EIR Founder and Contributing Editor: Lyndon H. LaRouche, Jr. Editorial Board: Melvin Klenetsky, Lyndon H. LaRouche, Jr., Antony Papert, Gerald Rose, From the Associate Editor Dennis Small, Edward Spannaus, Nancy Spannaus, Jeffrey Steinberg, William Wertz Associate Editor: Susan Welsh Managing Editors: John Sigerson, hree days after the cover date of this magazine, is the 15th anniver- Ronald Kokinda T Science Editor: Marjorie Mazel Hecht sary of President Reagan’s announcement of the Strategic Defense Special Projects: Mark Burdman Initiative (SDI). Certainly, on March 20, 1983, few people expected Book Editor: Katherine Notley Advertising Director: Marsha Freeman that such a “bombshell” was about to be dropped. Circulation Manager: Stanley Ezrol But those in the know, knew that Lyndon LaRouche had defined INTELLIGENCE DIRECTORS: that policy several years before, as a way of getting the United States Asia and Africa: Linda de Hoyos Counterintelligence: Jeffrey Steinberg, out of the strategic box in which it found itself. The era of Mutual Paul Goldstein and Assured Destruction (MAD), ushered in by Bertrand Russell Economics: Marcia Merry Baker, William Engdahl and H.G. Wells, perfected by Leo “Dr. Strangelove” Szilard, and History: continued by Henry Kissinger, was destroying the nation-state and Ibero-America: Robyn Quijano, Dennis Small Law: Edward Spannaus its scientific and technological capabilities. The domination of global Russia and Eastern Europe: economic and financial policy by the British oligarchy was leading, Rachel Douglas, Konstantin George United States: Debra Freeman, Suzanne Rose as LaRouche had forecast, to a blowout of the world monetary system. INTERNATIONAL BUREAUS: The spread of the counterculture was undermining nations’ resistance Bogota´: Jose´ Restrepo to these dangerous trends. Bonn: George Gregory, Rainer Apel Buenos Aires: Gerardo Tera´n At a conference sponsored by EIR in Washington, D.C. on Feb. Caracas: David Ramonet 17, 1982, attended by several hundred representatives of policymak- Copenhagen: Poul Rasmussen Houston: Harley Schlanger ing institutions from the United States and other nations, LaRouche Lima: Sara Maduen˜o developed a revolutionary conception of strategic antiballistic-mis- Mexico City: Hugo Lo´pez Ochoa Milan: Leonardo Servadio sile defense, as a lever to shift the direction of policymaking overall, New Delhi: Susan Maitra toward a return to the American System of industrial and scientific Paris: Christine Bierre Rio de Janeiro: Silvia Palacios progress. It was that powerful idea, which President Reagan endorsed Stockholm: Michael Ericson on March 23, 1983. Washington, D.C.: William Jones Wiesbaden: Go¨ran Haglund Today, we are in an analogous circumstance. The world’s leaders, confronting the meltdown of the global financial system, have no idea EIR (ISSN 0273-6314) is published weekly (51 issues) except for the second week of July, and the last week of what to do; no government has responded competently. A powerful December by EIR News Service Inc., 317 Pennsylvania Ave., S.E., 2nd Floor, Washington, DC 20003. (202) concept, like that underlying LaRouche’s call for a New Bretton 544-7010. For subscriptions: (703) 777-9451. World Wide Web site: http://www.larouchepub.com Woods system, can effect a rapid transformation. e-mail: [email protected] In this issue’s Political Economy section, we show how great European Headquarters: Executive Intelligence Review Nachrichtenagentur GmbH, Postfach 2308, minds of the past—from Friedrich List and Abraham Lincoln, to D-65013 Wiesbaden, Otto von Guericke Ring 3, D-65205 Wiesbaden, Federal Republic of Germany Walter Lautenbach and Franklin D. Roosevelt—defined policies that Tel: (6122) 9160. Homepage: http://www.eirna.com E-mail: [email protected] Executive Directors: Anno saved, or could have saved, their nations, in times of crisis. Hellenbroich, Michael Liebig In the Feature, Anton Chaitkin traces the battle between patriots In Denmark: EIR, Post Box 2613, 2100 Copenhagen ØE, Tel. 35-43 60 40 of the American System, such as Lincoln and Martin Luther King; In Mexico: EIR, R´ıo Tiber No. 87, 5o piso. Colonia Cuauhte´moc. Me´xico, DF, CP 06500. Tel: 208-3016 y 533- and the racist oligarchs, descendants of KKK founder Albert Pike, 26-43. Japan subscription sales: O.T.O. Research Corporation, lodged in the U.S. Justice Department—among other places. Takeuchi Bldg., 1-34-12 Takatanobaba, Shinjuku-Ku, Tokyo 160. Tel: (03) 3208-7821. Copyright 1998 EIR News Service. All rights reserved. Reproduction in whole or in part without permission strictly prohibited. Periodicals postage paid at Washington D.C., and at an additional mailing offices. Domestic subscriptions: 3 months—$125, 6 months—$225, 1 year—$396, Single issue—$10 Postmaster: Send all address changes to EIR, P.O. Box 17390, Washington, D.C. 20041-0390. EIRContents

Interviews Political Economy Economics 51 Angelo Beda 4 New Bretton Woods system Mr. Beda is Minister of Manpower must top the G-22 agenda in the Sudanese government. A As the financial crisis deepens, Christian, he comes from the south. there is increasing public discussion of Lyndon LaRouche’s plan for a 55 Samuel Aru Bol New Bretton Woods. When the Mr. Bol is a member of Sudan’s “Willard Group” of 22 nations National Congress, representing the meets in Washington on April 16, United Democratic Front, Salvation this is the number-one issue that Front. He was with rebel leader must be addressed. President Abraham Lincoln discusses the Emancipa- John Garang in the Sudanese tion Proclamation with his Cabinet. The American People’s Liberation Army until System of political economy, of which Lincoln was 6 A ‘New Deal,’ with Chinese recently, when he returned to a master, provides the key to solving the crisis we characteristics? Khartoum to join the National face today. Engraving by A.H. Ritchie, from the paint- ing by Francis B. Carpenter. China has embarked on a $1 trillion, Congress and work toward unity of three-year infrastructure-building the nation. program to ensure continued 20 How great minds thought economic growth. about the Great Depression President Franklin Roosevelt and Prof. Wilhelm Lautenbach 8 Britain is riding the ‘euro’ approached the global crisis of the horse Departments 1920s and ’30s in a way that The British are using the European policymakers should learn from Monetary Union, is to destroy the 15 Australia Dossier today. U.S. economy. OECD fronts for multinationals. 21 FDR’s American System 10 Financial crisis drives 16 Report from Bonn diplomacy merger mania Wanted: a sound economic Jeffrey Steinberg analyzes President program. Franklin Roosevelt’s article in the 14 Oil price collapse slams July 1928 edition of Foreign Venezuela 17 Report from Rio Affairs. You can buy a “Sir” with oil. 18 Business Briefs 24 The Lautenbach Plan for 72 Editorial economic recovery American education needs a From a speech by Helga Zepp- “paradigm shift.” LaRouche.

25 Friedrich List and the American System of political economy A speech by Michael Liebig. Volume 25, Number 12, March 20, 1998

Feature International National 30 How the KKK got into the 38 President Clinton’s 62 More Scaife-Falwell sleaze U.S. Justice Department diplomatic offensive behind assault on April 4 is a double anniversary: the Presidency murder of civil rights leader Dr. 39 Milosevic tries ‘final New revelations about the true Martin Luther King, Jr., and the solution’ in Kosova origins of the “Troopergate” story, dedication of a statue to secret payments to the Paula Jones Confederate General and Ku Klux 41 The new Mideast peace legal defense fund, and to Arkansas Klan founder Albert Pike. Historian offensive “sources” whose lies ended up Anton Chaitkin highlights the still- being circulated by the American President Clinton has tentatively ongoing struggle between two Spectator and other rags. irreconcilable traditions in begun a new diplomatic effort to force Israeli Prime Minister American life: that of the Lincoln 64 DOJ’s ‘Operation revolution vs. that of British- Benjamin Netanyahu to comply with the Oslo peace accords. Fruehmenschen’ apparatus sponsored anti-American treason. continues its reign of terror 42 Kosova: Britain’s war Former U.S. Rep. Mervyn Dymally, against the U.S.A. former State Sen. Documentation: 1917: Serbia Theo Mitchell, and Harley Schlanger of the Photo and graphics credits: defends British Empire’s “gate”; brief a forum at the University of Cover, Library of Congress Prints 1937: Serbia plotted genocide Houston on the crimes of the U.S. and Photographs Division. Page 7, against Kosova; The 1990s: the Justice Department’s permanent Courtesy of New Star Publishers. British hand against Bosnia; The bureaucracy against black elected Page 8, EIRNS/Joseph Jennings. U.S.-British ‘secret war’ in Bosnia; officials. Pages 11-13, 40, EIRNS/John Major Stankovic, the British traitor; Sigerson. Page 31 (Lincoln Dame Pauline Neville-Jones and the Memorial), National Archives. Dayton Accords; Brits provide 66 Mitchell issues challenge to Pages 31 (Pike statue), 49, 65, KLA with cadre and cash. NAACP EIRNS/Stuart Lewis. Page 67, “You are called upon to pay EIRNS/Chris Lewis. Page 52, 51 Sudan moves toward peace, attention to the all-too-long exercise EIRNS/Lawrence Freeman. democracy of the Fascist Doctrine of ‘Operation Fruehmenschen,’ ” former South Carolina State Sen. 51 Success is a matter of Theo Mitchell writes in an open political will letter to NAACP president Kweisi An interview with Angelo Beda. Mfume.

55 Southern leaders are 68 Congressional Closeup working with Khartoum An interview with Samuel Aru Bol. 70 National News 59 Colombia: Samper cheats to stop Bedoya electoral threat 60 International Intelligence EIREconomics

New Bretton Woods system must top the G-22 agenda

by Marcia Merry Baker and Gail Billington

On April 16, representatives of 22 nations will meet in Wash- casts on the crisis, is central to any solution of the crisis. As ington, D.C., convened by the United States, to address the we go to print, he was scheduled to be the featured speaker at crisis in the world financial system. The primary item that an EIR policy briefing in Washington on March 18, on what gathering must address, which the LaRouche movement is must be done. In a radio interview with “EIR Talks” on March mobilizing to force onto its agenda, is the formation of a New 11, LaRouche said, “We are in the opening phase of a new Bretton Woods system. round of crisis, generally comparable in broad terms to what The deliberations of the “Willard Group” (taking its name happened between late October and the middle of January, from the Willard Hotel, the site of the preparation session on but more severe. How much more severe at this time is not Feb. 17 and of the April conference) will occur in the midst of certain. It could go all the way. I would rather think it won’t two other international conferences in Washington: the Inter- go quite all the way, but it could. It depends on how govern- national Monetary Fund Interim meeting; and the Group of ments react.” Seven finance ministers (preparatory to the G-7 heads of state LaRouche had forewarned eight weeks earlier to “beware meeting in May, in Birmingham, England). However, the key the ides of March.” March is the end of the fiscal year for policy fights will revolve around the “Willard Group,” and Japan and other nations; plus, there is a confluence of due whether itmoves in thedirectionof a NewBrettonWoods. dates around the world, including corporate reports, trade The strategic potential of the Willard Group event, is that updates, tax and budget deadlines, derivatives contracts set- it could begin the turn, away from the policies which led to tlements, and so forth, not to mention deadlines imposed by the collapse of the global financial system, now entering a the zombified IMF, for their failed bailouts and “reforms” in phase worse than that of July-December 1997.The economies East Asia, Russia, and elsewhere. In particular, Indonesia, the of whole nations are being destroyed in the crash. What is fourth most populous nation in the world, is in an emergency required are traditional nation-serving measures to peg cur- breakdown situation, and in a showdown with the IMF. rencies, set up trade and investment flows between nations, Internationally, chain-reactions of plunging volumes of and hang speculators out to dry. U.S.-China cooperation is output and trade of physical commodities of all kinds, linked critical to lead the way to a new world financial system, and to collapsing currencies and credit, is under way. Meantime, the announcement that President Bill Clinton will confer with the fuse is burning on the “big one”: derivatives, ignited by President Jiang Zemin in China, in a 10-day state visit in June losses in Asia, which is fuelling a frenzy of global restructur- or July, is an important signal. ing, mergers, and fire-sales among companies suffering The problem so far in putting a new financial system in mega-losses from the financial turmoil (see p. 11). place has been, first, that governments bungled handling the first round of collapse of the financial system in 1997, and Calls mount for a New Bretton Woods only extraordinary leadership right now can steer a course Under these wild circumstances, statements are being toward the needed emergency measures. Second, financial made on a daily basis to the effect that IMF-era business-as- interests in London oppose such an option outright. usual approach won’t do, and that a new financial system is Lyndon LaRouche, internationally known for his fore- required—something that LaRouche launched as a campaign

4 Economics EIR March 20, 1998 for a New Bretton Woods conference in January 1997. On 50%, from $163.3 billion to $66.8 billion. The BIS added, March 12, for example, the London Financial Times ran a “The panic which followed the attack on the Hongkong dollar guest commentary by American economist Judy Shelton, ti- at the end of October led to an almost complete drying-up tled “A Walk in Bretton Woods.” On March 9, the National in the issuance of lower-rated and subordinated instruments. Farmers Union, at its annual convention in the United States, Secondary market spreads on higher-risk issues widened voted up a resolution calling for U.S. action for a New Bretton sharply, forcing a large number of borrowers to postpone or Woods system. And, the statement on March 2 by Japan’s withdraw issues.” Deputy Finance Minister Eisuke Sakakibara, that it is time for nations to confer on a new financial system, is receiving The Indonesia crisis extensive publicity. At the top of the list of national crises is Indonesia. Eco- In backhanded recognition of this momentum, and of the nomic activity in this nation of 202 million has been reduced LaRouche “New Bretton Woods” drive, the London Sunday to the point of shortages of vital necessities, including food. Observer on March 8 panned all the talk of new financial Its currency, the rupiah, has dropped from 2,600 to the U.S. mechanisms. The paper said, “Cool heads in a spin over hot dollar in July 1997, to below 10,000 to the dollar in March money; go back to Bretton Woods, create more bankrupts. 1998. Since January, the foreign debt of some $74 billion . . . Experts can’t agree how to end currency turmoil.” has been in de facto moratorium. Of immediate concern, is However, no matter what London says, the financial tur- securing 3-4 million tons of rice for this year, and basic medi- moil, and the talk, are intensifying by the hour. cines. What of the IMF’s $43 billion bailout package, pledged Ides of March confluence of crises last Halloween? The IMF is now withholding funds from the A few of the crisis spots upcoming in March include: country. Among its complaints, for example, is that Indonesia • Japan. On March 31, the fiscal year closes for most is not totally relinquishing its right to secure supplies of food companies and banks, many of which cannot demonstrate staples for its population (cereals, cooking oils, sugar). An solvency, especially in South Korea. Already, the Japanese IMF tranche of $3 billion set for March has been held up, and government has pumped $76 billion into the banking sector, funds from the World Bank and the Asian Development Bank aggravating, not relieving the crisis. are in limbo. • South Korea. International banks were to decide on President Suharto, who was recently re-elected, told the March 12 on roll-over of loans. Domestically, South Korea members of the People’s Consultative Assembly on March 9 also has $370 billion worth of won-denominated debt, a sig- that the IMF deal did nothing to stabilize the national cur- nificant part of which is due March 31. rency, and also violated the 1945 Constitution, Article 33, • Global markets. Settlement of 6- and 12-month con- on the public good. This article states, in part: “Branches of tracts for foreign-exchange and derivatives contracts come production essential to the State, and governing the life and due in March and thereafter. Huge losses exist. living of the public shall be controlled by the State. Land and • Trade credit blow-out. Emergency export-import fi- water and natural riches contained therein shall be controlled nancing for Asian trade, mostly 90-day letters of credit, ar- by the State and used for the greatest prosperity of the people.” ranged during November-January, as currencies and credit On March 13, Japanese Deputy Finance Minister Sakaki- blew out, are now entering a new crisis phase. bara will be in Jakarta, in advance of the March 14 arrival of • Hyperinflation. The record peaks of stock exchanges, Japan’s Prime Minister Ryutaro Hashimoto, to confer on the such as the New York Exchange’s Dow Jones Average ex- emergency. The previous week, President Clinton sent former ceeding 8,675 on March 11, or the German DAX spiking to Vice President Walter Mondale to Indonesia, as a special 4,900 on March 11, reflect not only speculative funds fleeing envoy. Asia, but high rates of money-pumping by the Federal Re- The ticking time bombs in Indonesia for the world finan- serve and other central banks. cial system, are in derivatives. For example, on March 6, The systemic scope of the crisis was summed up by the PT Bank Ekspor Impor Indonesia (Bank Exim), one of the Bank for International Settlements in its latest report, “Inter- country’s biggest, confirmed it has multimillion-dollar losses national Banking and Financial Market Developments.” For coming due from currency contracts made in summer 1997; example, one of the global implications of the financial melt- and, the bank will be unable to pay international creditors. down in Asia has been a sharp reduction in the issuance of The Indonesian newspaper Kontan states that under forward international bonds. The BIS reports that in the fourth quarter contract, Bank Exim is obliged to deliver $2.23 billion at of 1997, the total issuance of international securities, or some time later this year; the size of its losses will depend on “stand-alone international bonds and paper issued under euro the exchange rate of the rupiah to the dollar at that moment. medium-term note facilities,” dropped by almost 30% com- As the European edition of the March 9 Wall Street Journal pared to the previous quarter, that is, to $188 billion. With noted, such losses, common throughout Asia, are “a reminder repayments on such instruments taken into account, the net of the financial landmines buried in the books of Asian com- issuance of international securities dropped by more than panies: derivatives contracts.”

EIR March 20, 1998 Economics 5 A ‘New Deal,’ with Chinese characteristics? China has embarked on a $1 trillion, three-year infrastructure-building program to ensure continued economic growth. Jonathan Tennenbaum reports.

Chinese Vice-Premier Li Lanqing broke through the clouds demonstrate, from China’s official government budget statis- of virtual reality at the Jan. 29-Feb. 3 World Economic Forum tics, that the proposed investment figure is completely non- in Davos, Switzerland, by announcing that China intends to sensical, and that the Chinese government is already practi- invest $750 billion in domestic infrastructure and public cally bankrupt, never mind investing another $750-1,000 works projects over the next three years. Thereby, China billion! would counteract the negative effects of the Asian financial Whatever the personal peculiarities of Mr. Thielbeer crisis, maintain its high rate of economic growth, and provide might be, his argument is typical of the psychotic frame of alternative employment for workers laid off as a result of the mind which characterizes the behavior of the International ongoing reform of state-owned enterprises. Monetary Fund and, unfortunately, most governments in the The substance of Li’s remarks has not only been con- recent period. To Thielbeer—who otherwise specializes in firmed by a series of press reports and interviews with Chinese attacking China for “human rights violations”—it seems self- officials leading up to the March 5 opening of the Ninth Na- evident, that the future of 1.2 billion human beings should be tional People’s Congress (China’s legislature); but, an even determined by bookkeepers’ calculations! much higher investment figure of $1 trillion has been men- tioned, as the core of a modern Chinese version of President Start with what is needed to survive Franklin Roosevelt’s famous “New Deal” of the 1930s. Thielbeer overlooks the elementary fact, that the Chinese So, for example, Huang Qifan, deputy secretary general leadership, unlike most governments nowadays, tends to be of the Shanghai Communist Party, was quoted in a March 6 sane about these sorts of matters. They do not start with bud- interview with the International Herald Tribune, as saying get figures, but with what China and the Chinese people need, that China’s leadership regards $1 trillion in investment as to survive. Ensuring the survival of China, under the present necessary to keep a high growth rate and avoid massive unem- circumstances, is like fighting a war. There is no alternative ployment. The investment would go for construction of roads, to victory. So, when the Chinese leadership has determined, bridges, power plants, sewage treatment plants, water conser- that the survival of China requires certain things, they will do vation projects, and agricultural projects. everything they can, to make sure those things are supplied. Another article, in Hong Kong’s South China Morning If available funds are not sufficient, they will either directly Post on Feb. 19, cites “Communist Party sources” to the effect create new money—which any sovereign government can that Zhu Rongji, the successor to Prime Minister Li Peng, do—or, they will find other ways to obtain the required result, has been studying the use of large-scale infrastructure, public by indirect means. works, and housing construction as key measures to stimulate Discussions which EIR has had with Chinese economists the Chinese economy. “In strength and scope, the stimulation in recent days, provide a rather general, but otherwise quite program may be comparable to Roosevelt’s New Deal,” the coherent and credible picture of the thinking behind the recent source commented. announcements. Needless to say, such reports have attracted attention It is clear that the term “New Deal” is indeed being used around the world. Besides favorable comments, including in Chinese government circles, in an informal way, to refer from some unlikely quarters, the Chinese announcements to the idea of stimulating China’s growth by means of greatly have provoked expressions of disbelief, and even enraged expanded investments into infrastructure and public works. attacks. Can the Chinese be serious? Where are they going to This policy will develop as a dynamic, creative process. get all the money? Perhaps the most peculiar reaction has There is no fixed plan and no fixed scheme for financing at come from a certain Siegfried Thielbeer, who blasted the the moment. What exists now, is a basic idea of where China “Chinese New Deal” in an article in Germany’s major daily, has to go. the Frankfurter Allgemeine Zeitung. The article claims to The Chinese government does not propose to finance the

6 Economics EIR March 20, 1998 urbanization and industrialization of the country; construc- tion of modern, high-speed transport systems for the existing major cities (by the year 2000, in China 100 million people will live in cities with 1 million or more inhabitants; today, almost none of those cities has an underground subway sys- tem). These sorts of projects are highly profitable in macro- economic terms; they would make ideal applications for the Hamiltonian method of non-inflationary state credit-gener- China’s Vice Premier ation. Zhu Rongji, the successor to Prime In physical terms, China possesses sufficient developable Minister Li Peng, has resources of manpower, production capacity, materials, and reportedly been know-how to carry out a greatly expanded program of basic studying the use of infrastructure construction by itself, without outside help. Of large-scale course, importing state-of-the-art machinery and other ad- infrastructure, public works, and housing vanced technology will greatly assist the effort; for this pur- construction to pose, China could make better use of its enormous currency stimulate the Chinese reserves (over $139 billion), as well as its current export earn- economy. ings. The huge construction boom in China’s cities has al- ready provided employment and a certain amount of indus- trial skills to millions of workers coming in from the rural whole of such an enormous investment through the national areas. Up to now, much of that construction has been for non- budget directly. But, the government can greatly stimulate productive objects such as office buildings, hotels, depart- the investment from many different sources, by financing ment stores, and so on. If the same physical resources were some key projects, issuing bonds, mobilizing the population’s applied to development projects in the interior regions, the savings, enhancing the credit-generating power and effi- real benefits to China’s economy would be much larger. ciency of the state-owned banking system, and giving prefer- Commenting on the ongoing session of the National Peo- ential fiscal policies for investment in development of the ple’s Congress, some commentators have pointed to signs of interior regions of the country. This would especially include a continued tight fiscal policy, as contradicting the idea of a things like transport, energy, and water infrastructure. “New Deal.” However, it is important to understand that the The attitude would be: “Sooner or later, we will have to Chinese government cannot simply flood the economy with do these projects. Why not do them now?” new money. In order to avoid inflation and the “leakage” of In the worst case, foreign investment and export earnings funds into wasteful and speculative directions, investments might collapse entirely as a result of the global financial crisis. must be carried out in a highly controlled manner and with Judging from their recent public statements, and other indica- great discipline. There need be no contradiction between the tions, the Chinese leaders now see such a collapse as a real appearance of austerity and the implementation of a “New possibility, and are rethinking their economic-strategic op- Deal” with Chinese characteristics. tions accordingly. China’s internal market has a vast absorp- The outlines of the new policy, will presumably become tion and growth potential. Why shouldn’t the more developed much clearer in coming weeks and months, when the newly areas along the coasts, invest in development of the interior? formed government takes up its work. For the present author, three main questions are of particular interest: 1) How will Unlimited potential projects the Chinese government mobilize the population for the new As background, I would add the following. China has a effort? 2) Will China’s proposed “New Deal” include the practically unlimited array of potential projects for transport, crucial development of what Lyndon LaRouche calls “the energy, and water infrastructure, whose realization would be Machine-Tool Principle”? This would have to include a highly beneficial to the physical economy. These include, for much-accelerated program to develop the nuclear energy in- example: Accelerating the construction of the “development dustry (especially the modular high-temperature reactor tech- corridors” along the Eurasian Land-Bridge, including open- nology) as a prime “motor” of the Chinese economy. 3) De- ing up the enormous natural resources in the central and north- spite its large size and its “wall” of protective policies, China west areas along the Land-Bridge; north-south water transfer cannot long survive as an island amid the chaos of a total projects and irrigation projects to develop agriculture in the collapse of the world economy. Will China take the initiative, north of the country; improvement of the national water trans- together with other nations, to push through an urgent “New port system; countless rail and road projects throughout the Bretton Woods” reorganization of the world financial sys- interior rural areas, which were inaccessible to modern trans- tem? And, to restore the kind of elementary, economic sanity, port until now; construction of new cities to accelerate the which is so sorely lacking in many of the world’s capitals?

EIR March 20, 1998 Economics 7 Britain is riding the ‘euro’ horse by William Engdahl

Despite the imminent prospect of global systemic financial collapse, the leading governments of the 15-nation European Union appear more determined than ever to ram through their insane scheme for creation of a supranational single European currency, the euro, a European Monetary Union (EMU), and an independent supranational European Central Bank to run it all. Following a March 9 summit between German Chancel- lor Helmut Kohl and French President Jacques Chirac, to- gether with their respective finance ministers and central bank chiefs, the two nations issued a statement that all fundamental issues regarding the timely start of the EMU had been re- solved. Despite polls that show a 58% majority of the German the EMU. While Britain’s Tony Blair government has stated population opposed to introduction of the new currency, all that it will join the EMU, but not in this Parliament term, it is German parliamentary parties, including the Greens, support playing a decisive behind-the-scenes role shaping the rules of the new euro. A senior statesman characterized Britain’s role as “riding side-saddle on the continental euro horse, whose horse’s rear part is played by Germany.” Assuming that the shocks from Asia have not first pushed Sir Leon pushes the euro world markets, including European ones, into terminal col- lapse, the timetable toward the EMU crosses several decisive European Commission Vice President Leon Brittan points in the coming seven weeks. First will be the announce- gave the British line on European Monetary Union, in ment on March 25 by the European Monetary Institute (the a speech reported in Der Spiegel on Feb. 23: predecessor to the European Central Bank which is to open “The successful introduction of the euro will on June 1) and the Brussels European Commission, of which strengthen the European economy and be a force for countries qualify according to the four “convergence criteria” greater coherence and unity in the European Union’s set forth in the December 1991 Maastricht Treaty on Euro- external relations. I expect the euro will develop into pean Union. a major trading currency and probably even a major The most essential criterion in the treaty, a strict limit on reserve currency. It will increase the depth and liquidity public deficits to less than 3% of a country’s 1997 GDP, was of European debt markets, and make for a more bal- announced as being met two weeks ago, by the 11 countries anced international financial system. This will increase which have stated determination to be in at the start of the the EU’s weight as an international player. Some fear euro. The decision on which states will form the euro, how- that this will undermine the supremacy of the dollar and ever, will be made on May 2 at a special summit of all 15 American influence. I believe such concerns have been heads of government. It is fundamentally a political decision exaggerated. The emergence of a stronger, more effec- to create the world’s first technocratic central bank, free from tive European Union can and should bein U.S. interests, any political checks and balances—a Frankenstein’s monster because the EU is a close and fundamentally like- which would have been the envy of the Bank of England’s minded partner. But I accept that the EU will have to Montagu Norman, who schemed during the 1920s and 1930s be ready to take on new responsibilities, while for the to create a central bankers’ dictatorship over the world U.S. the adjustment may not be entirely straightfor- economy. ward.” One potential roadblock to the start of EMU is a new Supreme Court challenge filed by four Germans, including a

8 Economics EIR March 20, 1998