuse; it's already from NATO countries, and a geod deal of these from the burning. The lesson of the May 7 [NATO defense minis­ Eastern countries-we talk with them. This creates net­ ters'] resolution and the June 10 [NATO summit] reso­ works, a network of people who know each other. What lution [at which NATO out-of-area deployment was counts is not just the two weeks they spend together, but approved-ed.] is that it is issues outside our little fa mily the years after. Symbiotic relationships are established, of nations that have an increasingly serious impact on long-lasting ties. We should have more of these-that's us. It is now understood by everyone. France and Ger­ also what Basket Two of the CSCE [Conference on many did not want to discuss these problems before, now Security and Cooperation in Europe, the Helsinki Sum­ they do. The Middle East, Africa .... mitlcalled for, science, education, and the environment. In fact, we should have NATO and the Warsaw Pact Murawiee: With which institutions did CCMS originally sponsor jointly 8 or 10 such interacting proj ects every work? year. "emily : Well, it's very informal. Russell Train, with Moynihan, was the first U.S. representative at CCMS. Murawiee : How did you operate the transition from the Now he leads the World Wildlife Fund. So. WWF, era ofthe "Sputnik Gap" to that of "Limits to Growth"? NATO, the OECD, the Club of Rome, IIASA [the "emily : Well, there was the period of the "technological International Institute for Applied Systems Analysis in gap"-King can tell you a lot about ·that, after all, Vienna, a joint NATO-KGB think tank-ed.], IFiAS Servan-Schreiber's book [Le Defi Americain-ed.] was

44 International EIR August 3, 1982 essentially OECD texts he appropriated. There was this - meeting in Deauville on the management of technology BookReview on both sides of the Atlantic. I was involved. Out of this was decided to establish an International Institute fo r the Management of Technology. It was established in Milan in 1971, with Olivier Giscard d'Estaing, the brother [an �xecutive of IBM-France-ed.], Aurelio Peccei, Umber­ The crimes of to· (::olombo, top Germans, Britons, and Dutch. But it never worked. It fa iled and it disappeared. We could not get the European industries to be integrated. Perhaps the Lord Mountbatten concept was wrong-why separate "technology" from management in general? There was already the INSEAD by Uma Zykofsky [Institut Superieur Europeen d'Adminis tration des Af­ faires, located in Fontainebleau, France, near the fo rmer Mountbatten andthe Partition of India NATO headquarters-ed.]; thenl King also helped a lot by Dominique Lapierre and Larry Collins to establish the EIRMA, the European Industrial Re­ Vikas Publishing House Pvt. search Management Association, which I always call New Delhi, 1982, rupees40 1 Irma La Douce. There was Peccei and [Trilateral Com­ mission member Humberto] Colombo and King and The British Crown has always cosmeticized its imperialist Casimir the Dutchman-the 100 top high-technology design as an effort to upliftimpo verished and backward firmsin the world linked together through that institute, peoples. This myth has been cultivated most energetically which trains managers. by the British East India Company and its kept historians For the last 20 years we've had these fantastic people, in regard to India, the jewel of the far-flung British King, Peccei-what can we do when they disappear? Empire from the 18th century until 1947. Before the Club of Rome, in NATO, there had been the The idea that British imperialism is a cheerful accept­ report of the three wise men, Lester Pearson, Gaetano ance of "the white man's burden" was fo rcibly imported Martino, and Halvard Lange [the foreign ministers of to the colonies, by means of the re-education of the Canada, Italy, and Norway, respectively, who were com­ indigenous elites. While India's poor "natives" were missioned by the North Atlantic Council in 1956 to write victimized by British Malthusian looting and taxation a report on "non-military cooperation in NATO." They policies, the subcontinent's leadership was taken to Great wrote that the nation-state "is inadequate for progress or Britain and anglicized. At Oxford and Cambridge Uni­ even survival in the nuclear age."-ed.] on non-military versities, they were taught to believe that before the cooperation within NATO. Then later, a study sponsored British set foot in India, their native land was steeped in by the (NATO) Science Committee, funded by the Ford bestiality and irrationalism. Foundation, the Armand report, and then the Kilian Of course, the British were lying. The true history of report. It called for the establishment of a European the Indian subcontinent includes a great contribution to MIT .... It almost came up! Pierre Aigrain [a physicist world civilization, stretching with unbroken continuity who served in various high research administrative posts over 5,000 years. Sanskrit, the world's oldest language, under French President Charles de Gaulle-ed.] was was a product of this rich history and culture. Through­ instrumental in that-he was carrying very strict instruc­ out their rule of India, the British conspired to destroy tions from Ie general-[De Gaulle]-to kill it. this culture as a living tradition, going so far as to hide crucial historical and archaeological data fr om the Indi­ Murawiec: What other institutions do you work with? ans, to better press their case that the country was savage, Hemily: There is the European Science Fou'ndation, uncultured, and in need of colonial rule. [Lord] Brian Flowers was its first president. We work India's leaders in the fight forin dependence-nota­ closely with them, on this informal basis of a network. bly Mahatma Gandhi, lawaharlal Nehru, and Maulana We could have more useful links with OECD, officially, Kalam Azad-considered the rediscovery of India's his­ if it were not for this "neutrality" thing. tory central to their freedom struggle. Only upon the But at staff level, the interaction is total. One of our base oflndia's millennia-old traditions and philosophical staffe rs here with NATO is the man who originally set up wealth could a new nation-building effort be carried out the FAST program [Forecasting and Assessing Science in the post-World War II period, they believed. A fore­ and Technology] at the European Community. He was a most figure in his effort was Bal Gangadhar Tilak, the graduate of SPRU [Science Political Research Unit, anti-British philologist, historian, and lawyer who began Sussex University, Tavistock Institute-ed.], and stayed the project to revive and re-energize India through a some while with IIASA ....It's all the same network. writing of its actual history.

EIR August 3, 1982 International 45 India has been free of British rule for 35 years, but the behind by the British, Mountbatten speaks at length Crown's attack on its history continues. Dominique and with a transparent racialist condescension: "He Lapierre and Larry Collins's Mountbatten and the Parti­ [Nehru] used to get difficult to contain and I used to tion of India. a sequel to their 1976 bestseller Freedom at say 'You're not helping yourself. You're not helping Midnight. is a prime example of the British method of me. You're not improving your image.' censorship, distortion, and slander in historiography. " 'I can't bear it. I must speak out!' [Nehru would Lapierre and Collins are known to American readers as answer.] "I said 'I know .... You're letting offsteam the authors ofthe recent thriller Th e Fifth Horseman. a and I understand why. 'But if you're going to be Prime fictionalized British intelligence scltnario for nuclear ter­ Minister without me-while I'm there I can do it-if rorism involving Libya's Muammar Qaddafi.In Mount­ one day you're going to run this place on your own, batten they mix a lot of British intelligence-inspired you've got to control yourself.' fiction with a few fa cts and purport to tell the story of "The fu nny thing was that on this he always came how Britain gave independence to India. and cried on my shoulder. He wanted someone to go The story that neither this book nor Freedom at back to. I had a sort of fu nny fe eling that Nehru actually Midnigh t tells is how Mountbatten, Britain's last Viceroy required my presence in order to be able to fun ction. and in India and the man responsible for the transition of aft er Gandhi it was me. He used to go back to Gandhi, power in 1947, carried out a decades-old British Colonial and Gandhi was less and less use to him in the end, and Office plan to subdivide the subcontinent on communal then he [Gandhi] was assassinated" [emphasis Mount­ and religious lines with the establishment of Muslim batten's]. Pakistan and a Hindu india, and created the conditions It is widely believed in India that the British assassi­ for instability and bloodshed in the region for many nated Mahatma Gandhi because he was the one leader years after Britain relinquished her precious colony. of the independence movement unshaken in his view that India should not be partitioned. It is in this light A racist in his own words that one should read this last statement. Both Freedom at Midnight and Mountbatten are heavily based on interviews with the late Lord Montbat­ The making of British neo-colonial policy ten, the cousin of Queen Elizabeth, the mentor of her Mountbatten and the Partition of India is also rec­ husband Prince Philip, and a longtime adviser to the ommended' reading for those seeking a sharper under­ House of Windsor. Mountbatten is portrayed as "the standing of the strategic considerations shaping the greatest statesman of the 20th century"; next to him British Crown's colonial policy, up to its present-day India's national leaders appear as midgets. dealings with the Commonwealth nations and the de­ When Freedom at Midnight first hit the bookstores veloping sector. The circumstances leading to the parti­ in 1976, it was promptly banned in both India and tion of India and the creation of an independent Paki­ Pakistan. The governments' grounds were that the book stan illustrate graphically that even during a period of was a gross distortion of history which incorporated ostensible retreat, British colonial policy makers were viciously slanderous portrayals of all the subcontinent's carrying out plans to maintain control over the region fr eedom leaders. Mountbatten and the Partition of India in the post-war period. The references to their machin­ is represented by its authors as a response to this bitter ations in Collins and Lapierre'S book are few and slight, criticism. In addition to the interviews in which the but sufficient to give the reader a picture of the evil Viceroy speaks for himself, the book contains an appen­ schemes the British oligarchy has devised over the dix of selected documents released by the British India centuries to subdue the subcontinent. Office on the discussions preceding the partition. Lord Mountbatten himself was among the elite of The collection is worth reading. The authors let British policy makers who knew that the "sun was Mountbatten speak fo r himself to a surprising and setting" on British India. Since the late 19th century, revealing extent, and he lets slip some notable views of, the communal weapon had been freely wielded to in particular, the subcontinent's national leaders. M. A., maintain British control in the region. Now it was Jinnah, the founder of Pakistan, was in Mountbatten's Mountbatten's assignment to exploit the conditions words a "bastard" and a "lunatic." Of his dealings with created by this divide-and-conquer tactic to ensure that Mahatma Gandhi and Sardar Patel the Viceroy reports: if India was to win freedom, that freedom would-be "I used tactics like getting Gandhi to fast and kicking granted largely on British terms. Patel to sign." Gandhi, he adds at a later point, was like The groundwork fo r Montbatten's operation had a "bird happily chirping on the sidelines." been under way since at least as early 1905, when the Of Jawaharlal Nehru, India's first Prime Minister British India Office devised the partition of Bengal to and the b ui lder of that nation's now-considerable sci­ set Hindus against Muslims, and began the process of entific and industrial capabilities out of the ruin left creating a separatist consciousness between Indians of

46 International EIR August 3, 1982 • diffe rent religious backgrounds. Through careful ma­ Coupland intended for India, to be a potential trigger nipulation of this emerging nationalism, the British for international conflict. inspired and promoted the creation of the Muslim In fact, the men who carried out the partition of League in 1906. India remained on the subcontinent past Independence In his memoirs, Viceroy Mountbatten never once to carry on with the profiling and manipUlation that mentions the role of Sir Reginald Coupland, who in they hoped would lead to the further balkanization of 1941 prepared the thorough profiles of Indian Hindu the region. Among these were Sir Olaf Caroe, who and Muslim leaders and communities fr om which the played the Muslim side of the British partition game, British Foreign Office worked to prepare the final and Charles Lamb, who collaborated with Mountbatten partition plan. Coupland described his intentions as on the Hindu side of the deception. follows: "The partition threatens to throw India back to the condition it was in after the breakup of the Moghul The Commonwealth link Empire, to make it another Balkans. This would negate Mountbatten's post-Independence role in bringing the development of democracy in India. Partition would India into the newly created British Commonwealth of also prevent a free India from taking its due place in the Nations is revealing on two counts. On the more world as a great Asiatic power, for it would mean obvious level, it brings to mind the great degree to disruption into several states ranking from Egypt to which the British still dominate their fo rmer colonial Siam ....It would convert the whole subcontinent into dominions, politically as well as economically and fi­ a complex of quasi-national sovereignties, walled off nancially. When one considers that Mountbatten forged from one another, by political and economic frontiers. the Commonwealth with the full collaboration of Win­ India in fa ct would be balkanized and instead of being ston Churchill, who was during the same period a peaceful and stable element in the new international launched the anti-Soviet Cold War, the less obvious structure, it might well become like the Balkans in the point is made: it has been the British Crown's complete past, a breeding ground for world war." post-war grip on both East-West and North-South Mountbatten arrived in India in March 1947 to put relations that has repeatedly poisoned the waters for a Coupland's mandate into effect. He chose Lord Ismay post-colonial new world economic order. as his chief of staff for the India operation. It was Ismay There is a strong tendency among Commonwealth who produced the final document on the administrative members to dismiss the Commonwealth's power, but consequences of partition and the tranfer of power, and reading Mountbatten's memoirs makes one aware of who carried the working drafts of "Plan Balkan" back just how central the British considered this new organi­ and forth from Mountbatten in New Delhi and Lon­ zation to their post-war strategy. Mountbatten treats don's Foreign Office. Lord Ismay's role in the partition the continued link to Britain as a favor done for India, operation dispds the popular myth that Mountbatten in his typical condescending fashion, but also reveals fought for independence on behalf of India and against the depth of the Crown's desire to maintain its grip on the hardline Tory colonialism of Sir Winston Churchill, the subcontinent: "I had a feeling that if the Indians who was well-known to have referred to Mahatma went out on a limb, without the advantage of the British Gandhi as "a half-naked fakir." Lord Ismay was connection, they would probably not be able to carry Churchill's protege, and in 1940-46 served as Churchill's on .... We had people who could help them in their top commander and confidante. universities, in their police, everywhere, the connection Mountbatten met separately with Hindu and Mus­ simply couldn't just be cut. ..." It might be suggested lim leaders to work out the partition plan. The coming that India was blackmailed into joining the Common­ into being of Paki;,tan and India was carried out at the wealth, considering the depth of anglophile operations­ cost of millions of lives. Ten million Hindus and Mus­ in-place which Mountbatten has described. lims, ordered to migrate from their homes to territories Finally, it is worth noting that Lapierre and Collins now declared appropriate fo r their religious group, were studiously avoid a discussion of the Viceroy's morality displaced. This most massive migration in human his­ outside the political arena. This is another among tory resulted in such atrocities as the deaths by starva­ numerous efforts since Mountbatten's death to protect tion and disease of entire trainloads of immigrants, and him fr om charges that he was a homosexual, who the piling up of the corpses of those who could not be prided himself on using his wife's extramarital affairs transported at railroad stations. for political ends. But the subject of morality need not This policy of partition and genocide was fundamen­ be broached in this sphere to be efficently addressed. tally the same as that the British carried out in the The horrible deaths of the millions. of Indians butchered Middle East during the same post-war period. The and rendered homeless by the partition policy say all creation of a permanent condition of tension between there is to say about the morality of Mountbatten and Arabs and Jews in that region was also designed, as the British imperial ruling structure.

EIR August 3, 1982 International 47 China Watch by Gregory F. Buhyoff

Peking looks for a 'Third Way' the end of June that "the U.S. econ­ P.R. C. leaders are courting the underdeveloped nations, omy will still stagnate in the second scorning u. s. trade, and boosting the "peace movement. " half of this year." China is now courting closer economic ties with Japan to supplant the role assigned to the United States. China is engaged in furious di­ plomacy throughout the Third The People's Republic of China United States has not freed itself World, particularly Africa and the has been increasingly sending sig­ from its passive, disadvantageous Mideast, upholding Third World nals of its desire to distance itself position. The reason is its many interests and "solidarity" in the from the United States and position weaknesses." On June 25 another best tradition of Mao Tse-tung. Peking as the leader of a "Third official release said that Washing­ The shift was confirmed most clear­ Way." In line with more traditional ton is "on the defensive and Mos­ ly in a recent issue of the important Maoist rhetoric, Peking is pro­ cow on the offensive" in the battle analytical journal Ban Yue Tan, claiming its status as a Third World for world hegemony. which said, "China's foreign policy country, sympathetic to the op­ The apparent thaw in Sino-So­ can be summed up in three sen­ pressed and opposed to "both su­ viet relations over the recent period tences: strengthen unity and coop­ perpowers. " should be seen less as a unified eration with the Third World; op­ Peking's diplomacy includes move in Peking toward rapproche­ poses hegemonism; and preserve not only the Third World-it also ment than a move to cover its posi­ world peace." These three basic includes courtship of the Europe­ tion vis-a-vis the Soviets in light of points specifically echo on Chair­ ans and Japanese including increas­ the erosion ofthe U.S. capabilities. man Mao Tse-tung's theory of the ing contacts with the European So­ Earlier this year, its growing re­ "three worlds." On the question of cial Democracy, with independent servations about U.S. military hegemonism Vice-Premier Wan Li "Eurocommunists," and with the might notwithstanding, Peking still told a visiting Japanese newspaper oligarchies of the Old World. Pe­ expressed a desire fo r economic re­ editor that U.S. "hegemonism" ri­ king's latest policy line in fact con­ lations to be increased. China at the vals that ofthe Soviet Union. verges with the current Anglo­ time still saw a role for the United Consistent with such Third Way French moves toward positioning Stated as a source of technology developments, China has made an Europe "between" Moscow and and investment. However, even this about-face in its assessment of the Washington. has been called into question. international "peace movement," The Chinese policy is not an According to the Hong Kong­ which as late as this spring was the ideological shift; it is for the most affiliated Overseas Chinese media, object of Peking's apprehension as part a pragmatic assessment of the a high-level conference of P.R.C. a "Kremlin-inspired" plot to put decline of the United States as a economists and scholars took place the West at a disadvantage. power and hence its declining use­ this May in Peking during which a But on June 2, the official Peo­ fulness to China as a weapon to detailed critique was made of the ple's Daily approvingly described keep the Soviet Union at bay. U.S. economy, noting particularly the movement as a "broadly based" The gloomy Chinese view of the in flatio n, high interest rates, low upsurge, stating, "The spearhead United States fi rst came into public productivity, and unemployment. of the peace movement in Europe view at the beginning of this year It was concluded, according to and America is directed against the and has since become more ob­ these reports, that since there is Soviet Union and the United vi ous. In January the Xinhua News presently little U.S. investment in States ....All people know that it Agency declared in various releas­ China and little could be expected is precisely these two es, "The United States is no longer in the future, given U.S. economic superpowers-the Soviet Union what it was in the 1940s or problems, it would not matter if and the United States-which are 1950s .... In its contentions with there were no trade with the United frenziedly engaged in an arms race the Soviets over the past year, the States. The People's Daily said at that is threatening world peace."

48 International EIR August 3, 1982 Inside Canada by Pierre Beaudry

'Feed Pepin to the Crow' tion," adding that "provinces Higher shipping costs will wipe out already wf!akenedgrain [should] not participate directly in the formal negotiations." The producers. Is that Ottawa's intent? memo then concludes that Ottawa should provide the railroads with no more than $600 million a year in running costs while the farmers fund the rest "as well as all future At a time when grain production But this is not a question of cost increases." for export should at least double to railroads' incomes, either. It ap­ The Western provinces, Mani­ feed an increasingly hungry world, pears to be it strategic decision to toba, Saskatchewan, and Alberta, the Trudeau government, in ca­ phase out Canada's role as a grain have reacted with outrage. Some hoots with the railway companies, producer and concentrate on raw­ protest signs read "Feed Pepin to is planning to cut grain produetion materials manipulation. Prof. Alan the Crow" (pepin is French for for export by raising the farmers' . Aboucher of the University of To­ seed). According to Blakeney, '�If shipping costs. By abolishing the ronto coyly wrote last spring in the the railways no longer have to re­ traditional low railway rates known Toronto Globe and Mail: "If it is spect the principle of equal rates for as the Crow's Nest, Transport Min­ true that high grain transportation equal distance, [they] can decide ister Jean-Luc Pepin will not only costs cannot be repaid by the which county elevators will go,

raise the domestic price ofgrain but world's grain importers, perhaps which branch lines will stay' , which simultaneously increase their costs, we should contemplate a retrench­ towns will live or die." contracting their markets, income, ment fr om grain production or shift Saskatchewan, which produces and investment. to other activities which are more 60 percent of Canada's export The Crow's Nest rate is an 85- efficient from a national point of grain, will be hit hardest. Arvin year-old agreement between rail­ view. ." Bunker, an agriculture economist roads and grain producers which Th e already burdened grain for the U.S. Department of Agri­ established statutory freight rates growers who may end up paying culture, says that not only will the for grain shipped across Canada to "13 times the current rate by 1990," new policy "increase the price of export terminals. The 1897 rate according to Saskatchewan Agri­ wheat in Canada, but it will also agreement stipulates "equal rate culture Minister Gordon Mac­ decrease production and discour­ for equal distance": a farmer any­ Murchy. "That would mean an av­ age purchases . " where on the prairie will pay the erage freight rate for Saskatche­ In an interview with the Globe same rate as another farmer living wan, which pr09uces 60 percent of and Mail, David Kirk, executive the same number of miles from the the nation's grain, of$1.62 a bushel secretary of the Canadian Federa­ port to which his grain is shipped. by 1990. The bill for the movement tion of Agriculture, said that high The low rate was maintained to of prairie grain would jump to $2.6 interest rates are already hitting es­ build up Thunder Bay as a Canadi­ billion," he said. On July IS, Sas­ pecially young farmers who use ad­ an shipping center and prevent katchewan MP Victor Althouse vanced technology. High freight north-south commerce with the leaked a memo which Pepin sub­ costs could push them over the United States, as part of the British mitted to the federal cabinet last edge. Crown's effort to limit economic January proposing that Ottawa pay Figures from the Department of relations between the two coun­ as little as possible while forcing Consumer and Corporate Affairs tries. Canada's railroads are not each fa rmer to pay an average show that Canadian farm bank­ otherwise known for their philan- $2,000 more every year. The secret ruptcies have increased by 60 per­ thropic impulses. \ memorandum specifies that in this cent over the first half of 1981. Kirk Saskatchewan Premier Allan whole affair, Ottawa "must be seen concluded that unless farmers Blakeney charges that if the Crow's to be taking the initiative," and it across Canada get $1 billion avail­ Nest is abolished, grain farmers will "should emph.asize its desire for a able to them at a 10 percent interest be made to subsidize coal transport. 'made-in-Western Canada' solu- rate, the whole sector will go. I

EIR August 3, 1982 llllernational 49 Middle East Report by Nancy Coker

IMF's man axed in Turkey works," one New York banker told Now that Turgut Ozal is out, will the Fund continue to rule the a reporter wistfully. "I doubt there economy and wreck its industrial base? will be a total break with the IMF, but something big definitely is up." One sign of change is a govern­ ment decision to bail out Asilcelik, a specialty steel company, reversing Ozal's-and the IMF's-policy of letting firms go under. The high There may have been 'no dancing On the recommendation of the cost of borrowing is also expected in the streets of Turkey on July 14, IMF, Ozal lifted interest-rate ceil­ to be cut down. but most Turks felt immense relief ings, setting off warfare ambng the The demise of Ozal will also and pleasure upon hearing the news commercial banks. With Ozal's en­ have political ramifications. In ad­ that Deputy Prime Minister Turgut couragement, hundreds of unli­ dition to his role as IMF hatchet­ Ozal had resigned. censed money brokers then hastily man, Ozal was the pro-Khomeini For almost three years, as Tur­ set up shop, attracting thousands of inside man in the Turkish cabinet key's economics czar and the Inter­ small savers by offering returns of who favored closer relations with national Monetary Fund's top op­ as high as 160 percent on demand Iran. A member of the fu ndamen­ erative in the Turkish government, deposits. talist Nursi sect and a behind-the­ Ozal systematically wrecked the The game was up for Ozal when scenes leader of the pro-Khomeini Turkish economy by imposing the largest of these brokerage firms, National Salvation Party, Oza1 re­ harsh austerity measures and mon­ an outfit called Banker Kastelli, cently traveled to Syria, Iran, and etary constraints in an effort to ex­ went under in June. Five million Libya to promote cooperation with tract debt repayments fo r his IMF Turks, many ofthem army families, Turkey. controllers. In his zeal, Ozal had placed their savings with Kas­ General Evren, in contrast, is plunged the Turkish economy into telli, and they faced financial obli­ much more closely tied to Saudi the deepest depression in the coun­ teration as a result ofthe collapse. Arabia and Iraq. Evren reportedly try's history. To prevent the unraveling of the has worked out a deal with these Accompanying Ozal in his exit entire economy, Kenan Evren's two states to send troops to the from power were Turkey's Finance military government stepped in to Iraqi border area to ensure security Minister and the Minister of Public guarantee the deposits and bail out there against the rebellious Kurds Works, both long-time cronies. the banks that had marketed certifi­ while Iraq deals with Iran's inva­ During Ozal's tenure, Turkey's cates of deposit through Kastelli. sion in the south. "unprofitable" state sector enter­ Ozal and his friends were summari­ The ouster- also removes from prises, contributing 50 percent of Iy axed. the scen'e a key figure in Turkey's the country's industrial output, Ozal's removal clears the way black-market economy. Through were deliberately undermined. for a shift in economic goals in the now-outlawed National Salva­ Businesses that fa iled to switch into Turkey. The new finance minister, tion Party, Ozal was reputed to be export-oriented and hence fo reign­ Adnan Kafaoglu, has been an ad­ intimately involved in international currency-earning ventures fo und viser to Evren since the 1980 mili­ drug trafficking and terrorism, an themselves cut off from credit and tary takeover, and has long op­ involvement that the military did pushed into bankruptcy. Businesses posed Ozal's tight-money policy not look upon kindly. also collapsed under the sheer and austerity measures. Kafaoglu Ozal apparently does not intend weight of the cost of borrowing- believes Turkey must take a fr esh to fade into the sunset. Rumor has 70 to 80 percen t! look at its relations with the IMF; it that he has not lost his political Under these conditions, eco­ he is currently preparing a new 12- aspirations, and is planning to fo rm nomic activity in Turkey screeched month economic stabilization pro­ his own political party in prepara­ to a halt, and unemployment gram to replace Ozal's. tion fo r elections in Turkey next climbed to record-high levels. "Major changes are in the year.

50 International EIR August 3, 1982 DatelineMexico by Josefina Menendez

European-style separatism in the works Mexico, on the model of the Basque Anthropologists, Jesuits, and other "social engineers" are ETA and other such terrorist oper­ ations. planning the dismemberment o/ the country. It is rather ironic to see how leftist "social engineers" are exert­ ing themselves to bring to Mexico the fe udal structures behind the "Europe of the Regions" move­ ment. That movement is headed by I can scarcely read any fo reign Jesuit-run Universidad Aut6noma Otto von Hapsburg and other titled press source these days on Mexico Metropolitana (UAM) of Xochi­ oligarchic families of Europe. As which does not predict its balkani­ miico, environmentalist leaders and my colleagues have extensively zation into Indian separatist enti­ education ministry officials met to documented (see, e.g., EIR, July ties. One of the most elaborate attack government efforts to bring 20), the destruction of nation-states scenarios appeared in the June 14 the Indians into the mainstream of is the prerequisite for these families' issue of Business Week. "Leftists modern Mexican civilization. program. Otto von Hapsburg, to ha ve resurrected propaganda for an The government should not boot, comes from the same dynasty old 'independent Chiapas' move­ bother to teach Spanish to these which tried unsucessfully at that ment," the journal reports, specu­ tribes, a ministry official said at the time to impose its imperial nega­ lating that separatism "could be­ seminar; he proposed instead the tive-growth regime on Mexico in come a back door through which publication of government text­ the 19th century under Emperor Central America's problems infil­ books in 46 different dialects, under Maximilian. trate Mexico." the rationale that "there is no such The UAM meeting, I am told, As my regular readers know, thing as universal culture." was a sort ofspinoff from a June 12 these so-called movements have Attending the sessions were Ire­ UNESCO meeting of Ministers of nothing "indigenous" about them; nee Rojas, an environmentalist Culture and Education from Ibero­ they are part of the Malthusian ar­ leader who last year led a group of American and European countries mamentarium for breaking Mexi­ Tarascan Indians in a successful held at the palace of the sinister Cini co's national unity, and thereby its campaign to stop construction of a fo undation in Venice. resistance to anti-industrial de­ nuclear research plant at the Patz­ To the dismay of nationalist of­ signs. Chiapas, with its large Indian cuaro Lake in Michaocan; anthro­ ficials in the fe deral government, population and proximity to civil­ pologists from Harvard University the news here is that Mexico's Edu­ war-torn Guatemala, has been and the Mexico City-based Nation­ cation Minister, Fernando Solana, made a laboratory for that effort. al Institute of Anthropology and joined the kooky French Minister In July, a group of Harvard History (INAH); teachers from the of Culture, Jack Lang, in a diatribe University anthropologists de­ Jesuit-controlled Ibero-American against industrialization as a phe­ scended upon Chiapas to celebrate University; and members of the nomenon "alien to Latin the 25th anniversary of their "Chia­ PSUM leftist alliance. countries!" These plans for mass pas Project," i.e., intense profiling Mexican authonties have called murder-for that is what lack of of the local Indians' susceptibilities. my attention to the heavy European industrialization means for the Alongside their indelible for­ input into these discussions-which population of the developing sec­ eign trademark, these plans have is, more accurately, European fas­ tor-are to be pursued in a second active promoters here, not only cist input. The attendance of several UNESCO meeting of Culture Min­ among leftist academics, but in "experts" on Basque, Corsican, isters in Mexico City on July 26. some government circles. The Edu­ and similar separatist causes leaves In a future column, I will ex­ cation Ministry, in particular, has no doubt in their minds that a plan plain how the notion of Mexico's become an active funder and spon­ is in the works to bring European­ "Indian roots" has been planted in sor of "anti-integrationist" Indians. style separatism,. with its death­ Mexico, and what institutions and At a July 5-9 seminar at the dealing terrorist component, to individuals are involved.

EIR August 3, 1982 International 51 International InteWgence

ceremonial head of state and constitu­ propriate technology remedies. Britain plays with tional commander-in-chief of the armed First Boston Corporation guru Irv­ forces, is chosen by an electoral college ing Friedman, formerly of Citibank, 'Baluchistan ' card composed of the members of the state maintained that despite the virtual bank-· legislatures and the national parliament. ruptcy of the less-developed nations, There are strong indications, in the midst Zail Singh's victory was expected, but "nothing drastic is about to happen; only of the Gulf war between Iraq and Iran, his margin was larger than the total Con­ six countries have had to reschedule," that British strategists are pr�paring the gress strength in the electoral college. and that by 1990, LDC debt will reach ground for the coordinated balkaniza­ Reports from New Delhi say that signif­ oge trillion dollars. tion of Iran and Pakistan. Thus the recent icant sections of the opposition voted for "We have to be careful when we use activation of the Baluchi separatist Singh, including some supporters of the the word default," said Friedman, whose movement, which seeks to create an in­ Communist Party of India, the Tamil other credentials include his former dependent Baluchistan nation covering regional parties, and the Sikh regional chairmanship of SID, and a stint at the the Baluch tribal regions of both Iran party, the Akali Dal. The vote was there­ World Bank. and Pakistan. fore a victory for Prime Minister Indira EIR will report on the conference in According to Pakistani sources in Gandhi and a defeat for the opposition, an upcoming issue. London, Baluch emigres there have which had tried to use the presidential launched a newspaper called Azad (Free) election as a dry run for establishing a Baluchistan. In its premier issue, Azad unified anti-Gandhi fr ont of left- and called for the independence of Baluchis­ right-wing parties. tan, and carried a map showing its The position of the president can be Guatemalan Ayatollah boundaries including the Iran Baluch crucial at a time of political crisis or province and the Baluchistan province in collapse of a parliamentary majority launches bloodbath Pakistan. when the President selects the leader of a Meanwhile Muslim Brotherhood party to form a new government. In the little more than three months since sources in London are putting out the he was handed power in a bloodless coup, false story that the Pakistan People's Par­ "born-again" Guatemalan fundamen­ ty headed by the Bhutto fa mily is talking talist strongman Gen. Efraim Rios to Baluch emigres in London about a Montt has displayed the magnanimous deal which would include "autonomy" fr om the . statesmanship of Jimmy Carter and the fo r Baluchistan . The source linked this to Scenes SID sentimental enthusiasm of Ayatollah ties with the Soviets-which probably zero-growth conclave . KhOmeini. WQe,gthe general announced indicates British intentions to draw the July I that any Guatemalan found with Soviets into a deal based on carving up The Society for International Develop­ an unauthorized weapon would be shot Iran and Pakistan into separate entities. ment (SID) conference of depopulation immediately in the nearest town square, advocates in Baltimore which started on this cemented his friendships in the U.S. July 19 offered the following glimpses: State Department and certain Protestant Dudley Seers, former head ofthe mis­ sects. named SID, made an unscheduled ap­ One Texas missionary working Zail Singh become,new pearance at the panel on East-West rela­ closely with Rios Montt confided July tions to announce that "economic expan­ 20, "My friends in the government tell President of In dia sion" in Western Europe "can't be done me there is going to be a bloodbath in the without detaching Western Europe's , next few weeks." Rios Montt himself is The candidate of the ruling Congress-I economy from the U.S. economy. Other­ merely modestly proclaiming the "last party, Zail Singh, won an overwhelming wise we can't get interest rates down." stages" of a "finalwar" against guerrilla victory in the July elections for the Indian World Bank Vice-President for Ex­ opposition to his government. presidency. Singh, a veteran Sikh politi­ ternal Affairs Benjenk begged his audi­ The missionary went on to praise cian, is fo rmer Chief.Minister ofthe Pun­ ence to "avoid apocalyptic descriptions Rios Montt as a "true believer" whose jab and currently Home Minister of the of the situation in the Third World" be­ governmentem bodies his evangelical be­ Gandhi government. He took 73 percent cause, according to this Turkish mone­ liefs, and argued that people must "sub­ of the vote against the joint opposition tarist's logic, this would make the situa­ mit to the authorities that be and let God candidate, fo rmer Supreme Court Judge tion appear hopeless. Benjenk went on to handle the rest." He added that the Gua­ H. R. Khanna. The Indian president, the prescribe Brandt-Commission-type ap- temalan army plans to "use a good bit

52 International EIR August 3, 1982 Briefly

• THE BRITISH SPY scandal shows that while the British gov­ ernment was demanding U.S. mil­ itary support in its war against American hemispheric ally Argen­ tina on the basis of "the special more fo rce than that used by the Salva­ viduals who "served the interests of na­ relationship," the British were si­ dorans," and "as in any war, a lot of tional or fo reign sectors and companies, multaneously allowing (at best) innocent people will be killed." rather than the nation." The Army has gross amounts of American­ After 40 peasants were found decapi­ reportedly decided to continue with the gained information to be leaked to tated, the Mexican press reported on July investigation and has informed the Big­ the Soviet Union. The Cheltenham 21 denunciations made by the EGP none government's economic team of center operates in close collabora­ (Guerrilla Army of the Poor) charging this fact. Although nothing is being said tion with the U.S. National Secu­ Rios Montt with waging "bacteriologi­ about this publicly, the situation has ap­ rity Agency, the supersecret agen­ cal warfare" against the civilian popula­ parently gotten hot enough to have cy set up by British spy master Wil­ tion. According to the EGP, Rios Montt obliged the ex-Vice-President of the Cen­ liam Stephenson. is using such warfare against three towns tral Bank and a fo rmer economics official in the northern part of the country. Fun­ under both de Hoz and Alemann to leave • ALEXANDER HAIG is a damentalist missions representing 22- the country. member of the so-called fourth or­ plus sects have pumped dozens of mis­ Busqueda. an Argentine" monthly der of the Knights of Malta, the sionaries and upwards of several hun­ linked to anti-monetarist circles, pub­ organization that has threatened dred thousand dollars into Guatemala lished a lengthy interview with EIR 's by letter the life of Lyndon La­ since March. Most prominent among Latin Amelica editor, Dennis Small, in Rouche, according to sources in these is the Pasadena, California-based its July issue. Detailing the work of the Rome, who say that shortly before World Vision, which funds Rios Montt National Democratic Policy Committee his resignation from the State De­ and a very large international network of and Lyndon LaRouche, Busqueda calls partment, Haig tried suddenly to missionaries. EIR is preparing a Special LaRouche "the anti-monetarist voice in withdraw his membership fr om the Report on this topic. the United States." order. Investigations are continu­ ing.

• VITALII Korionov, Pravda po­ Argentina turns heat Aspen questions if litical commentator, revealed un­ surpassed but not unprecedented on economic saboteurs Palme can win lack of understanding in a July 14 article where he cites Cold War In recognition of the fa ct that British- Putting Socialist International leader founders Averell Harriman and allied monetarists in Argentina are deter- .. p!of. P!llm� back into power in Sweden George Kennan, as .two sane voices mined to wreck any efforts to stabilize.' ;. ; �.ay. '.i1of be an easy task, judging from in opposition to President Reagan. the economy, government officials have discussions made available to EIR from Harriman's reputation among his taken a series of initiatives to keep crea- the Aspen Institute's annual trustees employers is as a "Moscow-han­ meeting, held in 'junein a secluded castle tures like fo rmer Finance Ministers Jose dler," and among EIR readers as a Martinez de Hoz and Roberto Alemann in Saitsjobaden outside of Stockholm. thoroughgoing racist and genoci­ The Aspen Institute is one of the control- in line. dalist. According to the Buenos Aires daily ling agencies for the European oligar- Ciarin, chy's environmentalist when Martinez de Hoz met pri- movement. • QUEEN ELIZABETH should vately in mid-July with Interior Minister Zygmunt Nagorski, a friend of step down from her throne in favor Llamil Reston, he reported that he and Palme's and a prominent executive of the of Prince Charles, said the July 21 Council on Foreign Relations, noted that other members of his economic "team" issue ofthe Swiss newspaper Welt­ he expected Palme to win easily "before were being "persecuted" by banking in- woche. Elizabeth is to blame for vestigations. Martinez de Hoz and many I got to Sweden [in June], but I am not so the recent violation of her bed­ sure after my discussions ...." of the collaborators who helped him de- room, according to the paper, be­ stroy the economy during his tenure as The same perspective was echoed by cause she refused to have a modern finance minister (1976-8 1) are in fact the another attendee who has ties into Swe- security system installed. But "the objects of an investigation that dates den's current government, who noted magic can be restored by Prince that Palme's back to April 1980. "early and close identifica- Charles and Diana," says We lt­ At that time, fo rmer President Lan- tion with the wage-earners fund"-a woche. usse told then-Army Commander Gal- proposal for taxing profitsto give work- tieri to investigate reports that the gov- er's equity-"is now being backed off ernment's economic team included indi- from by the Socialists."

EIR August 3, 1982 International 53 �TIillNational

Congress punts on the Vo lcker bailout issue

by Ronald Kokinda, Washington, D.C. correspondent

Something worse than the dog days descended upon doom-mongering are warnings of a U.S. banking col­ Washington the fo urth week in July. 1) Federal Reserve lapse that are designed to create the climate for Volcker Chairman Paul Volcker announced to the Senate that he to take whatever emergency action he chooses, above intends to bail out the offshore Eurodollar markets with all bailing out the Eurodollar debt. American liquidity, if need be, while denying interest­ Before the Senate Banking Committee on July 20, rate relief to the domestic economy-and he went un­ ranking Democratic Senator Donald Riegle of Michi­ challenged in Congress. 2) The White House attempted gan addressed Volcker, who was testifying there: "We to divert attention from the entire Volcker issue by are in a jeopardy not seen since the 1930s. There have puffing the ludicrous balanced-budget amendment pro­ been quiet runs on financial institutions. A top banking posal-even though the malignant size of the deficit is officer told me that the U.S. economy is on the edge, largely due to the burden of Volcker's rates on the and there is a 50 percent chance that we will go over." Treasury. And 3) the Harrimanite wing of the Democrat­ Volcker replied that, while "I think the financial ic Party leadership re-Iaunched its proposals for top­ system is a strong one in this country," "the Federal down post-industrial rationalization and economic con­ Reserve is well aware of its responsibilities as lender of trols-while privately saying they welcome the contin­ last resort and provider of liquidity to the economy if uation of Volcker's rates. necessary. " If there were any illusions that Volcker intends to The Euromarket question begin providing adequate credit for American industry Not that Capitol Hill has been devoid of talk about and agriculture, it should have been dispelled when he financial and economic collapse. The talk is of two stated that 1983 monetary targets would remain at this kinds. One is impotent, if sincere, wailing about the year's level, that he was pleased by the decline in U.S. domestic effects of high interest rates. Despite the fact real wages, and-on July 21 to the House Banking that Lyndon LaRouche's National Dmocratic Policy Committee-that the Federal Reserve would not inter­ Committee has saturated Congress with material on the vene to save smaller banks like Penn Square (see article, danger of a Euromarket crash and an inflationary U.S. page 12). backup for these bad offshore loans, the subj ect has not A parade of witnesses flanked Volcker to lay out the come into the open. Congressmen who were warned a gory state of the economy due to high interest rates. year ago by the NDPC that the interest rates were The picture presented led Sen. Henry Jackson (0- wiping out industry have finally caught up with that Wash.) to comment that if things continue the way they reality, but seem utterly unequipped to deal with the are, "the next thing we'll have is a financial panic." A danger of a Euromarket crash. The second kind of source close to Riegle confirmed that the panic talk was

54 National EIR August 3, 1982 designed to create the conditions to enable Volcker, the As the Republicans and the White House reduced man who has destroyed the economy, to dictate the themselves to the appearance of total complicity with emergency action, on the basis that "the President has the Fed, the real Democratic gameplan was summarized no emergency powers" and that the "Congress will once more by a staffer on the House Banking Commit­ recess soon for the elections." tee. "The last thing we want is for the Fed to change its Being saddled with Volcker's high interest rates is monetary policy," the staffer said. Volcker has done a recognized by many Republicans as a tremendous elec­ very good job on the economy. He's done a good job tion-year liability, but even those most hostile to Volck­ bringing down inflation, and a very good job bringing er did not raise the issue of a bailout of the Eurodollar down wages. We don't think credit should be growing market. Rep. Stan Parris (R.-Va.) told Volcker on July any faster," he said, arguing that all that is needed is a 21 that "if the nation's economy is reduced to a pile of "limited bailout" of Eurodollar banks, not a general rubble the battle [against inflation] may be won but the increase of credit to the economy. The aide further war lost ... if you are wrong in your policies you will confirmed that "the Democratic leadership is not inter­ have done a great and irreparable harm to the American ested in any change of Fed policy and if Reagan attacks economy ... you may be remembered as the Benedict the Fed, we'll defend the Fed .... Reagan knows that Arnold of monetary policy ...." President Reagan's we will do this, and that is why he has not come out close friend in the House, Rep. Tom Evans (R-Del.) openly against Volcker." made a rare appearance before the House Banking While the Democratic leadership focus has been on committee to tell Volcker that he had "avoided using the panic, a drumbeat continues for the Democratic you as a whipping boy, but I now think that your National Committee's program of credit controls, wage policies are too rigid." The best that Parris could and price controls, and a surrender of the U.S. economy suggest, however, was to refer to Arthur Burn's tenure to the International Monetary Fund. Hearings held in at the Fed a "historical justification" for "loosening July on national urban policy in the congressional Joint money supply without inflation." Economic Committee organized by Rep. Henry Reuss The consistent theme among the Harriman-con­ (D-Wis.) laid out the alternative. Felix Rohatyn, author trolled Democratic Party leadership, a theme which was of New York's Big MAC, demanded of Congress that initiated by Sen. Ted Kennedy (D-Mass.), is that the a Reconstruction Finance Corporation be set up to bail high rates are just what the Reagan administration out the large banks "whose fragility is cause for serious wants, that Volcker is only following administration concern." Sen. Daniel Moynihan (D-N.Y.), an early wishes. Spokesmen for the administration have lent advocate of the "benign neglect" approach to minori­ credibility to such charges. Hours after Volcker ap­ ties, urged that some financial institution was needed to peared before the Senate Banking committee, presiden­ ease the formerly industrialized, formerly urban centers tial press spokesman Larry Speakes told the press that into the post-industrial society. "The great manufactur­ "we want interest rates to come down, but we agree ing cities that grew up in the 19th century had entered a with the Fed's existing monetary targets." Murray period of sharp decline for the simple reason that the Weidenbaum, as chairman of the President's Council economic functions they once served-especially those on Economic Advisers, appeared before the Senate associated with density-are no longer decisive. The Banking committee the day after Volcker on July 22. cities would no longer serve the economic function they As Sen. Paul Sarbanes (D-Md.) reported, "Weiden­ once had done, and there would be much social disrup­ baum made clear that the Fed was pursuing the policy tion." Another witness Reuss brought before the com­ that the administration wanted." It is possible, but not mittee was Chase Manhattan Bank's Philip Braverman, likely, that Weidenbaum's abrupt departure was related who was even more explicit: "A national financial entity to his endorsement of Volcker. . may be appropriate to provide assistance to the cities Casting himself in the role of the Washington willing to make hard sacrifices. The IMF provides such "outsider" attacking big government, the President was assistance to nations; we should be prepared to do no also taking the heat off of the Fed by addressing a top­ less for our own cities ." down organized rally on the Capitol steps July 20 for a Volcker openly affirmed his agreement with Moyni­ Constitutional amendment for a balanced federal budg­ han in a response to Rep. Stan Lundine (D-N.Y.) at the et. EIR has heard for the last five months from Volcker House Banking Committee hearing. Lundine warned supporters on how the balanced budget campaign Volcker that "the future of American industry is at would get the Fed off the hook. The White House views stake ...." Volcker's reply: "Our manufacturing base it as an easy means of political gains in popularity, has been declining for a period oftime. This is becoming although it would be an unconstitutional farce at best a less important section of our economy-which may be and a terrible blow against defense, Social Security, a reflection of a trend toward a post-industrial society." infrastructure, and other necessities at worst. That statement went unchallenged by the committee.

EIR August 3, 1982 National 55 When will the United States launch a productive policy toward Asia? by Daniel Sneider, Asia Editor

It is no secret that there has been a continuing dispute According to all accounts, Haig was prepared to go within the Reagan administration over U.S. policy to­ as far as Peking wanted. Haig's argument was essential­ ward China, a dispute which figured in the ouster of ly the same geopolitical one which has motivated the Alexander Haig. ,It is a better-kept secret that in reality U.S.-P.R.C. link since the Kissinger days: the dubious the United States has no policy-no official policy to­ proposition that the strategic weight of the P.R.C. as a ward China and no policy' fo r relations with all of Asia, de facto military/political ally against the Soviet Union which comprises almost two-thirds of humanity. outweighs all other considerations, including U.S. com­ In his final days as Secretary of State, Al Haig was mitments embodied in U.S. law to Taiwan. rushing to gain presidential approval of a draft between The State Department's problem was that the White the United States and the People's Republic of China House simply preferred to put off a real decision. The (P.R.C.) to resolve the issue of the U.S. ties to the word from the top, filtering through to State fr om Republic of China on Taiwan, including the question of Donald Gregg on the NSC, was "go slow." The Presi­ continued U.S. arms sales to the Taiwan regime. The dent, under pressure from Haig on one side and from P.R.C. has been threatening "grave consequences" if the conservatives, like Sen. Barry Goldwater warning United States does not agree to end arms sales to Taiwan, against a "sellout" of Taiwan on the other, kept sending recognize the sovereignty of the Peking regime over the back the drafts in search of other "options." The word island, and terminate even semi-official ties between from National Security Adviser William Clark was that Washington and Taipei maintained under the Taiwan a way should be fo und to satisfy Peking and to avoid Relations Act. any abandonment of Taiwan. Already the President had refused Taiwan's demands for purchase of advanced How much to give Peking? fighter aircraft to replace their F5E tactical fighters, Under the impetus of Peking's threats, the State built under a co-production agreement with Northrup. Department has been conducting negotiations with the That agreement expires soon, and the administration is Chinese over the past months. Vice-President Bush's faced with a November deadline for notifying Congress spring visit to China was part of that process, and talks that it wants to renew the agreement. have continued under the direction of Ambassador Certainly the removal of Haig, the number-one Hummell in Peking. booster of the U.S.-P.R.C. alliance, creates a new Haig and the State Department were simultaneously situation regarding China policy and policy toward negotiating with the White House. Drafts of a fi nal Asia as a whole. George Shultz is said by sources close joint communique with Peking-called by some to him to fa vor an "even-handed" approach on the "Shanghai II" (the first Shanghai communique was P.R.C.-Taiwan dispute. According to one source, citing issued at the conclusion of Richard Nixon's first visit)­ a discussion during a visit to Taiwan in Schultz's have been flowing from State to the National Security capacity as Bechtel president, Shultz favors maintaining Council. According to various sources, two principal the status quo concerning Peking, and opposes any formulations were offered as alternatives. The more overt abandonment of U.S. commitments to Taiwan. extreme fo rmulation agreed to a specificda te for cutoff of arms sales to Taiwan (the administration had already Looking beyond China offe red the concession of withholding advanced sys­ Unconfirmed reports from conservative circles, tems, particularly certain aircraft, to Taiwan) and to however, are that a draft has finally been sent to Peking, some acknowledgement of Peking's sovereignty over accompanying a letter to Deng Xiaoping. Those sources ' the island. The "lesser of the two evils" agreed to an say the draft contains the "lesser-evil" formulation, eventual termination of sales in principle, with no agreeing to an eventual "termination" of arms sales, specific date, and an agreement to meanwhile merely and that the President "signed off' on the fo rmulation. supply parts fo r systems already sold to Taiwan. This may be less than what Haig wanted, and also less

56 National EIR August 3, 1982 than what Peking wants, but it reveals the real problem: murderous Pol Pot regime in Cambodia. the lack of official policy toward Asia-a situation There is an appearance of a unified posltlOn­ which has permitted the Global 2000 advocates of mass against Vietnam-on the part of ASEAN, the United depopulation within State to disgrace the United States States and the P.R.C. in this dispute. In reality, the by advancing the cause of the monstrous Khmer 'Rouge ASEAN approach differs from China's. Put in simple and Chinese Communist Party, which share their hatred terms, ASEAN seeks to negotiate a political agreement of growth and industrial civilization. with Vietnam over Cambodia and the future status of The State Department, whose senior ranks are al­ relations among all the Southeast Asian nations. To this most entirely dominated by Sinophiles schooled in the end, ASEAN has kept alive the Khmer "resistance," Henry Kissinger approach of utter adoration for Han including backing the unholy and untenable alliance of Mandarin culture, has been able to push through its Prince Sihanouk (China's frontman), the Pol Potists, pro-Peking pol icies due to the absence of alternative and former Premier Son Sann's miniscule forces against policy conceptions from the White House or any other the Cambodian government of Heng Samrin. For most source . "Going slow" in pursuit of a pragmatic desire of ASEAN these are bargaining chips to be dealt away to "have your cake and eat it too" is not, repeat not, a in a prolonged diplomatic game in which eventually policy alternative. ASEAN must reach some accommodation with the The focus on the Taiwan issue obscures what is Indochinese co untries (see EIR , July 20). really under dispute. Whether Taiwan existed or not, Peking's goals are totally different. Its rulers seek the United States would still be faced with an array of the reimposition of Pol Pot rule in Cambodia, and are circumstances compelling it to determine what Ameri­ prepared to make only cosmetic concessions to can national interests are in Asia, particularly East Asia, ASEAN's desire for a negotiated path to prevent and to face the necessity of choosing clearly between ASEAN from making a deal with Hanoi. As clarified in the national interest, and that of the P.R.C. recent conversations by this writer with ASEAN diplo­ A glance at the region reveals that while Haig was matic sources, many in ASEAN, like the Indonesians, fiddling in Peking, U.S. relations with Japan have been see China as the real threat to the region and would set afire by the anti-growth trade warriors at the Com­ oppose Peking's desire to militarily destroy Vietnam. merce Department (with a supporting role now played by the Justice Department). This is part of a fa miliar Diplomacy for what? pattern-since Kissinger sat at the feet of Chou En-lai The real problem is that the United States, which in 1972, Japan, once the pillar of American policy in proclaims its support fo r ASEAN, has linked up with Asia, has been relegated to the back burner, and lately China. This was manifest at the U.N. conference on to the status of a virtual adversary. Only one senior Cambodia last year, when, with U.S. support, Peking State Department official, Senior Deputy Assistant Sec­ blocked an ASEAN resolution clearly opposing a retary Thomas Shoesmith, has any depth of knowledge Khmer Rouge return to rule. Eventually, ASEAN will of Japan, and it has become an un written rule that the seek a way out of its impasse with Vietnam and reach Assistant Secretary must be a "China man." At NSC, an agreement. China will then put forward its opposi­ East Asia policy is looked at by Donald Gregg, a CIA tion. What will Washington do? man who knows Japan and Korea but is considered a The administration needs not only to halt its backing China Card enthusiast (which may be why he is moving in the U.N. fo r a universally a cknowledged perpetrator over to join the staff of Vice-President Bush), and, as of of genocide, the Khmer Rouge, and its allies, but also July, by Gaston Sigur, formerly director of the Sino­ to fo rmulate the principles of an active Asia policy that Soviet Institute at George Washington University. would go beyond the current quest for largely imagi­ Though Sigur's appointment was considered a conces­ nary ch ips against the Soviet Union. Such an undertak­ sion to conservative opponents of the China policy, he ing requires reflection on the tradition of Gen. Douglas is a "lightweight" in Washington policy circles. MacArthur, the great sponsor of modernization, edu­ Apart fr om Japan, perhaps the most important cation, republican government, and economic develop­ litmus test in coming months of whether Haig's depar­ ment in Asia, and the enemy of fe udalism-whether ture will mean anything for the creation of a real Asia Japanese or Chinese "communist"-and colonialism­ policy, will be fo und in Southeast Asia. The standard whether official or unofficial. An American diplomacy State Department press-release fo rmulation of U.S. premised on mutual pursuit of capital-intensive trade policy is that "we support ASEAN," the Association of and investment would find itself quickly superseding South-East Asian Nations (Thailand, the 'Philippines, the dead ends and dilemmas perpetuated under Alex­ Singapore, Malaysia and Indonesia)-particularly in ander Haig and his Global 2000 policy coaches. Such a the dispute between ASEAN and the Indochinese coun­ policy must be pursued in concert with our best ally in tries fo llowing the Vietnamese-backed overthrow of the Asia, Japan .

EIR August 3, 1982 National 57 Conference Report processed through its programs hundreds of executives and managers of the nation's Fortune 500 companies. To this day, such firms as AT&T, Citibarik, CBS, Mathew Bender, IBM, Chase Manhattan, General Foods, and American Machinist, run their employees through the center's brainwashing programs-at fees of up to $750 a head for weekend seminars, in the process financing the center's activities.

Subversion of the military The session I attended late in June convinced me that the controllers of the kook counterculture move­ ment in the United States. have achieved an advanced Aquarians brainwash degree of success in insinuating their ideas into the highest levels of American business, the nation's mili­ U. S. businessmen tary, and even the highest levels of our fe deral govern­ ment bureaucracy. Five hundred people came to Tarry­ by Helen Tiefmann town or the meeting, which-in between juggling les­ sons, magic shows, tarot card readings, jazz workshops, and disco concerts-presented a lineup of speakers on How do the backers of America's decline into the "post­ behalf of a new anti-science, anti-technology movement industrial society" intend to organize the panoply of that will replace what one conference speaker character­ environmentalist sects, consciousness-raising societies, ized as "the old answers which are not working, and the and liberal peacenik grouplets that have appeared on the old institutions, which are breaking apart." landscape in recent years into a mass-based movement The most celebrated of the confC(rence participants unified behind their objectives? Since attending a June was Marilyn Ferguson, author of Th e Aquarian Con­ 26-27 weekend seminar series at Tarrytown House on the spiracy, the 1979 bestselling book which charts a path former Mary Biddle Duke estate in Westchester County, away from a modern, reasonably ordered society into New York, I am convinced that the Tarrytown Group, the new Age of Aquarius, a post-industrial society which frequently organizes such events, and the regional dominated by political pluralism. Ferguson keynoted counterparts of this "Esalen East" training center for the conference with a report on the dissemination of counterculture kookery, are playing a critical but little­ Th e Aquarian Conspiracy 's perspective, which she said publicized role in the creation of a new fascist movement is circulating widely in the German Sociological Asso­ aimed at replacing America's governing political and ciation, in the leadership of Poland's Solidarity move­ economic institutions. ment, and among "chief executive officers of top cor­ Tarrytown House and the Tarrytown Group which porations." She added "the response from politicians runs its activities were fo unded formally in 1963 as the like Jerry Brown has been enthusiastic." Executive Conference Center by Robert L. Schwartz, a Most telling however, was Ferguson's account of former Time magazine editor with ties to military intelli­ the penetration of the U.S. military leadership by the gence and the Scientology cult, with huge loans from ideas in her book: IBM and AT&T. During the course .ofthe 1960s and "I was the keynote speaker at an Army think tank, 1970s, the Center dabbled in everything from transcen­ 'Taskforce Delta,' at the Army War College on the dental meditation to transactional analysis, Jungian topic of 'What would a transformed military look like?' analysis, rebirthing, biofeedback, Zen Buddhism, yoga, I advanced the idea of the 'First Earth Battalion,' an "polarity massage," LSD research, and Erhardt Sensitiv­ ecotopian, holistic grouping that would be concerned ity Training (the EST cult). Schwartz himself devoted with the planet and with futuristic scenarios. This these years to joint projects with the Stanford Research battalion would win wars through non-violent conflict Institute, the base of operations of futurologist Willis resolution. The idea really caught on. When I proposed . Harmon, and the southern California Esalen Institute that the generals take the leadership of the peace brainwashing center, as well as to collaboration with the movement, they gave me a standing ovation." engineers of the MK-UItra drug dissemination project, If Ferguson and her associates have made as great including Aldous Huxley, Gregory Bateson, and his an impression on the U.S. military as she did on one wife, the late anthropologist Margaret Mead. conference participant, who argued all during lunch Schwartz's Executive Conference Center was in fact that nuclear war is impossible because the United States the first full time center for corporate meeting and semi­ and the U.S.S.R. have developed "telsa machines" nars in the United States, and it had, by the early 1970s, capable of destroying nuclear warheads, it is no exag-

58 National EIR August 3, 1982 geration to say that our nation's defense forces have Eastern mysticism-peddling Ta o of Physics and Th e been destroyed by this rash of insanity. Turning Point, attacked the Space Shuttle as an attempt An afternoon "rap session" fo r conference attendees to further America's military ambitions by putting with John Nesbitt, publisher of the pricey intelligence deadly weapons into space. Capra, a Vienna-born quan­ weekly Th e Trend Report from Washington, D.C. be­ tum physicist with the Lawrence Berkeley Institute, also trayed the wider subversive scope of the conference told the audience that "undifferentiated economic organizers: to destroy what basis is left in the American growth ... is leading us to social breakdown and economy- and the nation's political institutions for nuclear war. In Chinese terminology, the yin has been mounting a competent defense of the United States and neglected in fa vor of the yang. " Capra praised the its allies. Nesbitt presented the thesis that the United recent years' growth of religious cult movements in the States is "moving toward a monarchy, like in Britain," U.S. and Western Europe as a return to "a feminist yin and a governing system in which "the Congress, the perspective," and asserted that the breakdown of White House, and the courts,"-in fact all of America's broadscale social and religious institutions confirms constitutionally mandated institutions-"will become British historian Arnold Toynbee's theory of the cyclical merely symbolic and ritualistic." This, Nesbitt said, will collapse and renewal of civilizations. As Western civili­ constitute true "participatory democracy." Referring zation collapses, said Capra, its members should give repeatedly to President Reagan as "Bonzo's keeper," up their pretension to literate language and literature. Nesbitt asserted that the American people "do not care "The Hopi language is much simpler than English, and who is President, half of them don't vote anyway." I think that should be our model," he said. America's economic future, said Nesbitt, is suggest­ The audience also put up with Robert Sheldrake, an ed by growing motion "away from the nation-state" Oxford-trained biochemist who now resides at a Bud­ and toward the break-up of the United States into dhist monastery in India and lectures with his shoes off. "smaller and smaller power centers," possibly into Sheldrake's thesis is that people can "tune into other multiple nations. We must substitute for "the nation­ peoples' memories and this results in telepathy." They state a geographical, ecological state of mind," he said. sat through an address of Dr. Sandra McLanahan, who Nesbitt not only endorsed the end of nation-states, but was introduced by center fo under Robert Schwartz the end of industrial development as the goal of national himself. McLanahan runs a holistic health center in entities. The United States, in particular, he said, will Putham, Connecticut. She had this to say: "Our whole move away from a concentration on heavy industrial planet is like a brain floating in space: 'doingness' is activity: "Auto, steel, and housing will never revive like the left side of the brain, and 'beingness' is like the again. Buffalo, Cleveland, Pittsburgh, and right side of the brain ....It has been shown that if you Detroit-the old industrial centers-will die ....We are feed people with biscuits that contain meat, their health moving toward the information society. There is-and will not be as good as those who eat meatless biscuits." there will continue to be-a lot of pain ....But on the The only thing ordinary about lunch was the roast whole, this economy is in much better shape than it was beef. One person at my table turned to me and confided: a decade ago." "You know, I can teach you to bend metal with your For the nations of the developing sector which pin mind like Uri Geller in less than an hour." I took out all hopes of rescuing their populations from mass my keys and replied, "Okay, here's metal, bend it." He starvation and backwardness on the capital goods man­ exclaimed: "I wouldn't even try to do it while you're ufacturing capacity and agricultural export capability thinking the kind of thoughts that you're thinking of the United States, Nesbitt had this proposal: "Third now." Someone else at the table added: "Don't you and Fourth W orId countries will leap over the industrial know anything? Don't you know that a negative stage altogether and go directly to the post-industrial thought cancels out a positive thought? No on.e can informational society." bend metal if there is someone thinking negative thoughts in the room." The perfect brainwashing environment I left the seminar at the end of the first day's session, By and large, conference participants sat through but not before I had heard John Nesbitt's frightening Fergusen's kookery and Nesbitt's prescriptions fo r in­ synopsis of the "new paradigm" that he and his fellow dustrial collapse and genocide with nary a whimper. Aquarian conspirators intend to establish through such And why not? Preconditioned by their daily newspaper events; including the change "From industrial to infor­ and television news campaigns marketing the same mational; economies of scale to appropriateness of insanity, these victims fo und no hint of political or scale; left versus right, to the radical center; conquerors economic reality within the environment created by of nature to partners of nature; capitalism to entrepre­ Schwartz and his friends that might lead them to suspect neurialism; from the myth of the melting pot to the that they were being brainwashed. celebration of diversity; and from machismo to an Most sat quietly while Frijof Capra, author of the androgynous society."

EIR August 3, 1982 National 59 Congressional Closeup by Barbara Dreyfuss and Susan Kokinda

ate Labor Committee in investigat­ the senior officer in the armed H atch and Sheridan ing charges that FBI officials with­ forces, and would become a mem­ push Reagangate held information from the Com­ ber of the National Security Coun­ Despite concerns expressed by mittee concerning Donovan dur­ cil; and 3) the President and the Sens. John East (R-N.C.) and Jer­ ing the confirmation process. That Secretary of Defense would be ad­ emiah Denton (R-Ala.), Orrin jurisdiction lies in the Senate Judi- , vised by aNat ional Military Coun­ Hatch's Senate Labor Committee ciary Committee which oversees cil consisting of a chairman on five voted to investigate events sur­ the FBI, the Senators argued. members selected from retired of­ rounding the confirmation hear­ A mid-August target is set fo r . ficers and one or more civilians. ings of Labor Secretary Ray Don­ completion of the investigation. Taylor's proposals would clearly ovan and to give committee inves­ weaken military input into defense tigators Walter Sheridan and decisions. Frank Silbey wide-ranging powers of independent investigation. Ken­ nedy staffer Sheridan is intent on B ill on Joint Chiefs using the Donovan investigation drafted in- subcommittee to promote a "Reagangate" cli­ The House Armed Services Com­ S enate Abscam Committee : mate. mittee Subcommittee on Investi­ arms tied behind its back During the preliminary skir­ gations has drafted a bill regarding The Senate Select Committee cre­ mish on July 21, East and Denton the much-discussed reorganization ated in the wake of the FBI's Abs­ warned that the resolution was, in of the Joint Chiefs of Staff. The cam Operation began its public effect, creating "surrogate Sena­ issue, raised prominently by pro­ hearings July 20 with statements tors" by allowing staff members to posals by recently retired Joint by some Senate members of the conduct independent questioning Chiefs chairman David Jones and committe, including its chairman of individuals with only the pre­ by Army chief General Meyer, in­ Charles Mathias (R-Md.), that in­ condition of a Senator's initial volves strengthening the Joint dicated a vastly self-circumscribed presence at the questioning. In an Chiefs' role. role for the committee. effortto block consideration of the General Jones has proposed Mathias threw cold water on resolution, East invoked a Senate enhancing the power ofthe chair­ the anticipated investigation of ex­ rule which prohibits committees man of the Joint Chiefs while Gen­ ecutive branch wrongdoing and from conducting business while the eral Meyer has emphasized creat­ abrogation of constitutional rights Senate is in session, and the vote ing a military policy body some­ in Abscam as he said, "Most em­ was delayed one day. Hatch recon­ what comparable to the German phatically that our mandate is this vened the hearings the next morn­ General staff. inquiry is not to punish the execu­ ing at 8:30 a.m. and succeeded in The subcommittee bill, how­ tive branch of government, not to passing the resolution. ever, does not include any signifi­ exempt members of Congress from The National Democratic Poli­ cant strengthening of the body. application of any proper and ef­ cy Committee (NDPC) has count­ Subcommittee Chairman Richard fective law-enforcement technique, ered Hatch's efforts to get Dono­ White (D-Tex.) admitted following and not to terminate the use of van with a call to "investigate the its drafting that the bill just does undercover operations." investigators." In a memorandum "minimal things" to the existing The narrowly self-defined role circulated to the entire Senate, the structure. has come from chief c\Jmmittee NDPC documented Walter Sheri­ In opposition to these sugges­ counsel James Neal, whose associ­ dan's previous role in covering up tions is retired Gen. Maxwell Tay­ ations with Walter Sheridan and the connection of the international lor. Taylor, testifying before the other corrupt elements of the Jus­ assassination bureau, Permindex, subcommittee on July I, made the tice Department go back at least to to the murder of President Kenne­ following proposals: I) dissolve the his role as Chattannooga prosecut­ dy as well as Silbey's possible con­ Joint Chiefs and send the chiefs ing attorney in the Jimmy Hoffa nections to the Israeli Mossad. back to their respective branches; trial. At the July 20 hearings, Denton and East also ques­ 2) place the staff under the Secre­ Neal's big "story," obviously cho­ tioned the jurisdiction of the Sen- tary of Defense. Its chief would be reographed with the FBI and De- ,

60 National EIR August 3, 1982 partment of Justice to direct and tee chairman Robert Roe (D-N.J.), Rivers and Harbors bill in many shape the committee's work, was who said, "You have made some years. on just "how many FBI internal very important points, and we ap­ guidelines we've fo und since the preciate your remarks. The gener­ committee began its work." alized economic impact of these Patrick Leahy (D-Vt.) strongly kind of project is often missed in J EC hearings: bailout for reminded his colleagues and the the debate over their feasibility." banks, IMF rule for cities press that they were in business to The NDPC testimony was pre­ A full round of hearings on nation­ answer whether "the U.S. Govern­ ceded by a line of desperate Con­ al urban policy, organized by Rep. ment was out to stop crime or out gressmen and local officials and Henry Reuss (D-Wis.) in his Joint to create qime, whether the U.S. businessmen pleading for pennies Economic Committee, amounted government was out to catch to carry on vital operations and to an organizing drive for the In­ known criminals or create new maintenance, and flood-control ternational Monetary Fund's plans criminals ... . " projects in the current austerity for the U.S. economy. Daniel Inouye (D-Hawaii) also climate. Some, including Wes The hearings were orchestrated motivated a thorough investiga­ Watkins (D-Okla.), attacked the by Reuss after a "draft urban pol­ tion as necessary to restore confi­ administration's current emphasis icy" document had been leaked dence in the institutions of govern­ on fo rcing local communities to from the Reagan administration, ment by relating how puzzled he share the cost of federally built who called for a "free market" was when several colleagues con­ infrastructure projects, warning abandonment of federal help for gratulated him on how "coura­ that "this demand for cost-sharing the cities. Witnesses at the hearings geous" he had been to defend the will shut down water develop­ castigated that policy, proposing Abscammed Senator Williams. ment-especially in rural areas. IMF dictatorship in its stead (see "When I asked why they thought Over a period of time these proj­ article, page 54). Sen . Daniel Moy­ I was courageous," Inouye said, ects pay for themselves, but com­ nihan (D-N.Y.), the author of the "they asked me 'aren't you afraid munities just don't have the up­ original "benign neglect" ap­ of being put on the FBI's hit list? front money to contribute at the proach to the nation's minorities, To think," Inouye continued, beginning." shamelessly attacked the adminis­ "that this is an accepted way of The NDPC's call for the $200 tration's current version of his own thinking by members of the Sen­ billion NAWAPA project pulled policy. ate!" the group out of its hapless mood. Chase Manhattan Bank's Phil­ "Some might think we have lost ip Braverman was blunt about the our senses in calling for a project nature of the new institutions of this magnitude at this time," needed to ease the troubled urban N DPC to House: 'water said the spokesman. "There was a centers into the brave new world: development is all-American' time when the average American "a national financial entity may be A National Democratic Policy citizen and Congressman knew appropriate to provide assistance Committee spokesman told the that there was an American System to the cities willing to make hard House Subcommittee on Water of economics and that internal im­ sacrifices ...." Resources of the House Public provements were a cornerstone of It was left to Felix Rohatyn, Works Committee July 21 that the it." The spokesman then detailed author of New York City's Big $200 billion North American the analysis of the LaRouche-Rie­ MAC, to lay out the policy in detail. Water and Power Alliance project mann econometric model of the Royatyn argued that the national coupled with the rest of Lyndon impact of infrastructural spending financial entity-a Reconstruction LaRouche's four-point program on overall economic productivity Finance Corporation-type institu­ provides the only resolution of the -speeding up the. economy in tion, was also necessary to bail out economic crisis gripping the thermodynamic terms. the major banks, which could be United States an the world. The subcommittee is conduct­ hurt by, for example, "an unex­ This mini-educational on the ing hearings on national river and pected default by a large debtor economics of infrastructure was harbors in anticipation of the in­ like Argentina, caused by political warmly welcomed by subcommit- troduction of the first Omnibus rather than economic events."

EI R August 3, 1982 National 61 NationalNews

•

of Illinois and the Control Data Corpo­ ocratic Policy Committee, and supports ration, combines the medium of today's NDPC Advisory Committee Chairman video games with a drill-and-grill curric­ Lyndon H. LaRouche's four-point pro­ Right-to-Life leader ulum. Evaluated separately, the video gram to end the depression. and the drill-and-grill have been fo und O'Reilly called Mondale and his reveals eugenicist policy by educators to be damaging to a child's Democratic allies "damned fools" who Proceedings at the July 15-17 national cognitive development. The combination "are delighted the economy is about to convention of the National Right-to-Life of the two into a public-school curricu­ go under," as they operate under the Committee show why the U.S. "pro-life" lum aroused alarm from a broad spec­ delusion that this will sweep them into movement, despite its 10 million mem­ trum of Baltimore residents. office. "I want to remind my fellow Dem­ bers, is not able to stop the imposition of Word that the PLATO installations ocrats that Jimmy Carter put Paul Volck­ infanticide and euthanasia in the United would not proceed as planned came dur­ er in office, and Volcker's high interest States. The sociologists, sexologists, and ing a school board meeting in June where rates have caused farm debt alone to rise corrupt clergy who run the "pro-life" Debra Freeman, a leader of the citizens' to $30 billion this year, while farm in­ organization and "movement" have protest and a Democratic candidate for come sinks to the $15 billion level. Totid ruled out any effective fight against the Congress in the Third District, de­ fa rm debt is now over $200billion ." deliberate economic commitment of the nounced Board of School Commission­ IMF, World Bank, and Paul Volcker's ers head David Deneker for deceiving the Federal Reserve to world depopulation. citizens of Baltimore when he insisted An interview with Dr. Jack C. Wilke, last fall that no teachers would be laid off conducted by EIR at the conference, due to the computerization scheme. The A victory for EIR in makes clear the eugenicist policies es­ topic of the June meeting was the layoff Murphy's censure poused by certain leaders ofthe right-to­ of 900 teachers. Following Mrs. Free­ life movement. Wilke, President of the man's speech, Deneker told the candi­ Patrick Vincent Murphy, President of National Right-to-Life Committee, is a date that "as a result of what you did, the Washington, D.C.-based Police sexologist by profession. The following ' PLATO will not be implemented." Foundation, was censured the week of are excerpts from his statements: July 19 by an executive body ofthe Inter­ national Association of Chiefs of Police "We've decided to limit ourselves to (IACP). The censure was the result of a the questions of abortion, infanticide, year-long campaign directed by a tradi­ and euthanasia .... tionalist faction within the IACP and by "We are concerned about the declin­ Minnesota farmer Investigative Leads (IL) newsletter­ ing birth rate in this country .... This declares for Congress EIR 's publication on law-enforcement nation's indigenous-native-popula­ Patrick O'Reilly, a family farmer from concerns and intelligence developments. tion is dying out. Unless we start having Canby, Minnesota, announced his can­ babies, then the population in this coun­ The move for Murphy's censure orig­ didacy on July 19 for the Democratic try is going to change radically. We will inated during the September 1981 88th nomination for Minnesota's Second IACP annual convention, where IL per­ be replaced by the immigrant peoples Congressional District seat. After filing sonnel organized the membership of the who have babies. I'm not making any with the Minneapolis Secretary of State, IACP to oust Murphy and his allies. An judgments, I'm just saying what will hap­ O'Reilly declared, "�t has been my firm IL memorandum of Sept. 22, 198 1 dis­ pen. The same is true in Australia and conviction that you don't have to support tributed to that meeting read: New Zealand ...." being gay or killing babies to be a candi­ "The Police Foundation has been in­ date of the Democratic Party"-refer­ volved in various attacks on local police ring to the fact that his opponent, State departments using such 'issues' as police Senator Jim Nichols, and the state Dem­ brutality .... Be it resolved, that this Computer 'education' plan ocratic Farmer-Labor Party have sup­ body hereby informs the Reagan admin­ ported homosexual "rights" and liberal­ istration that the Police Foundation and set back in Baltimore ized abortion as major planks in their the Police Executive Research Forum A plan to install PLATO computerized platforms. (PERF) in no way represent the interests education in Baltimore, Maryland public O'Reilly contends that the Demo­ or voice of American law enforcement." schools has been stalled as a result of a cratic organization, which has historic Murphy's three-year tenure as police year-long campaign by citizens and edu­ ties to Walter Mondale and Hubert commissioner of New York City' was' catms who protested the brainwashing Humphrey, are out of step with the main­ dedicated to destroying the effectiveness effects of the electronic curriculum. stream of Democratic voters. O'Reilly of the NYPD. Murphy has acted as a PLATO, developed by the University has been endorsed by the National Dem- long-term agent ofthe Ford Foundation,

62 National EIR August 3, 1982 Briefly

• • MARYLAND'S Court of Ap­ carrying out its policies of wrecking mu­ gram moves into the engineering phase, peals ruled July 20 that state courts nicipal services and allowing drug traffic which will take the program out of the have the power to authorize steri­ to proliferate. by weakening law enforce- laboratory and into industry. The Fusion lization of mentally incompetent ment. Act mandated that by the year 1990 a minors. The court set standards IL editor Robert Greenberg com­ Fusion Engineering Device (FED) requiring evidence that steriliza­ mented on the censure of Murphy: would be operational so that the new tion is necessary for the "life, men­ "This was a baby-step against the technologies and engineering design tal health, or well-being of the mi­ 'police reformers' whose aim is to turn needed for future commercial power nor." Director of the Association our streets over to the terrorists and fel­ plants can be developed. fo r Retarded Citizens of Maryland ons and turn over our police fo rces to Various proposals are circulating in Elmer L. Cerano warned of the 'Guardian Angels' and other 1984-style Washington on how to avoid building great danger of abuse of such a 'youth gang police.' While Murphy is the FED. In late May the DOE even policy, citing cases of institution­ taking the heat, his Vice-Chairman, discussed delaying the decision on any alized persons who have been re­ James Q. Wilson, is presently bending new major facility until late in the 19808 diagnosed as having curable prob­ Ed Meese's ear and dir ecting a large or even into the next decade. lems. portion of the Reagan administration's Congressional backers of the Fusion law-enforcement policy." Bill have at least verbally reaffirmed their • VICE-PRESIDENT BUSH is IL is offering a $10 packet-which commitment to the bill's goals. On June scheduled to be the keynote speak­ includes the three-part series on the Po­ 17 ajoint resolution was introduced into er at the 1982 Woodlands Confer­ lice Foundation and a report on the both Houses of Congress to try to put ence which will be held in Houston IACP 88th annual convention. Write to pressure on the executive branch to live in November. The conference will Investigative Leads, 304 W. 58th St., 5th up to the intent of the Fusion Act. The be a major gathering for the Glob­ floor, New York, N.Y. 10019. resolution, introduced by Marilyn Bou­ al 2000 population-reduction quard (D-Tenn.) in the House, currently crowd. One of the key organizers has 31 signators, and the Senate version, for the Houston event is the author introduced by John Danforth (R-Mo.) of the Carter administration's has II. Global 2000 Report, Gerald Bar­ Fusion budget to be taken ney. down another ratchet? • THE CENTER for National Spokesmen for the Office of the Science Policy, a Washington-based Har­ Adviser, headed by Dr. George Key­ rimanite think tank, announced worth, and the Office of Management July 15 that it will conduct a 12-to and Budget havejoined ranks in an effort Jersey City infrastructure 18-month study of "U.S. Industri­ to dismantle the magnetic fusion-energy al Policy as a Means Toward Res­ program. Representatives from Key­ undercut by Volcker toring the Vitality of the U.S. worth's office have recently said that More than 30,000 residents of Jersey Economy." The study win be magnetic fusion will not be ready for City, New Jersey were without water in chaired by Felix Rohatyn. Lane commercial deployment for another 70 lOO-degree heat following a water main Kirkland will also participate. years, which is contrary to the conclu­ break July 16-a direct result of the high sions of every review of the fusion pro­ interest-rate policies of the Federal Re­ • MIKE GELBER, former New gram which has been made in the last five serve. City officials have admitted that England Coordinator for the Na­ years. the city's water system is in disrepair due tional Democratic Policy Commit­ It also defies the law of the land, the to municipal budget cuts-one official tee, announcedhis candidacy July Magnetic Fusion Energy Engineering stated July 17 that the cost of borrowing 16 for Mayor of Boston. "My cam­ Act of 1980, which mandated an acceler­ to pay fo r infrastructure repair is prohib­ paign will explode the myth that ated development program for fusion. itive. The municipal tax base in Jersey this city has ever been ruledby its City, once one of the most industrialized The OMB has instructed scientists at elected officials," the candidate cites in the state, is now collapsing. the Department of Energy to submit stated. "Boston is held hostage by Jersey City'S infrastructure has been their FY84 fusion budget plans based on the same racist Anglo-Saxon fam­ collapsing fo r a long time. The city loses the assumption that budgets will be flat ilies that made their fortunesin the for the next five years. close to 25 percent of its water supply due China opium trade." The dispute is not centered solely on to leaking water mains, but this is the the amount of money in the budget. The first time that a disaster on this scale has primary issue is whether the fu sion pro- oct:urred. •

EIR August 3, 1982 National 63 Editorial

A diplomatic turningpo int? :

The visit of Indian Prime Minister Indira Gandhi to all over the world about the danger of global war. a the United States is a welcome event. The very fact of danger triggered by instability and confrontation in the visit-the first by an Indian Prime Minister since ' Third World' arenas. 1971-is encouraging. The events in Lebanon, in the Arabian Gulf, in There is a clear desire on both sides to make the Latin America are of great concern to India, as a eight-day visit a success-particularly to establish a nation and as a leader of the Non-Aligned nations. relationship of understanding and friendship between Mrs. Gandhi willbe traveling to Moscow in Septem­ the President and Mrs. Gandhi . There is a belated ber, and she is ready to do what she can to promote a recognition in the White House that India, a stable, relaxation of East-West tensions and their extension fu nctioning democracy of 700 million, is of iQlPor­ into the Third World. ' tance to ,American interests in the world. There is a For India and for Mrs. Gandhi, therefore, the recognition that Prime Minister Ghandhi is one of the North-South issue, in its )broadest sense of the link leading statesman in the world today, and that her between economic development, the creation of a new words, as the leader of India, carry great weight, world economic order, and ensuring peace, is what is particularly among the two-thirds of humanity in the really on the agenda. The administration must be so-called South. prepared to deal forthrightly with these issues. Yet a "friendly" visit which ends in mere generali­ In this context it is worth recalling two previous ties and expressions of good will can prove to be visits by Mrs. Gandhi, in 1966 and 1971. In 1966 illusory. There are hard issues to be dealt with. The President Johnson assured her that he was seeking a U.S. decision to massively arm the military dictator­ way out of the Vietnam war-she called him "a man ship in Pakistan, on the pretext of responding to the of peace." There was talk of improved Indo-U.S. Soviet intervention into Afghanistan, is a prinCipal relations. What fo llowed was an expanded war and source of tensions. The Indians contend that those U.S. backing for the imposition of a World Bank­ arms will only be used against them, and that the IMF austerity policy in India, including a fo rced Afghanistan crisis cannot be resolved through invit­ devaluation of the rupee, which brought aboui an ing superpower confrontation in the South Asian economic and political destahilization of India and a region. India has already made efforts to facilitate wave of anti-American sentiment. political negotiations toward removing Soviet fo rces In 1971 Mrs. Gandhi came seeking President Nix­ fro m Afghanistan; in Washington, M rs. Gandhi will on's support in ending the Pakistani military'S blood­ seek some understanding of this approach. bath in then East Pakistan, a bloodbath that sent Issues also include the U.S. cutoff of nuclear fuel millions of refugees streaming across the border into supplies to the U .S.-built po�er reactor at Tarapur. India and threatened to spread chaos in the entire While the Reagan administration has talked about region. The press proclaimed a "meeting of the being a "reliable supplier of nuclear fuel," in practice, minds" between the two leaders. What followed was they have not carried out contractual obligations to Kissinger's "Pakistan tilt," the creation of a Pakistan­ India. A broader question is fu ture U.S. support fo r China-U .S. military alli ance against India and the economic development in India and throughout the fledging Bangladesh liberation movement, and the developing sector: on "free-market" grO\�nds, the wreckin� of Indo-U.S. relations to the point where United States has blocked even multilateral aid loans KiSSing� deployed the 7th Fleet into the 13ay of to India. Bengal hreatening to intervene against India and its ' Mrs. Gandhi however is not coming to the United Banglad shi allies. States to ask fo r "aid" or even to dwell on bilateral The signs nQw are relatively good that progress problems. She is coming with more global concerns. can be made. But we warn against ilfusions and sabo, For the past two years she has been speaking strongly tage of good intentions.

64 National EIR August 3, 1982 EIR

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