EXECUTIVE INTELLIGENCE
REVIEW May 8-14, 1979
New Solidarity International Press Service $10 [THIS PAGE IS INTENTIONALLY BLANK] Editor-in-chief: Fernando Quijano Editor: Paul Arnest Associate Editor: Kathy Stevens Production Manager: Patricia Van Zwaren
Contributing Editors: Lyndon H. LaRouche, Jr., Criton Zoakos, Christopher White, Costas Kalimtgis, Nancy Spannaus
NEW YORK BUREAU: Nora Hamerman, bureau chief Africa: Douglas QeGroot Asia: Daniel Sneider Counterintelligence: Jeffrey Steinberg Mnitary Strategy: Paul Goldstein Economics: David Goldman Energy: William Engdahl Europe: Vivian Zoakos Labor: L. Wolfe and M. Moriarty Latin America: Dennis Small Law: Felice Gelman Middle East: Robert Dreyfuss Science and Technology: Morris Levitt Soviet Sector: Rachel Berthoff United States: Konstantin George and Stephen Pepper United Nations: Leif Johnson
INTERNATIONAL BUREAUS: Bogota: Carlos Cota Meza Bonn: George Gregory im Brotherhood: Brussels: Christine Juarez Chicago: Mitchell Hirsch London's shocktroops for the Copenhagen: Vincent Robson Mexico City: Robyn Quijano New Dark Ages Milan: Muriel Mirak . Paris: Catherine Kantor The turbulence and bloodshed of the "revolutionary Rome: Marco Fanini Islainic" Khomeini regime threatens to spill. across· Stockholm: Clifford Gaddy Iran's borders into Turkey, Iraq, Saudi Arabia, and Washington D.C.: Laura Chasen and Ron Kokinda Afghanistan. But, the spread of sectarian warfare across Wiesbaden (European Economics): the Middle East is no "sociological phenomenon." This Mark Tritsch process is carefully guided by British intelligence, its , Zionist collaborators, and its academic fellow travelers, like Princeton University Professor Bernard Lewis. Executive Intelligence Review is published by New Solidarity The principal tool in this project for a new Dark International Press Service Age is the Muslim Brotherhood, the fanatic cult that 304 W. 58th Street controls not only the Khomeini regime, but the New York City, N.Y. 10019 murderous Pakistan junta of ,Zia ul-Haq and major
Copyright (C) 1979 New Solidarity antigovernment elements in Turkey, Iraq, and Saudi International Press Service Arabia. Our COUNTERINTELLIGENCE report tells the exclusive story of the Muslim Brotherhood and its puppet, Iranian strongman Ibrahim Yazdi. Their aim: Subscription by mail for the U.S.: a percent depopulation of the Islamic world and the 3 months - $125,6 months - $225, 50 1 year - $400 capture of a generation of the Middle East's potential scientists and leaders by feudalist insanity. Page 14 ISSN 0146-9614
© 1979 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited. EXECUTIVE INTELLIGENCE IN THIS ISSUE REVIEW
THIS WEEK The making of The European election agenda ...... John Connally 5
John Connally's race for the pres idency may not be as Texan in inspi ration as a candidate would like to ECONOMICS put foward. In a series of interviews Furor over Euromarket controls deepens...... �.... made available to theExecutive Intel 7 Banking ...... Agriculture ...... ligence Review and published in our 8 10 Corporate Strategy.... Gold ...... U.S. REPORT, a view of the candi 9 12 date emerges that has not been por Trade ...... 10 Domestic Credit ...... 12 trayed by the American press. The question answet;ed there is: What is Mr. Connally's relation to the New York Council on Foreign Relations, COUNTERINTELLIGENCE and some are wondering if Mr. Con Muslim Brotherhood ...... nally isn't Alexander Haig's White 13 horse? Page 35 London's shock troops for the New Dark Ages Iranian strongman Yazdi: a British creation...... 26
Sen. Kennedy's health
care plan: shut it down INTERNATIONAL Senator Edward Kennedy's much Giscard, Brezhnev sign pact for peace ...... 28 touted plan to nationalize health care The French-Soviet joint communique ...... in the United States is billed as a 29 What the press is saying about the accords ...... cost-containment measure to cheap 31 ly provide health care to all Ameri cans. Our SPECIAL REPORT this week conclusively shows that behind ASlA the noisy debate over cost contain ment versus inflation and over Vietnam and China talk while preparing for new war 33 whether the federal government or ...... The Vietnamese peace proposal ...... 34 the private sector can more effective ly cut costs there is a much bigger story: Kennedy's plan, if implement ed, will strip U.S. medicine of its U.S. REPORT world-renowned high-technology ef fectiveness in com bating disease. The making of John Connally ...... 35 Page 48 Presidential candidate woos Zionists at New York event
© 1979 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited. Vol. VI No. 1 May 8-May 14, 1979
ECONOMIC SURVEY World steel in crisis
...... Part II: the cartel World steel industry in crisis ...... : 40 U.S. Part 1/: the U.S. steel cartel· The V.S. steel industry is in col Trigger Price Mechanism: a case study ...... 47 lapse. Ration alized, diversified out of steel and into "more profitable" ventures, the industry can't compete with the superior technology of Jap SPECIAL REPORT anese steel-except by imposing in flationary surcharges on Japanese Sen. Kennedy's health care plan: shut it down ...... 48 steel imports. In our ECONOMIC The national health insurance plan ...... 50 SVR VEY this week, we continue our Behind the rising cost of health ...... 56 report on the crisis in the world steel The road to nationalized health care ...... 58 industry,. focusing on the V.S. and the industry "giant" V.S. Steel-a company not run by industrialists, but by financiers, many of whom ENERGY gained their executive status by climbing the ladder within the Scot Mexico, France map world en rgy meet ...... � ...... 60 tish Rite of Freemasons. Plus: we Lopez Portillo's principle is expanded production zero in on the Trigger Price Mecha to meet world needs nism as a case study in Keynesian economics-the outlook that has a lot to do with the collapse of V.S. steel production. Page 40 COLUMNS labor Periscope ...... :...... 37 Furor over· Euromarket Congressional Calendar ...... 38 controls deepens Facts Behind Terrorism ...... 62 The American System ...... 63 Last week Executive Intelligence Review World Trade Review ...... 64 blew the secret plans of the V.S. Federal Reserve to seek reserve requirements on the international Euromoney markets at an upcoming central bankers' confab at the Bank for International Settlements in Ba sle. This week's ECONOMICS re port brings you the update on the furor touched offby our expose, in cluding hints by one central bank that it will veto the Fed proposal if it comes up. Plus, our reply to London economist C. Gordon Tether's tout ed article on gold and the EMS in the March 1979 issue of Gold Newsletter. Page 7 EXECUTIVE INTELLIGENCE REVIEW
The U.S. can get in on the boom which the new European Monetary System will create. But where are the opportunities and how do you get in on them?
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III Illilloi, ,.ill 800- Following French President Valery tary Fund, and defeating the City of ous is the fact that neither Schmidt Giscard d'Estaing's dramatically London's aim to hurl the globe into nor Giscard can count on their own successful Moscow summit with So a new Dark Age of economic and parties for institutional support. Tip viet President Brezhnev, the pros political disintegration. sy Willy Brandt is running the Euro pects for continental Western Eu The British oligarchy makes no pean Parliamentary campaign of rope to stem the tide toward war secret of its plans to use the elections Schmidt's Social Democracy so as to have brightened for the first time in fo r Strasbourg and the May 3 British mirror the regionalist and environ months. What comes to mind is the national elections as the combined mentalist politics of the PEU on the Bonn summit of one year ago be lever against the "Gaullist illusions" "left. ',' The candidate heading the tween Brezhnev and Chancellor Hel of Schmidt and Giscard. Strasbourg slate from Giscard's co mut Schmidt, where Giscard's clos Legally, the Strasbourg assembly alition is Education Minister Simone est European partner committed his is only a consultative body consisting Veil, who is opposed to every facet of nation to detente with the Soviets of nationally elected delegations Giscard's policy. and economic cooperation to devel fr om the nine Common Market With 36 European Parliament op the Third World. countries. But both Tory Prime Min candidates in West Germany and That war-avoidance strategy was ister-elect Margaret Thatcher and Belgium, and complementary na confirmed again in Moscow April Otto von Hapsburg, the head of the tional election races in Sweden and 25-27, with the crucial new feature Pan-European Union, have stated Italy, the European Labor Party is that the French and Soviets agreed their intention of turning it into a rallying the Western Europeans to to set up formal coordinating mech forum for the cause of Europe's "re insist that their leaders break openly anisms to keep regional "hot spots" gional ethnics," such as the Basque with the bellicose lunacy of Wash from flaring into full-scale war. terrorists, and using these groups as ington and London and establish a Just two months after the May, a battering ram against the central "superpower for peace." The way to 1978 Bonn summit, Schmidt and ized European states and the War do this, argues ELP West German Giscard led the European Commu saw Pact. A top Thatcher advisor, chairman Helga Zepp-LaRouche, is nity in establishing the European Reginald Steed, regaled 250 Eastern for Schmidt and Giscard to publicly Monetary System, the key to which European 'exiles and West European support the 1980 presidential candi- . was the proposed European Mone monarchists at the PEU's April 28 dacy of the American economist who tary Fund to extend credit for great Congress in Wiesbaden with prom developed the theory on which the industrial projects in the developing ises of a coordinated NATO-Peking European Monetary Fund is sector. Yet, neither of the two leaders war buildup. I based-Lyndon H. LaRouche, Jr. mobilized their nations around that What makes Hapsburg's gaggle policy for economic recovery and of old Nazis and "greenies," danger- -Nora Hamerman ' peace. An eleventh-hour chance to do so, moving off the momentum of the Moscow summit, is provided by the ) C_ fh_ _e_�_'_e_e_h_'_ft _8_ r_'_e_f______June 10 elections to the European _ Parliament. And the strongest direc As of May 3 both the New York of record" were not informing their tion for effective action in that elec Times and the Washington Post had reAders of the best chance of saving toral forum is offered, ironically, by totally blacked out French President the nation from nuclear war, they did the small European Labor Party Giscard's Moscow summit with not fail to deliver threats to the West the only political force organized on Bre�hnev and the text of their histor ern Europeans should they pursue an a continentwide basis that is backing ic communique. A wag pointed out independent foreign policy. Fresh Schmidt and Giscard's policies. that the two newspapers delayed cov from the April 27 meeting of" the As is widely recognized, only a erage of last year's Schmidt-Brezhnev Bilderberg cult in Austria, George Europe led by the combined weight summit until months after the event. Ball in the April 29 New York Times of France and West Germany is ca EIR 's exclusive report is in our IN ascribed the "Angst" of over-rapid pable of enforcing the program of TERNATIONAL section. economic growth to Western Europe, the still unrealized European Mone- But while the U.S. "newspapers warning that an Iran scenario-i.e., May 8�May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW This Week 5 I. ".� .":' terrorism'-might soon engulf the win the French to his program for fore the June Tokyo'economic sum continent. European cooperation based on the mit have already beenre�ed. Trade European Monetary System and an is only the club. Itis Japan's adher * * * East-West detente axis that could ence to the continuation ofthe Inter lead to realizing a Europe "from the national Monetary f.un�.system, its _ Senator James McClure (R-Idaho) Atlantic to the Urals." separation from the emergent Euro attacked President Carter's plan to On May 4, Giscard goes to the pean Monetary System, and its divert production away from gasoline southwest of France, where he will shoulder-to-shoulder stand on such to heating oil. "What this means," address the question of Spain's entry strategic issues as Camp David and McClure told Congress April 26, "is into the European Community. On the China card that the Administra that the Administration is planning to May 8 he will attend the commemo tion really seeks. create a �as shortage this summer. ration of France's national heroine, Back in Tokyo, not a few Japa For what reason, we can only conjec Joan of Arc, who led French armies nese politicians, like former premier ture. to repel English invasion. From there, Takeo Fukuda, and businessmen are "We have here a clear pattern Giscard travels to Alsace, where he angry over Ohira's "sellout" and are developing on the part of the will issue a major speech on the Eu sharpening their samurai swords Administration to create an energy ropean Monetary Fund. looking for a chance to ambush Hen shortage which will then drive up International diplomacy will ry Kissinger's loyal friend. demand and trigger the necessity for then take the French leader to Africa gas rationing in the U.S. this summer. for the Francophone countries' sum * * * And that just happens to occur at the mit May 12-22, and then to Greece South African Prime Minister P.W. time the Senate Energy Committee is May 28, where he will pr�side over Botha's government is in the process asked to approve the standby ration the ceremonies fo r that country's en of expanding its military range' of ing plan; at the same time the Admin try into the EC. operations throughout southern Af-' istration says, 'but we have to plan or Japan's Premier Masayoshi Ohira rica. Calling this the establishment desire to put rationing into effect'." arrived in Washington this week for of "a comm unity of interest" against McClure noted that the Carter the pilgrimage that all new Japanese outside pressure, Botha and his fac- gas hoax also coincides with a letter premiers must make to the shrine in . tion in the South African military are the President just sent him repudiat America. Only a few weeks ago setting up the machinery to extend ing the McClure-Carter agreement Ohira made a visit to the Yasukuni their military presence into especia:lly of last summer for continued fund Shinto shrine which humors Japan's Rhodesia and Namibia in order to ing of the Clinch River Breeder Re war dead, days after it was revealed preserve the South African economic actor project. The Senator linked this that the shrine had secretly entered system of apartheid. to the overall reduction of nuclear the names of Japan's top war crimi In January 1977 Botha proposed power in the U.S. under conditions nals, headed by Premier Tojo, on its that South Africa had to "choose to oftightening oil supply. list of honored dead. Do the two live dangerously" by striking out in McClure's statement followed visits have a connection.? its own interests, regardless of reac his personal ultimatum to Energy The answer might by found in the tion in the West. The South African Secretary Schlesinger to produce for ample expanse of Henry Kissinger, newsweekly To Th e Point reported Congress in one week the data to who passed through Tokyo on his April 27 that an officially sponsored back up the Carter allocation policy. way to Peking and stopped long conference to establish this defense On May 2 a spokesman for the Sen enough to chat with his good friend communitycO will be held later this ator said he has acquired no reply Ohira. Kissinger let it be known that year. from Schlesinger. now is the time for Japan to rearm Bishop Abel Muzorewa, who has not independently mind you but in been declared winner of the election * * * close cooperation with the United staged recently in neighboring Rho States (and Peking ...shush) -to desia (Zimbabwe), pledged his inter After arriving back in Paris from his meet the "Soviet threat" from the est in joining South Africa's defense trip to Moscow last week, French north. Ohira promptly announced community: "If we felt that the inter President Valery Giscard d'Estaing that he wants a "qualitative improve est of Zimbabwe would' be better says he will tour France to tell his ment" in Japan's military muscle. served by even having a aefense countrymen of their historical task The press says the big agenda treaty (with South Africa) that is a to turn Europe into "a superpower item fo r Ohira and Carter will be thing we would look at, very serious for peace." Using the vehicle of the trade and economic issues. But ly, too." June 10 elections to the European Ohira's desperate offers to solve the Parliament, Giscard is working to outstanding economic questions be- * * * 6 This Week EXECUTIVE INTELLIGENCE REVIEW Maya-May 14, 1979 .eO.NOMle •. ) Euromarket Controls: furor deepens When Western central bankers assemble in ·Basle, unrolled." What WaIlich really meant to say was: "The Switzerl.and, on May 6-7· fo r their regular monthly existence of the Euromarket is creating overly 'easy consultation, the top item on their agenda will be a credit' conditions-both here and abroad. If we raise highly confidential memo prepared by the V.S. Federal interest rates here, we simply pull more Eurodollars Reserve staff advocating the imposition of reserve into V.S. markets and the domestic credit expansion requirements on the Eurocurrency market. continues. Therefore, to induce a V.S. and a world Should the central bankers agree to implement such rece.ssion, we must eliminate the Euromarket. measures-acting under the guise of "fighting excessive credit expansion" in the Euromarkets-this could French resistance The Fed's plan is likely to draw support from the British, West German, and Dutch central banks, but it INTERNATIONAL CREDIT MARKETS may run into tough resistance from the French central bank chief at the upcoming Bank for International Settlements (Group of Ten) meeting in Basle. According provoke a major flow of funds out of the offshore to a high French official, if Fed chief G. William Miller market and back to the offshore banks' parent branches puts a proposal to implement reserve requirements on in (primarily) the V.S. Then, if credit" conditions are the table, the Bank of France will simply veto it. simultaneously tightened in the domestic V.S. market, A source at one of the major French commercial tbe resulting. worldwide credit squeeze could set off a banks angrily characterized the Miller plan as an-effort . "Crash of '79"-a V.S. recession which spreads to "to extort a retreat on the European Monetary Europe and Japan, debt defaults by developing country System." Last year, many French and West German borrowers, bankruptcies of major commercial banks, banking officials expressed the hope· that the EMS mounting currency chaos, and, finally, the transfor might effect a "consolidation" of the Euromarkets mation of the Internation:;tl Monetary Fund into a full not to pull the plug on the world economy, as Miller blown world central bank to "restore order." and Wallich propose, but to provide long-term dollar Although the existence of the Fed's memo has so and gold-b.ased financing for advanced sector capital far been unreported by the nation's financial press, goods exports to the Third World. except Executive Intelligence Review, the Fed's staff has If the French are really serious about stopping the already begun a public relations campaign to prepare "Crash of '79" scenario, however, they will have to the V.S. business and financial community for Euro take on Otmar Emminger and his clique at the West market controls. Henry Wallich, a member of the Fed's German central bank. BundeSbank chief Emminger-a Board of Governors, last week authored a two-part man notable for placing his narrow-minded obsession article series in the Journal of Commerce, a delphic, with controlling West German monetary growth rates pseudo-objective assessment of the effects of the above all other national priorities-has been acting as Euromarkets on domestic V.S. monetary growth. a de facto agent of the Anglo-American financial Although Wallich did not explicitly endorse reserve interests who are planning the Euromarket shakeout. requirements, he argued that the Euromarket had The Bundesbank's 1978 annual report, issued two allowed an expansion in international lending which weeks ago, warned that Euromarket "over-recycling" might not have occurred if the market had not existed: posed a grave "danger to the international community" "Lenders of funds, and seekers of credit, would have and called on major governments to draw up "a set of had to go through other channels had the V.S. banking rules" guiding Euromarket operations. The meaning of system not responded. But some of them might not the phrase "over-recycling" was explained by Bundes have found an attractive source of funds. Consequently bank official Herr Rieke in an interview with Executive there might have been less lending and borrowing. Intelligence Review. According to Rieke, one must . Accordingly, inflationary pressures would have been distinguish between countries which incur "avoidable" less, interest rates would have been different, and a and "unavoidable" balance of payments deficits. It is whole sequence of unforeseeable events would have "unavoidable" that certain countries would go into Maya-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 7 .� deficit as a result of increased oil prices. However, in increasing awareness that the lack of· control over the cases of "Turkey, Peru, Zaire," and other especially banks' foreign branches was unsatisfaclory",.. Revised crisis-ridden countries, Rieke insisted that. "if the rules governing the consolidation of these foreign Euromarket didn't finance them" then "the IMF could subsidiaries could extend controls across national have moved in ... much, much earlier .... Those deficits boundaries. " would disappear if they weren't financed." Zijlstra's comments provide a hint as to the form In other words, the Bundesbank is demanding that which Euromarket controls may initially take. Banks private commercial banks stop financing the countries will probably be required to "consolidate" their with "avoidable" deficits and hand them directly over reporting of lending by their offshore branch offices I to the IMF, where they will be SUbj ected to the IMF's with lending by their home offices, and a reserve austerity requirements. But, as the case of Zaire (whose requirement will then be slapped on all international central bank is now being run by an IMF official) lending. In this way, the central banks hope to get shows, IMF conditions are a cure that kills the patient. around the problem of how to police each presently Dutch central bank chief lelle Zijlstra, who also . unregulated offshore center. The Bank of England has heads up' the Bank for International Settlements, has already directed all British banks to consolidate their joined Emminger in calling for the imposition of some reporting and the Bundesbank annual report indicates form of controls on the Euromarket. Zijlstra's views a similar change in accounting practices is underway in were published in the annual report of the Dutch West Germany. central bank issued last week. The London Financial -Alice Roth Times reported that Dr. Zijlstra "said there was an. ment objectives and corporate phi BANKING losophy than the unique 14,000- member bank system that has its roots in the American tradition . ... We are dealing with an issue that has an impact on the prosperity and quality of life of each of us ..." Mr. Richardson called upon Governor Carey to form a private sector committee "to chart the New York shows some fight course for the state's banking system versus British banks . :. the very best people, experts in banking, members of regulatory The New York State legislature's recent approval of the purchase by boards, legislative leaders, nonbank passage on May 1 of the "Takeover HongShang of New York's Marine ing members." The committee must Bill" proposed by New York Super Midland and the purchase by Stand hold public hearings on the issue "to intendent of Banks Muriel Siebert ard Chartered of the Union Bank in create opportunities for open dia marks a new show of fight among Los Angeles. logue among concerned citizens." New York legislators, banks, and Rumors are circulating in Al The Takeover Bill, which passed citizens generally against the im bany that the public outcry, capped the New 'tork Senate on April 23 pending wave of predatory British by the passage of the bill, may give and Assembly on May 1, will give the bank takeovers of American banks. Superintendent Siebert the support State Banking Board the right to This New York response has she needs to deny the HongShang its prevent foreign banks from buying been sparked by the U.S .. Labor Par application on the New York State New York banks. Before, the law ' ty's now year-old effort to expose the level. provided for oversight only on their Hong Kong and Shanghai Banking Arthur M. Richardson, president voting of the stock once bought. The Corporation and other British of the Security Trust Bank in Roch Board, led by Superintendent Sie- . " banks' involvement in the illegal ester, reflected this in his statement bert, will include five smaller New world narcotics trade and their intent to the bank's annual meeting late last York State regional bankers, who to politically influence the U.S. cred month. "Like Superintendent Sie will outvote the pro-British Chemi it system on behalf of the British bert, I have questions about these cal Bank Chairman Donais Platten government. The USLP filed suit trends ... these foreign based institu nicely. April 16 to stay the Federal Reserve's tions operate with different manage- -Kathy Burdman a Economics EXECUTIVE INTELLIGENCE REVIEW Maya-May 14, 1979 ly from Europe. There is a great fear CORPORATE STRATEGY of expropriation in Europe just now, a tremendous desire to get capital out of Europe. Even Lloyds has a great overcapacity just now. EIR: Who specifically will come in? A: Well I've heard the German banks are interested. You know, anyone can buy a seat on the exchange, since what we're looking for is new money, not. just shifting insurance money. We were thinking of putting $30 mil New York State Insurance Exchange lion in and we're now telling a group touted as new "hot money" center of our customers with assets of a billion to keep a window on the Ex The New York State Insurance Ex West German Economics Minister change. change which went into effect on Graff Otto von Lambsdorff is push May 1, together with its connected ing legislation to force commercial EIR: Th ere's talk of credit controls in Free Zone, is being mounted as the banks to divest large portions of the U.S. Will this affect the Ex major institution of London banking their assets in industrial corpora change? directed reorganization of the $800 tions, which would be absorbed by A: Not at all. You remember that in billion Eurodollar market out from insurance companies, freeing bank World War II, insurance companies the European Monetary System assets for new ventures like the Ex were exempt from controls, so I (EMS). change. wouldn't worry about that. They are According to top sources, the The following interviews further supernatural ... supernational, rath purpose of the Exchange is "to bring indicate that the Exchange will be er, companies. But if you dig deep in new money," "to give the non run by groups closely associated with into the bowels of this thing, you'll insurance people a crack at the insur the "families" identified in Gold find that AIG (American Interna ance game." And David Winton, di man, Steinberg, and Kalimtgis's re tional Group) and INA (Insurance rector and trustee of Johnson & Hig cent book Dope, Inc. as the bankers Company of North America) are gins insurance brokers describes it as and operators of the international running the Exchange. "really big by 1985 and by 1990 the drug trade. The insistence by one largest insurance power in the person interviewed that there be ab II. With a lawyer connected to world." Since insurance is already solutely no "regulation of the Ex the Exchange the world's largest financial opera� change by V.S. agencies is signifi tion this would mean that the Ex cant in this respect. EIR : . ..If the Capital Control Act change would be the largest single of /969 were activated, do you think global financial power in the world. I. With a financial analyst in that would affect the Exchange? Donald Kramer, president of Kra New York A: ... Listen, I'll tell you one thing: mer Capital Consultants, Inc., a if government agencies try to get founding member of the Exchange, EIR: Th e Insurance Exchange is now control of this, it will be ruined .... member of Lloyd's, and a general in operation. What in your opinion is If the IRS doesn't give prompt its potential? partner in Oppenheimer and Sons, is fa vorable rulings, this would be 'said to have convinced President A: There is very tight competition in terrible. Where did you get word of the reinsurance business with capital Carter to approve the exchange be this Capital Control Act from? cause, Kramer told Carter, the Ex growing faster than premiums. This change would take in enough capital holds true of the captives as well, and EIR: Last week's Executive Intelli by 1990 to offset the entire V.S. bal- I think there is a great desire to place gence Review covered the story. ance of payments deficit. .. money in the exchange. As the Exchange is being pre -LeU Johnson pared to accept flight capital out of EIR : Will events like Three Mile Is Europe and Japan, corporate leaders land affe ct the Exchange? aware of possible Euromarket con A: You know that catastrophe hurts trols are also planning to repatriate corporations much more than insur funds. Beyond this, a rumor is circu ance companies; in fact after a good lating that certain companies in hurricane insurance booms and the Western Europe are threatened by payouts aren't really that much. But government expropriation, and I think the money will come especial- May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 9 \ ing together with the much bigger OPEC surpl\lsnow ex�cted.1' Other TRADE countries will.have to "adjUst their policies to this" (Le. run big deficits' in West Germany and Japan), or else "it will be the final irony if the U.S., having exported inflation for four, years, now exports its potential reces- sion (emphasis added). . The other side of the "export drive" hoax are the attempts by the u.s. mounts trade drive U.S. Administration to establish a to export recession banking new Trade Department and push U.S. business into the China market The major trade news of the week • the necessity for "decouplipg" in lieu of industrializing the under French-Soviet trade, peace, and the underdeveloped sector from the developed sector, as desired by the technological cooperation agree advanced sector; best elements in Europe, Japan, and ments that emerged from Giscard '. intensified pressure against Ja the USSR. The Administration has d'Estaing's visit to Moscow-has pan. run up against its own credibility , been largely blacked out of the An gap, however. As noted April 23 by glo-American press. Instead, trade The first of these operations, the Representative Charles Yanik, chair coverage has been promoting global touted U.S. "export drive," is most man of the Trade Subcommittee of "recession," notably through circu forthrightly described by an editorial the House Ways and Means Com lating: in the May I London Financial mittee, too many Congressmen have Times. "Externally, the U.S. im been disillusioned by tl1e new Energy • a bogus U.S. "export drive" proved balance of payments can Department to want to see a similar being pushed by the Administration; have a very deflationary eff7ct, com- venture in the trade field. ernment allocations for all research, the President has in effect prescribed AGRICULTURE a net real reduction of 10 percent in agricultural research funds. The Sen ate Agriculture Committee has rec ommended that the 1980 budget be held at last year's $566 million, and the matter is presently under consid eration by the Senate Appropria tions Committee. But, as Senate Agriculture Com Agriculture research cuts mittee staffers and others emphasize, will fuel inflation the internal features' of the Presi dent's recommendations are'as dan Carter Administration action to gut Work on the 1980 budget is in the gerous as the austerity approach to the 1980 agricultural research pro final stages. President Carter called the overall funding level. Within the gram budget by 10 percent is not just in January for a $530 million agricul budget itself, funding is being redi bad farm policy-it's an object les tural research budget, a drop from rected away from basic scientific re son in bad economics. The budget 1979's $566 million. Adjusting for search and applications, that is, away cutters may pat themselves on the inflationand for certain nonresearch from making the discoveries and cre back today. But it is in the nature of costs such as miscellaneous construc ating and developing the new tech the way basic research determines tion outlays included in the 1979 nologies to enhance the 'productivity economic growth rates that the dam budget, the Carter recommendation and efficiency of the American farm age will not show up until tomorrow. represented a 2 percent decline in food industry. Instead the budget But, show up it will, in a drop in dollar value in the total agricultural emphasizes the type of sociological productivity, disruption of food sup� research package for nex,t year. Giv and behavioral studies' of the farm plies, and soaring food costs. en a 7.5 percent increase in 1980 �ov- population and its "quality of life" 10 Economics EXECUTlVE'1NTELLlGENCE REVIEW May a·May 14, 1979 The China market aspect of the instead of sitting on them as atpres " Chinese reportedly are heeding Administration's export drive is ent. warnings against the creation of 'in being pushed personally by Treasury As for the China-trade compo dustrial ruins' such as have devel Secretary Werner Blumenthal and nent, the announcement at the begin oped here and in the Soviet Union, <;ommerce Secretary Juanita Krebs. ning of May that Peking is "reassess for instance (it is not clear whether At an April 30 appearance before a ing" its modernization policies and 'here' means China or the U .S. gathering of Knight-Ridder report at best will not cancel foreign con.: ed.). Instead there is more talk now ers, Blumenthal announced that tracts already in the works must about the faster the creation of so Mrs. Krebs may initial a U .S.-Chinl:J. daunt sober businessmen, if not Mrs. called light industries turning out agreement during her trip to Peking Krebs. Columnist H. Peter Dryer, an metal prtlducts, cameras, electronic the following week. At the same associate of the European Commis consumer goods and so forth." What time, Blumenthal indicated that a sion officials in Brussels who are is left merely implicit in this appraisal U.S.-Soviet trade pact is still subj ect trying to induce Europe and the U.S. is that China's "switch into light in to the Administration's "human to give up on Third Warld trade and dustry," which is to involve the lay rights" program. investment, tried to put the best face off of 20 million industrial workers Krebs further declared May 2 on the matter in a story filed from and their transfer to what the New that the Administration is opposed Peking in the May 3 issue of the New York Times termed May 3 "more to even the eight-month statutory York Journal of Commerce. Admit sophisticated" jobs, is aimed at bust deadline on export licensing deci ting what was revealed a month ago ing the manufactured exports of sions approved by the House For in this publication, Dryer wrote: underdeveloped countries in Asia eign Affairs Subcommittee the same "China may now be unwilling, and and elsewhere, whose industrial pro day, whereby export licenses not ap indeed probably unable, to embark duction Japan in particular. has proved within the deadline would go on all those grandiose investment moved to promote while Japan in to Congress for oversight. Krebs schemes to the tune of many creasingly concentrates on super threatened that if such measures be hundreds of billions of dollars .... high technology. come hiw, the Administration will The buildup of heavy industries is no -Richard Schulman simply reject the license applicatons longer quite so much to the fore. The that are the special obsession of en creasingly on farming out research postharvest technology research is vironmentalists and antitechnology work on a competitive "free market" slated for a $ 12 million budget cut to "consumerists" generally. basis. $75.3 million for 1980. This trend was established firmly Predictably, the faddish Ivy It is not a little ironic that the with the Ralph Nader "Agribusiness League and other private research outspokenly proconsumer and anti Accountability Project" assault on institutions have jumped into the inflation Carter Administration the Land Grant Colleges (a political running. Unlike the Land Grant col should mandate such cutbacks. Nu assault otherwise manifest in United leges, whose administration appara merous studies, including one done Farmworkers leader Cesar Chavez's tus to manage such work has been in by this magazine (see Executive Intel recent efforts to shut down the devel place for years and is estimated to ligence Review July 11-17, 1978), opment of technologies that would amount typically to about 3 percent have demonstrated that it is precisely free human beings of stoop labor in of project cost, the private institu postharvest tec,hnology research that agricultural harvesting). The reor tions eat up the bulk of the grant is urgently required to bring the mar ientation is being reinforced by a monies in administrative costs, to the keting end of the fo od chain out of Carter Administration push for an tune of 14 percent or m-ore of total the 19th century trap of high-cost, increased role for "competitive project cost. labor intensive inefficiency and grant" funding of whole portions of One of the most striking illustra waste and into coherence with the the agricultural research monies. tions of the wretched economics in highly productive, highly efficient Rather than channeling federal volved in the Carter Administra capital intensive production of farm research monies into the Land Grant tion's orientation is found in consid commodities proper that is the core college system of interconnected ed ering the fate of just one of the re of American agriculture. It is the ucational and research and extension search areas-postharvest techilOlo marketing bill which absorbs 60-70 facilities that were created for that gy, focused on the optimal utiliza percent of the consumer food dollar, purpose in the first place and have, tion of crops and involving research and whose steady expansion presses in fact, carried on the bulk of agri and development in such areas as both farmers' incomes and urban cultural research in the U.S., the processing, storage, distribution and dwellers'. pocketbooks. Carter Administration has relied in- marketing. Under Carter direction, -Susan Cohen May 8-May 14, 1979 EXECUTIVE INTEL LIGENCE REVIEW Economics 11 Mr. Tether's thesis is that the EMS at present is a Keynesian plot GOLD by the Trilateral Commission and "V.S. imperialism" �o globalize'the dollar as fiat money, but that it may yet be saved by a Margaret Thatcher led "European" revolt to do away with currencies altogether and put the world back on the pre-1914 gold reserve standard. In thus attacking Senate Banking Committee May 24- DOMESTIC CREDIT MARKETS 25. While Administration spokes men have said that they dislike the idea of credit controls, they have also said they don't want to see the Credit Control Act repealed. This has only increased suspicions about their fu ture plans. A staffer on Sen. William Prox mire's Banking Committee told a re porter last week that the proper ques Step by step, Miller moves tion to ask was not what powers does the Credit Control Act give the Pres to ration credit availability. ident, but what powers doesn't it give Treasury Secretary Michael Blumen wartime credit rationing as the next to him! Vnder the Act, which was thal told a newsmen's luncheon in step in the Administration's ostensi pushed through Congress in the in Washington April 30 that he opposes ble efforts to arrest inflation. flationary climate triggered by Viet the use of credit controls as an anti As we reported last week, Sen. nam War defense spending, the Pres inflation tool. However, given the Jesse Helms's anxiety over the pros ident at will may direct the Federal Carter Administration's propensity pect of government entanglement Reserve to cut off credit to selected for doublespeak-typified by Feder with private credit flows prompted areas of the economy-such as the al Reserve Chairman William Mill him last month to sponsor a bill to very fragile auto market, real estate, er's recent statement that he thougltt repeal the Credit Control Act of business spending, etc. The Act also interest rates had risen high enough, 1969, which gives the President authorizes the President and the Fed which was followed by yet another standby authority to selectively ra to move against V.S. bank and cor hike in interest rates last week-one tion credit. Helms's bill will be die porate borrowings on the Eurodollar should not rule out the imposition of subject of hearings to be held by the market, an increasingly significant 12 Economics EXECUTIVE INTELLIGENCE REVIEW May B-May .1 4, 1979 sion of the gold reserve standard. backwardness. used: under British intellectual hege French President Giscard aQd money in postwar (Keynesian) eco EMS: Gold Exchange Standard ' West German Chancellor Schmidt, nomics, Hamiltonian direction of Alexander Hamilton's Report on on the contrary, have proposed in credit was halted in fa vor of real Manufactures stipulated clearly that the EMS a gold exchange standard estate and raw materials-related bub the basis fo r hard money-and this is such as Hamilton's in which the ex bles such as the Eurodollar market, what has made America great-is the change reserve currency, the dollar, causing a contraction in the U.S. 's dirigistic direction of credit by the will be turned into hard money. The export market by maintenance of the central bank to the highest technol EMS member central banks would T,hird World in an impoverished ogy sectors of the national economy, soak up billions of footloose Euro state. By the early 1970s, U.S. export to ensure the constant technological dollars through intervention and collapse produced (as today) a huge breakthroughs and vigorous capital bond issues, and deploy them as Ex trade deficit... formation which alone produce pro port-Import bank-type credits in "This allowed the British govern ductivity and thus a profiton capital, consortia with private commercial ment to bring its dollars to the U.S. rendering the currency a desirable banks into the underdeveloped sec Treasury window and demand pay investment medium. That is all a cur tor to create huge high.tech nology' ment in gold-'�ow, please'�in the rency is fo r. The British' Crown, to investment projects. The dollar summer of 1971, touching off a gen the contrary, has spent the 18th, would be the most profitableinv est eral run on the dollar which forced a' 19th, and 20th centuries embargoing ment medium-the hardest curren panic closing of the gold window ..." technology from the U.S. and the cy-in the world. Mr. Tether takes cunning advan world by seeing to it-;-using gun tage of the hard money man's desire boats-that no other country, except What went wrong in '71 to See his gold investments prosper Britain, which colonially controlled As we wrote on May 2, 1978, "What as they would under the real EMS in the gold mines, had the coin to in went 'wrong' in the period up to the any case-to frighten his readers into vest. That was the gold reserve stand Nixon cut-off of the dollar from gold deserting the sinking dollar ship al ard-a credit rationing system which on August 15, 1971, was not the gold together. kept nine-tenths of the globe in rural exchange standard but how it was -Kathy Burdman source of bank and corporate Iiquid member banks that, in the Fed's own ing liquidity-by $1.9 billion. °ity which has come under scrutiny words, is "designed to establish more Bankers Trust's Woolley com ·for fueling an inflationary inventory effective control over growth of bank mented that if it is implemented, the buildup in the U.S. economy remi credit." The Fed invited comment by chief effect of the new restructuring niscent of 1973-74. May 18 on a proposed rule that of reserve requirements would be to Donald Woolley, chief econo would apply a 3 percent reserve re drive even more banks out of the mist of Bankers Trust, said in an quirement on member bank repur Federal Reserve System. interview that credit controls are too chase agreements (RPs) and fe deral Since early this year, when Euro much of a political liability for the funds borrowings from nonmember dollar interest rates eased, U.S. mon Administration to be thinking along banks, corporations, and Federal ey center banks have been issuing those lines. "Even if controls did agencies. large amounts of certificates of de slow down borrowing, the effect In proposing the regulatory posit (CDs) on the cheaper Eurodol wouldn't show up in the inflation change, the Fed noted that almost 20 lar market to raise lendable fu nds. rateright away," said Woolley. "The percent of the growth in commercial According to Woolley, the use of Administration would not score any bank credit over the past six months new domestic reserve requirements, points with the public by invoking has been financed through RPs which would raise the cost of bor controls." Woolley also believes that sales of Treasury bills by banks to rowing money in the U.S., would . the Fed staff"doesn't have any stom corporations under an agreement to tend to shift bank borrowings in ach for controls-they view them as repurlthase them in several days creasingly onto the Eurodollar' mar- an Administrative nightmare." and overnight interbank borrowings ket. The fact remains, however, that on the so-called fe deral funds mar However, if the Fed simultane Fed Chairman Miller is already mov ket. At the end of March, total mem ously moves to impose reserve re ing step by step to limit credit avail ber bank RP liabilities were $42 bil quirements on banks' Eurodollar ability. The money' markets seem to lion and outstanding federal funds branches. then the effect will be an have practically ignored a proposal were $23 billion. Thus, the effect of across the board shutoff of credit issued by the Fed on April 13 to the new rule would be to increase availability. iJ;npose new reserve requirements on required reserves-and drain bank- -Lydia Schulman Moy a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 1'3 ( COUNTE.,NTE" 'GENCE Muslim Brotherhood: London's insane cultist followers of Reverend Jim Jones's I . People's Temple, the mindless "Islamic revolutionaries" Introduction of Iran have lost their human souls. Led by confused and fanatical mullahs, of whom Khomeini is only the best known, the masses of Iran's revolt have been The period from the fall of the Shah of Iran ' to plunged into the abyss of sheer insanity. Without Ayatollah Khomeini marked a turning point in the immediate assistance from outside Iran, the population history of the Middle East and of the Islamic World. of that unfortunate nation will shortly become an The establishment of the Ayatollah's Islamic Republic unsalvageable mob: of Iran inaugurated the implementation of the Anglo In this report, we will demonstrate that the upsurge American financial interests and .British Intelligence's of Islamic orthodoxy-whether of the Iran variety, or strategy to impose a "New Dark Age" across the that of the more commonly known Muslim Brother region. hood, or the Jamaati Islam of Pakistan, or even the To appreciate the enormity of the implications of mystical Sufi brotherhoods of Asia-is a project of the the Khomeini revolution in Iran, it is necessary to look City of London. beyond the geopolitical struggle along Zbigniew Two interrelated consequences-and policy goals Brzezinski's "arc of crisis," and beyond the strategic can be identified with regard to the New Dark Ages debates about the viability of an Islamic movement to strategy of the London Islamic mafia. The first is most combat communism. One must look into the horrify immediately obvious: if the Muslim revolution is ingly empty eyes of Khomeini's supporters. Like the permitted to proceed along its present course, the population of the entire Islamic world will be reduced r by half to two-thirds. Already, Iran is following the "Cambodia model," with urban populations being In this section relocated to rural areas and mass unemployment plaguing the country. With the breakdown in central A special investigative team, headed by Robert authority, tribal and sectarian warlords are asserting Dreyfuss, Middle East desk chief of our New demands for autonomy, and Iran's countryside is being York bureau, and Thierry LeMarc of the Wies swamped with wandering rebel armies that pillage rival baden, West Germany office, has compiled a cities. comprehensive study of the inner workings of the This process now threatens to spill over into the Muslim Brotherhood cult that runs the new Arab world, Turkey, Pakistan, and Afghanistan. The Islamic government of Iran. Detailed here are the fragmentation of the Middle East along such lines has background and origins of the Brotherhood been dubbed the "Bernard Lewis plan," named after movement in the British colonial subversion of the British' Oxford scholar of Islam, who is a close the Muslim world, the history of the Muslim collaborator of British and Israeli intelligence and a Brotherhood since its founding in modern-day consultant to Brzezinski's NSC. form in 1929, the 1954 expulsion of the cult from Second, there is the effect of the Khomeini Egypt by nationalist leader Nasser, and the spread revolution on the minds of the Muslim populations, of the Brotherhood throughout the Middle East especially the youth. Students, youth, and others are and the expatriate Muslim communities in Europe being systematically brainwashed into automatons. By and the United States since the 1950s. the hellish chants of the adherents to the Muslim Brotherhood, the precious creative mental abilities of 14 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 ------�------) shocktroops for the New Dark Ages an entire generation are being destroyed. While the report has been prepared with those The instrument of this British-inspired devastation Middle Eastern governments particularly in mind, it is is the Muslim Brotherhood, the Ikhwan al-Muslimun. also aimed at a U.S. readership whom the daily press has barraged with disinformation about the "spontane Origins at Oxford ity" and "inevitability" of the religious backlash against In the immediate sense, the Ikhwan is an outgrowth of modernization in Iran. The story of the Muslim a movement within the Muslim world that began in the Brotherhood is crucially illuminating for policy-makers 19th century, under the direction of Oxford and and investors who are instinctively prepared to stake Cambridge universities and the mystical circles of the their decisions on high-technology development in the Scottish Rite of Freemasonry. It had its ori"gins among Third World, but are now being told that "the lessons the British-sponsored cults of Islam, including the of Iran" flash a caution light against rapid economic secret Sufisoc ieties and groups like the Bahai cult. The progress. political godfather of the Muslim Brotherhood was Already, Iran and Pakistan have been seized by Jamal ai-Din ai-Afghani and his disciples, the "reform perhaps mortal cases of the Muslim Brotherhood " ers" of Islam, and the Salafiyya group. disease. A concerted effort has been launched across But in the longer run the Muslim Brotherhood must the Iranian and Pakistani borders to topple the be seen as the product of a centuries-long decay of government of Prime Minister Taraki in Afghanistan. Muslim culture that began with the evil cult of T�e government of Turkey is threatened by a Muslim Asharism and its chief spokesman al-Ghazali, born in Brotherhood-led revolt, in coordination with the 105S. AI-Ghazali, the enemy of science and rational fundamentalist National Salvation Party, that could inquiry; was the bitter, lifelong enemy of the influence very soon lead to the establishment of a junta like of the great Islamic genius Ibn Sina. AI-Ghazali's work Pakistan's in Ankara. According to well-informed has been carefully studied and catalogued by British sources, both Malaysia and Indonesia are slated for Islamicists over the years, and has been tapped by Muslim revolts. In the Arab world, Syria and Jordan British intelligence as the key source fo r subversion -of have been specially targeted for Muslim Brotherhood the cultural institutions of the Muslim world, since at activity, and Teheran has recently been implicated in least the ISth century. fueling Ikhwan activities in these countries. In Saudi It is for this reason that the Executive Intelligence Arabia, since the death of King taisal by an assassin's Review commissioned a team of U.S. Labor Party bullet-an assassin linked to the Muslim Brotherhood experts to prepare this report. The method employed in and to British intelligence and Henry Kissinger-the the report' is one uniquely developed by the U.S. Labor brotherhood has gained by leaps and bounds, under Party. The efforts of governments and intelligence the careful guidance of the backward Prince Abdullah, agencies of the Muslim nations, Western Europe, and the chief of the Saudi National Guard. Throughout even the Soviet Union have, so fa r, pr!Jved utterly North Africa and southward into Africa's Muslim inadequate to grasp the method employed by the regions, the Ikhwan is reportedly growing rapidly. British in fueling the Islamic movement-what Bernard We present first a short history of the movement Lewis calls "The Revolt of Islam." Unless the material known as the Muslim Brotherhood from its formal contained in. this report is absorbed and acted upon by inauguration in 1929 until its crushing by President the national governments of the Arab states, Turkey, Nasser of Egypt in 1954. We then show the background and so forth, the Khomeini disease will spread and origins of the brotherhood movement and its roots unphecked. The national security of every state in the in the British subversion of the Muslim world, tracing area depends on meeting this danger directly. the tradition of al-Ghazali, Sufism, the Bahai move- Maya-May 14, 1979 eXECUTIVE INTelLIGENCE REVIEW Counterintelligence 15 The network of the Muslim Islamic Foundation Brotherhood Federation of Islamic Organizations Indiana United Islamic Federation of the United Kingdom and Ireland Union of Islamic Students in Spain Union of Islamic Students in Italy United Islamic Turkish Federation of Europe Islamic Union of Germany United Islamic Federation of Students in France United Islamic Student Organization in Vienna United Islamic Student Association in Europe Islamic Association of Afghan Students in Europe United Islamic Federation of German-speaking Swiss ment, ai-Afghani, and Mohammed Abdu. Then, we loyally served the interests of the British Empire. Its present the present organization and form of the chief weapons were violence, terror, and assassination. Ikhwan since the 1950s, when it no longer had the But the Ikhwan's most important contribution to benefit of its Cairo base of operations; in this section the British Empire was its propagation of an obscur we lay particular emphasis on the names and locations antist, antiphilosophical extremism and xenophobia of the British control of the movement. Finally, we among the Egyptian and Arab masses, especially present the case of Iran as a study of the application of students. With the rise of Zionism-also, of course, the Muslim Brotherhood treatment to a major nation, sponsored by London-the Muslim Brotherhood be focusing here on the career and role of D.r . Ibrahim came the chief instrument of the rabble-rousing anti Yazdi, the controller of Ayatollah Khomeini. Semitism and bogus Islamic nationalism that kept the British-and the British Army!-continually mediating between warring Arab and Jewish factions. With its commitment to the Middle Ages, it is no wonder that the Ikhwan became the leading force in opposition to II. H istory of the Muslim Brotherhood, President Gamal Abdul Nasser, the Egyptian nation alist leader-or that the Ikhwan tried, at the end, to 1929·1954 assassinate him. The history of the Muslim Brotherhood, or the During its formal existence, before it went underground Society of the Muslim Brothers, begins in the period during the Nasser era, it was common knowledge that fo llowing World War I in Egypt. The intelligence the Muslim Brotherhood was a tool of British officer then responsible for the Near East and Islam intelligence. Throughout its history, there are many was Prof. Arnold Toynbee, who first served in British documented instances in which the Ikhwan was caught military intelligence and then headed the elite Royal in illicit collaboration with the British Embassy in Institute for International Affairs (RIIA) from 1925 to Cairo, the Suez Canal Company, and so forth. Despite 1955. The 1925 edition of the RIIA annual report deals its often loud attacks on "the British," the Brotherhood chieflywith the imperial problem of the Muslim world, 16 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 Council for the Advancement of Arab-British Understanding Sir Richard Beaumont Sir Charles Duke Mu'slim World League Islamic Conference Prince Abdullah and was assembled under Toynbee's direction. sored Muslim movement, led by the Syrian Rashid The founder of the Muslim Brotherhood was Hasan Rida, the disciple of Mohammed Abduh. Abduh, in al-Banna, born in Egypt in 1906. In his early years, turn, was the student and homosexual partner of Jamal Banna passed in and out of a series of religious and ai-Din ai-Afghani, the British agent who was the mystical organizations, including the secret Society for originator of the "Islamic nationalist" or pan- Islamic the Prevention of the Forbidden and the "Order of the movement. ,The philosophy that Afghani, Abdu-and Hasafiyya Brothers." Gradually, he was inaugurated Banna-adhered to opposed "Western" influence, into the higher mysteries of the Sufi circles, a centuries materialism, fr anji (foreign ) traditions, and the cultural old network of freemason-like orders whose ideological trappings of the West in favor of "pure Islam." patron is Abu Hamid al-Ghazal i. By the age of 16, In 1927, Banna helped to found the Young Men's Banna's entire world revolved around the Sufi mysteries Muslim Association. This was quickly superseded by and al-Ghazali. the establishment, in 1928, of the Society of the Muslim As Banna was drawn closer and closer to the inner Brothers. Ban na set up his headquarters in Ismailiyya, core of the Sufi networks, his political activity began. a port city controlled by the Anglo-French Suez Canal During the 1920s, he passed in and out of a sequence Company. From the start, the Suez Canal Company of religious-political organizations, in which the invar the leading representation of British imperialism in iant was violent opposition to secular nationalist Egypt-financed the Muslim Brotherhood, helping politics-called "apostasy and nihilism" by Banna's Banna to build the first mosque run by the Brotherhood, associates-and against the secular philosophical ideas completed in 1930. By 1932, the Muslim Brotherhood then gaining momentum at Egyptian universities, a of Hasan al-Banna, joined by his brother Abd al trend spurred by the Mustafa Kemal Ataturk revolt in Rahman al-Banna, had set up branches in Ismailiyya, Turkey. Port Said, and Suez; it rapidly spread to Cairo and other cities, including Alexandria. The cult of 'Pure Islam' Over the next years, the Muslim Brotherhood built By the age of 21, Banna had been introduced to the its organizatipn, beginning a series of new publications most intimate circles of the British intelligence-spon- including a newspaper. By the late 1930s, the Brother- May B-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 17 hood was strong enough to create its first paramili�ary leading sympathizer of the Muslim Brotherhood. The branch, the kataib ("battalions"). It began with the network was then complete: Azzam, Maher, - Misri, creation of a division called the "rovers," at first Maraghi, the al-Azhar network of mullahs, Young growing out of the youth section athletic training but Egypt, and the Muslim Brotherhood. The whole group gradually becoming more and more openly a private was in close contact with German Nazi intelligence army. The organization of the Brotherhood's kataib agents. followed closely the pattern of the Nazi youth or Into this circle came Anwar Sadat. Although the Mussolini's squadris,ti; indeed, throughout the Arab full story is not known, it is clear that Sadat served a Middle East similar movements were being assembled critical liais�n role between the Egyptian military, with British, Italian, and German Nazi assistance. In especially General Misri, and the Muslim Brotherhood. Lebanon, Pierre Gemayel established the Kataib, or In this matter Sadat's collaborator-was Abd al-Munim Falangists. Abd al-Rauf. This army faction, though ostensibly In 1935, Abd ai-Rahman al-Banna made contact "pro-Nazi" and therefore "anti-British," worked �o with the increasingly pro-Nazi, British-supported Mufti herently as a subversive tendency within the emerging of Jerusalem, Haj Amin al-Husseini. During this entire Free Officers group that, in 1952, overthrew the period, Muslims who opposed the intrUSion of Zionist Egyptian monarchy and eventually installed Gamal settlers tn Palestine were fo rced into supporting Abdul Nasser as the president of the Egyptian republio. eXl'licitly anti-Jewish, fanatic parties like the Ihkwan It was during this period, in 194 1, that the first and the Mufti rather than oppose the overall policies . of publicly documented case of direct cooperation between the British. the Muslim Brotherhood and a leading British intelli In fact, during this period the Ikhwan sought and gence officer, J. Heyworth-Dunne, at London's Cairo received support from the corrupt, pro-British King embassy is reported. It was a mere shadow of things to Fuad and, later, King Farouq, both obsequious stooges come. of London on the Egyptian throne. Like Egypt's other . Immediately following the reported contacts with fascist party, Young Egypt (Misr al-Fatat), the Ikhwan the British, the Muslim Brotherhood began its next of Hasan al-Banna celebrated the rule of the king while' phase: the establishment of the widely feared Secret quietly preparing for a violent revolution that would Apparatus. Beginning in 194 1-42, the Ikhwan set up its establish a mass-based (and, London hoped, more private intelligence arm, called the "secret apparatus," stable) regime. which rapidly became a widespread terrorist, paramili tary, �nd intelligence branch of the Muslim Brother Enter Anwar Sad at hood. The SA was based on the early "rover" battalions With the outbreak of World War II, the Muslim and the kataib, and it was formed with the explicit Brotherhood began its first period of expansion. notion of carrying out extralegal activity. The basis for The contacts established in the years 1939- 194 1 the SA was the essential Islamic concept of the jihad, or formed the network that, until this day, has remained holy war. London's Muslim Brotherhood. In this period, the At the same time, the internal organizational Ikhwan established ties with the Azzam family, structure of the Muslim Brotherhood was reorganized including Abdel-Rahman Azzam, the first head of the along the lines of a cell system. The Brotherhood was Arab League after World War II, who currently lives preparing, for its terrorist phase. in London at the top of the Ikhwan apparatus (see By 1944, the Ikhwan Secret Apparatus had begun Section III); Fuad Serageddine, the lc:�ader of the right to infiltrate, and in some cases take over, other wing faction of Egypt's Wafd party; Anwar el-Sadat; organizations. Interestingly, one of the organizations and key circles in the Egyption Army. infiltrated by the Ikhwan Secret Apparatus was .the In 1939, Prime Minister Ali Maher developed a Communist Party of Egypt. close relationship with Banna, and reportedly began to This established the pattern of what, in future funq the growth of the Muslim Brotherhood with decades, would be a common occurrence, namely, the Egyptian state funds. Another friend of Ali Maher was collaboration of Communist parties of the Arab world Sheikh Mustafa al-Maraghi, the chief of al-Azhar, and Iran with the Muslim Brotherhood. This blending Egypt's chief mosque and religiou! school and center of "left" and "right" networks is a classic stamp of of the Islamic world establishment outside of Mecca. British method, refined and employed by the London Both Maher and Maraghi became strong-if sometimes Tavistock Institute and Sussex University. It is the basis secret,backers of the Ikhwan. for the "Islamic Marxist" movement that catapulted A key ally of Maher was Abdel-Rahman Azzam, Ayatollah Khomeini to power in Iran. who in ,1939 was first minister of awqaf, or religious affairs, and then chief of Egypt's key "territorial army." Wave of terror The next link in the chain was formed by the As the era ,of World War II approached, the Ikhwan Egyptian Chief-of-Staff Gen. Aziz Ali al-Misri, , a launched a wave of terror. In this respect, the chief 18 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 goal of the British in Egypt in the postwar period was grew to be more than friends," says Sadat of Rashad to destroy elements in the nationalist Wafd Party, in his autobiography In Search of Identity, "We became within the Communist and labor movement, and perpetual companions. . . . I still remember the day among the army and industrial circles that, together, he gave me John Stuart Mill's Totalitarianism, Liberty, might have forged a coalition to oust the British from and Representative Government, which. impressed me the Suez and Cairo. deeply." The endless assassinations by the Ikhwan SA served So was Sadat recruited into the service of British / this British cause, culminating in the Dec. 28, 1948, intelligence. assassination of Prime Minister Nuqrashi. Via Rashad, Sadat served as London's link between After 1945, a quiet alliance was established in Egypt the King, increasingly paranoid about the British, and among the palace, the aristocracy, and the Muslim the Muslim Brotherhood of Hasan al-Banna. Brotherhood. Critical to the establishment of this Throughout 1946-47, the Brotherhood functioned alliance-the cornerstone of the British presence in as a political wrecker, assassinating leaders of all parties Egypt-was Anwar Sadat. Afterhis release from prison and especially trying to block the possibility of a Wafd in 1944, Sadat immediately set up contacts with Hasan Communist alliance. The Wafd, though split by factions AI-Banna, who asked Sadat to mediate a deal with King and corrupt, leveled deadly accusations at the covert Farouq. alliance among the King, Prime Minister Sidqi, and Sadat's contact to the palace then was Yusuf Banna's Brotherhood. The nationalist Wafd Party press Rashad, the personal physician to Farouq and the attacked the "fascist terror" of the Muslim Brother director of the Royal Intelligence Service. Sadat and hood, accusing the Nazi-like "phalanxes of Muslim Rashad had been close friends for many years. "We Brothers" of thuggery. When the Wafd would establish The MSA: A Muslim by injecting into them and then manipuJating a Brotherhood antihumanist, front group phony, and in fact sense Of "Islamic identity." American blacks adhering to the Muslim Headquartered in Plainfield, Indiana-the same state faith are also being targeted and similarly victimized that spawned the Rev. Jim Jones, Charles Manson, as part of a Muslim Brotherhood-backed effo rt to and a number of other cult operations-the Muslim undermine the World Community of al-Islam in the West. Students' Association of the United States and On Columbia Canada (MSA) is a tightly organized body claiming April 24 at University in New to have 400 chapters. According to atop MSA York, the MSA sponsored a . meeting that fe atured official, "the MSA is no different from the Muslim ' speakers calling fo r the overthrow of the Taraki Brotherhood." government in Afghanistan and the govemment of In the mid- 1 970s, Ibrahim Yazdi was a member Iraq, (See below fo t an eyewitness account of that of the executive committee of the MSA. His son-in meeting.) One of Yazdi's controllers, Prof. Richard law, Shariah Rouhani, now Yazdi's "ambassador" FalkofPrinceton University, was invited to speak at in Washington, D.C., was an MSA regional repre the affair hut declined because of scheduling sefitative. Yazdi's Young Muslims Organization is, problems. Falk, who is associated with the Bertrand according to informed sources, the same operation Russell Peace Foundation and is, chairman of"the as the MSA-Persian Speaking Group (MSA-PSG); U.S. Peoples Committee on Iran, visited Khomeini Paris i.e., there is no distinction, except in name, between in last winter and later traveled to Iran stirring the YMO and the MSA·PSG. up pro-Khorneini fe rvor as he went. Accompanying Established 16, years ago with Saudi money, the him wQ.s Ramsey Clark, currently in Iran. Falk is MSA is now receiving its funds fr om K.uwait and now in the process of fo rming a new group of the States. Qatar. In recent period, the com mercial and Khomeini sympathizers in the United A high organizing activities of the MSA in the U.S. have level MSA official has described Falk as "the best escalated sharply. The prime target of recruitment American friend of the new Islamic Iran." are M uslim students studying at campuses across On May 25 in Oxford, Ohio, the MSA will its the country. The students-the future leadership and convene annual convention, drawing Muslim intellectual elite of their respecti ve countries-are Brotherhood leaders and ideologues from all over being deliberately sucked into joining the MSA cult the world. May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 19 < "' '" -:; ; a typical "minority government," the Brotherhood .. . . ,.: < , � . . " ; >: . < ,'' " . . •. ,> . ; · . , . . <;,�:� ., ' /: '> " terrorism. In one case, the Finance Minister Amin ' ' Uthman Pasha was assassinated in 1946 amid public .;:::��> . \ , M$A : ,p'Jc�M(l n:. charges that he was a "British agent"-charges made, · .: ':(,>: " 'WE}·.kiif�:>8hu'tQ' surprisingly, in documents published by the RIIA! In "",;>. this case, Anwar Sadat was arrested for the murder. ' The Muslim Brotherhood wave of terror climaxed :,:.:; Thej()IIt>�iJtg is 'an lnt�Ie.)v' w;lth a top-level M S� :<' . ,: ·, '. ,ojJicfa/: :' .' . . . in 1948. That year, an Egyptian government crackdown ...... ' . ' ' . . . :: : - , . : q c $ f against the obviously subversive and:6angerous Ikhwan : . ·. lde logi �ly pea�ii g, ·ther:e is absOlutely uo '. : 'di(fer.. e�ce. betw fascists led to a severe decline in the Brotherhood's . een the'MSA . · and lk hwan . (:thc > activities, which had expanded tremendously until then. • ·::'Jz$YPtia? lvtl1slim ;Btotherbood) ..We are also ·tinked> � : .• <;to the JanuUtti Islami {in . Pa. ki$tan} and the Jamaati : At first, as the government suppression hit, Banna . . . . ' ' .• • ..; . , ' piously denied having anything to do with the terror .:< Hi�di (in IncliaJ. •. . '. .'.' wave, blaming it on uncontrollable elements of the -> The lJrotherhood has taken over Irail and ' our movement. But in November 1948, Prime Minist\., :�: Pa kisian.The revolutiorl in Iran is success. In s.ame: The Zia· ,government QUl" Nuqrashi issued an order dissolving and outlawing the ' ::'/Paki�;;p1; tbe there is Brotherhood. On Dec. 28, Nuqrashi was then himself :�':�overritnenf� Dhut(o ' stood . for the intrusion of . assassinated-and the Ikhwan was naturally held .' . Western cult)Jre iJilQ l:siatn�·lfe. was everything 'that: we . responsible. In January 1949, Banna, seeking to go �4l'kistat1�w�s not. We ktUed bitn for that. And over to the offensive, repudiated his: earlier disavowal · .wUl ·use . his delilh as a warningto . others. ' . .• , .: > ,;: · : Whl,lt: · y{)U S� .. going on now of terrorist methods, and called the Ikhwan to jihad. , 'in ' Afghanistan . is '. our Finally, on Feb. 12, 1949, Banna was assassinated. : •. 'alsO. out liandiwork,. the •• work of brothers in the >; .: <�.;'·Jatnaati ·Islami; -lndia js next; the Mus. lims in India Reorganization-and the assault against Nasser ;.-:< are beginning tO under�tand wbat must be· done. to occllr The assassination of Banna temporarily upset the .:' !hC revolution is also goipg in ·S!l)Jdi Egypt," . and: s6Qner t. Turkey. . This Ikhwan network, but it rapidly stabilized itself again. ··•·•••• ··· '·1\,tabia/ Q httcr . in · · , Islamic. ' mo:vem�CIt has going 20 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 . ' . •. . ,i� u�ing:. ihf 'p�ir��911a:��' to. tint{�� •...• ,< 1tere �n tbe .��ft:ti�:"Vo�ld. 'Th�y" . . . " . :., :with Ziit in Paldsi:a,n: ' : . •. . ' " :I" �oufd "ve: :Saudi Arabia ten· · ' · .'tui�ei, Brotherhood was to serve as the catalyst for the civil echoes of the shots faded away, Nasser told the crowd: war. (The scandal resulting from the capture by Nasser Oh, ye people. Oh, ye free men .... Even if they of the Israeli Mossad team was called the Lavon Affair, kill me now, I have placed in you self-respect. Let after the Israeli defense minister at the time.) them kill me now, for I have planted in this nation The Mossad-Ikhwan links were publicly attacked freedom, self-respect, and dignity .... Remember by Nasser and the Egyptian press. that, if anything should happen to me, the The Muslim Brotherhood, which had been officially Revolution will go on, for each of you is a Gamal dissolved by the regime, now was identified with the Abdul Nasser. policies of the imperialists "and the Zionists" by AI , Ahram . Mass arrests and executions quickly followed. During 1954 the crisis came to a head. Nasser Throughout Egypt, the terrorists of the Muslim battled the increasingly violent Brotherhood, which Brotherhood were hunted down. Hundreds fled the gained support from Saudi Arabia, Kuwait, Bahrain, country for Syria, Jordan, the Gulf, and Pakistan. But and other Gulf states who wished to topple Nasser. the movement had been crushed in Egypt. The inner circles of the Secret Apparatus began to It would soon rebuild elsewhere. think more and more in terms of a "popular uprising" by the masses under Brotherhood leadership. A mass assassination of all of Egypt's ministers was also discussed, and the Brotherhood hoped that the now III.The Muslim Brotherhood today discredited General Neguib might be induced to take power away from Nasser if the unrest could be maintained. With the destruction of the Muslim Brotherhood in Finally, on Oct. 26, 1954, as Nasser was addressing Egypt, a series of adjustments had to be made to keep a huge crowd, a Muslim Brotherhood terrorist fired six the tradition and the movement alive. But, because shots at Nasser, who however went unharmed. As the they h�d lost their base in Cairo and Alexandria, the \ 21 May a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence Ikhwan was forced out into the open , as an agent of are thoroughbred British agents, Anglophile to the London. core. In 1955, the Muslim Brotherhood relocated to From London, the Islamic Council and the Ikhwan headquarters in London and Geneva, Switzerland. In networks have established a far-flung empire. One of Geneva, the Institute for Islamic Studies waa set up by the key bases for the Ikhwan is South Africa, and in Said Ramadhan. Ramadhan, who was a leading recent times Nigeria has become a center for Ikhwan member of the Ikhwan in Egypt, fled Nasser's purge activities in Africa. In the United States, the Muslim although he was indicted as a conspirator in the Brotherhood operates through several student organi assassination attempt against the Egyptian President. zations, especially the large and well-funded Muslim In London, Salam Azzam and Abdel-Rahman Student Association (MSA), and through some chan Azzam, the latter the ex-secretary of the Arab League, nels within the World Muslim League. and both brothers at the top of the Muslim Brother Naturally, there are powerful underground Ikhwan hood, relocated in London. There they established the networks in Indonesia, Turkey, and virtually every Islamic Council of Eu rope. Today, the Azzam family Arab country, especially Egypt and the Sudan. Iran and the Islamic Council are the chief force behind the and Pakistan now are virtually colonies of the Muslim Muslim Brotherhood from Morocco to Pakistan, Brotherhood. operating through hundreds of "religious" centers The chief organizations and foundations that today across Europe and via a network of fundamentalist represent the core of the Muslim Brotherhood network students at European universities. of British intelligence are the following: Needless to say , Ramadhan and the Azzam family 1. The Federation of Islamic Organizations in Eu- Organizing U.S. campuses for New Dark Ages The antiscience fe udalism and religious fundamen si�n" and fighting for the "decolonization of the talism of Ir�n's Khomeini regime is being proselyt minds" of an Iranian people oppressed by the western ized among U.S. student layers by the Plainfield, imposition of values. " In diana-based Muslim Students of America, the Foll owing this revealing discussion of the philo domestic arm of the Muslim Brotherhood. At a sophical underpinnings of the Khomeini reginie, forum last week at New York City'S Columbia Fahrang laid out the essentials of the revolution'S University, one of an ongoing series sponsored by economic program. In answer to a question, Fahrang the MSA, ,a reporter for the Executive Intelligence told a student that the radicaL "Marxist" Iranian Review observed the hard sell of this Dark Ages economist Abdul Hassan Bani-Sadr is working on a perspective first hand. national policy based on Kuranic principles which The forum fe atured as guest speaker Mansur he terms the "Economics of Oneness." A look at Fahrang of Sacramento University, an associate of Bani-Sadr's plan indicates that it is comparable to Khomeini's U.S. support network, which also the Maoist "back to the land" conception. includes Princeton's Richard Falk. Fahrang spoke Following Fahrang's talk, Columbia University at length on the impact of the Iranian revolution on Professor Bulent called for a quick rebuilding of " "the people of the Third World, who have been Muslim Brotherhood networks in Egypt and other oppressed by colonialist forces." He praised the countries to "spread" the Iranian revolution and superiority of Iran's Shi'ite Islam over other sects, create a regionwide community of Islam. asserting that by its nature Shi'ite Islam "resists The moderator fo r the forum made numerous tyranny." references to the "tyrannical" regimes of Iraq and But most revealing was Fahrang's rhapsodizing Afghanistan. The MSA even provided an Afghani over the teachings of the assassinated Iranian speaker to rave against "the communist and repres sociologist Ali Shariati. Fahrang lauded the London sive regime of Afghanistan's president 1araki." The trained Shariati, who was an associate of the French 'association then took up a collection fo r a support existentialistci rcles around Jean-Paul Sartre and the fu nd fo r the overthrow of the Taraki regime, and Bertrand Russell Peace Foundation, as "one of the distributed leaflets against the Iraqi Baathist govern most creative thinkers of all times." The British-run ment, another target of Muslim Brotherhood desta sociologist "set an example forthe Iranian people," bilization operations. said Fahrang, going "beyond the material dimen- 22 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 rope. This organization, based in London, is made up of center, was Abba Eban. At the time, Eban-who later many dozens of organizations (see chart.) It functions rose to become foreign minister of Israel-:was a mere as an umbrella organizations. captain in the British Army with very close ties to 2. The Islamic Council of Europe. This is the Azzam British and Zionist intelligence. In the circles close to family, mentioned above. Eban and MECAS in 1944 were several top British 3. The Islamic Foundation.This organization, head "Arabists": General I1twyd Clayton, the military quartered in Leicester, England, is headed up by governor of Egypt during World War II who was very Khurshid Ahmad. It is a leading conduit for money close to the Muslim Brotherhood; Lord KiIIearn, the from British intelligence and from the Arab Gulf states, British ambassador to Cairo; and his aide, Sir Walter especially Kuwait and Saudi Arabia. Smart. This group was linked directly to the British 4. The Hans Seidel Foundation.This foundation, Special Command of Liaison between the Special based in Munich, West Germany, is headed up by Otto Operations Executive (SOE) and the Jewish Agency. von Hapsburg. The representative of the Seidel group Several SOE British intelligence officers were assigned in Cairo, Dr. Rainer Glasgow, is very close to the to the MECAS group then, including General Wilson, Muslim Brotherhood there. Major General Taylor, and others. 5. The Institute for Islamic Studies.This is Said Associated with the MECAS project at the time Ramadhan, in Geneva. were such top British figures as Martin Charteris, the Funding for the Muslim Brotherhood activities of director of British Secret Intelligence Services; Sir these organizations and institutions comes largely from Harold Beeley, private �ecretary to Queen Elizabeth; two sources. Part of the capital comes directly from and Albert Hourani, a Lebanese member of the RIIA. British circles, especially the British House of Lords In 1946, MECAS and Abba Eban sponsored a seminar aristocracy and the elite British banks and corporations. with these and others on the subject of whether or not These include many of the institutions most closely Egypt is part of the Arab world! identified with the Zionists, such as Lazard Freres. Since the 1940, literally hundreds of leading British The bulk of the funding for the operations of the intelligence officials and agents have been trained at brotherhood, however, comes from British-linked cir MECAS, learning the Arabic language, history, and cles in the Arabian peninsula. Chief among them is culture. Among past students and teachers there we Prince Abdullah of Saudi Arabia, who is widely known find the famous Sir John Bagot Glubb Pasha and his to be "London's boy" in Riyahd. Allied to Abdullah is ,son Faris Glubb; George Kirk of RIIA; A.J. Wilton, the Emir of Kuwait, Saad ai-Abdullah ai-Salem as Britain's present ambassador to Saudi Arabia; Kim Sabah, who has recently expressed sentiment in favor Philby; Sir Donald Maitland, Col. Bertan Thomas; and of Khomeini. Both Abdullah and Emir Sabah were others. trained together at Hendon Police College in London. The MECAS group over 35 years became the core Other Gulf funding sources for the Muslim Broth of the British intelligence establishment that helped to erhood network are Qatar, Bahrain, and the United sponsor the evil Muslim Brotherhood and other British Arab Emirates, especially Dubai. operations in the area. Among its chief graduates are the modern-day Lawrences of Arabia that set up the CAABU AND MECAS Arab-British Center .. To understand the forces in London that stand behind The center is the base of operations for several the Muslim Brotherhood, it is necessary to examine interlocked organizations: the Council for the Advance two archetypical British imperialist bastions that back ment of Arab-British Understanding; the Anglo-Arab the Ikhwan network. Association; the Arab-British CharitableTrust; and the The first is the Arab-British Center, which is also Labour Middle East Council. called the Council for the Advancement of Arab-British Among its leaders and directors are: Sir Harold Understanding (CAABU). The second, recently closed Beeley of MECAS, former ambassador to Cairo, after 35 years, is the related Middle East Center for presently chairman of the World Festival of Islam Arabic Studies at Shemlan, Lebanon. Trust with the UAE Ambassador Mohammed Tajir in The Middle East Center for Arabic Studies (ME London; Sir Richard Beaumont, KMG, OBE; Sir CAS) w�s established under the auspices of the Royal Charles Duke, KCMG, CIE, OBE; Sir Geoffrey Institute fo r International Affairs (RIIA) in 1944. It Furlonge, KBE; Colin Jackson, MP; Peter Mansfield, was set up in Shemlan, just south of Beirut, as a Editor of Petromarket; and . John Reddaway.· Robert training center for British intelligence and Foreign Swann, an assassin and top British-Thai intelligence Office personnel assigned to the Middle East. agent, is also associated to the CAABU. MECAS brought together the elite of British, The British corporations and banks that support Zionist, and pro-British Arab circles. Among the chief CAABU read like an imperialist who's who: Barclay's founders of MECAS, perhaps even the godfather of the Bank, British Aircraft Corp., British Bank of the May S-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 23 Middle East, Lazard Brothers, Lloyd's International, . is directly possible. This, Ibn aI-Arabi said, is the Lonrho, National Westminster Bank, Rolls Royce, and "world of the imagination," in between ;the Platon'i¢ Unilever. division between the world of the senses and that of th¢ Linked to CAABU and MECAS is the Anglo-Arab intelleci . .In fact, in the Sufi view, this is the world of Association of Sir John Bagot Glubb Pasha. Glpbb, dreams and fantasies. _described as "illumination" by the former commander of the Jordanian Arab Legion, the Sufi. Such "illumination" is often r�ached by the is the foremost British Middle, East hand. His son Faris aid of hallucinogenic drugs to induce psychedelic states, Glubb is a correspondent in Beirut for the subversive of "heavenly vision." Middle East International magazine, in which Robert Such ecstatic movements have given rise over the Swann, Christopher Mayhew, Lord Hugh Caradon, years to the many transcendenta! orders of mystics and David Watkins, and Marion Wolfson appear as writers. dervishes. Many of these orders are still in existen,ce CAABU, MECAS, the Anglo-Arab Association, today. Among the chief ones are the , Qadiri, the and Middle East International bring together the elite Naqshbandi, and the Suhrawardi. In the Sufi tradition, support network for the intelligence operation that any important leader of a group de facto creates his controls the Muslim Brotherhood. They are the real own "sub-order," leading to a constant proliferation of controllers of the Azzam family, Said Ramadhan, and Sufi orders. the other Arab British agents. One of the striking things that has marked Sufi Our investigations in Europe have turned up direct orders over the centuries, and is still true today, is the evidence that the CAABU circles represent the conduit worship of the grave and of death. Tombs and burial in continental Europe for the Muslim Brotherhood. sites have become shrines for followers of Sufism. For instance, in Aachen, West Germany the so-called Many of the Sufi traditions are mere holdovers from· Mosque Bilal-linked to the Islamic Council group pre-Islamic times and have simply introduced pagan has served as a covert station for the deployment of the rites and rituals into the quasi-Islamic ceremonies of Khomeini fo rces. The Mosque Bilal acted as a clearing the Sufis. Witchcraft a d other such de i1 worshi and ? � \ p house during the plot to destabilize Iran through mother-goddess worship are common 10 Sufi CIrcles. Khomeini-Ikhwan circles in 1978, funneling Khomeini though disguised. Magic and incantations often play a operatives from Paris and London across Europe and prominent role. into the Middle East. Like ,the backward Hindu cultures, many Sufis In this case, the channels operate primarily through adopted yoga and meditation as a means to the sought Muslim-extremist groups of students. They are collected transcendental experience. , into the Federation of Islamic Organizations, in such Perhaps the most important of the Sufiord ers is the organizations as the United Islamic Federation of the Naqshbandi sect, a Sufi brotherhood of Central Asia. United Kingdom and Ireland or the Union of Islamic The Naqshbandi order grew rapidly beginning in the Students in Spain. 17th century under Sheikh Ahmed Sirhindi and then Shah Waliullah of Delhi (1703-1765), his successor. Both of these Sufi mystics arose to push orthodox I V ideology and a retilrn to pure Islam after the collapse • London cults: the heirs of and breakup of the Mogol Empire and the decline of al-Ghazali-al-Afghani, Islam in the East. the Bahais, the Sufis The Naqshbaridi order spread rapidly into the Ne!lr East. Various Naqshbandi teachers traveled from In a very real sense, the founder of the Muslim Central Asia to Mecca, Cairo, Turkey and Persia Brotherhood-and indeed of all Muslim mystical arid spreading the Sufi mystical revival. The son of Shah extremist organizations-is the infamous al-Ghazali. In Waliullah, Shah Abdal-Aziz, gathered around him a his book the Destruction of Philosophy, Ghazali network of disciples including the Kurdish Sheikh assembled together all the stale arguments of antira Khalid ai-Baghdadi (1775-1 826), who visited India in tional ideologues since before the time of Plato,-basing 1809. In this instance, the impact of the British himself chiefly on the "fundamentalist," u�traorthodox influence could begin to be felt. Radiating from British writings of al-Ashari. The 11th century al-Ghazali run India, Eastern mysticism engendered an Islamic marked the beginning of the rapid decline of Islam as revival of xenophobic, hlamic "purity" that considered a system dedicated to science and reason and the rise of all outside influences to be susp� and evil. Some Of mysticism as the dominant force in the Islamic world. the Islamic orders demanded "safeguarding ourselves Following al-Ghazali, the Sufi mystic Ibn ai-Arabi from the penetration of Persian traditions and Indian became the official father of Islamic mysticism from habits." Among the movements that arose at this time the 12th century onward. The object of Sufism, as put were the extremist Wahhabi movement in the Arabian forward by Ibn ai-Arabi, is to find the "intermediate peninsula . • world" wherein communication between man and God By the middle of the 19th century, the mystical 24 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 tendency in Isla� was crystalized into the movement Turkish Ottoman sultan. In Persia, following an that eventually, under British guidance, became the attempted assassination against the Shah in the. mid- Muslim Brotherhood. 19th century; the Bahai cult was expelled from Persia The initiator of pan-Islamicism was Jamal ad-Din and eventually settled in Istanbul. ai-Afghan. His movement arose in supposed reaction Despite the fact that the Bahais were nothing more to the very conservative, pro-British Sir Sayyed Ahmed than insane cultists and terrorists, the British were Khan, an Indian scholar who argued that Muslims quick to defend them. Among the leading defenders of must cooperate with the British Empire, an argument the Bahai was E.G. Browne, the partner or al-Afghani. for which he was knighted! AI-Afghani, also a paid The most important organizer of the Bahai cult was agent of the British, took up the other side of the coin, Bahaullah and his son Abdul-Baha. In the firsty ears of 3:cc,using Sir SayYed Ahmed Khan of being a "ration the 20th century, when it was widely known that the alist." Against him, the theologians rose in horrified Bahai cult was the product of British inspiration, the opposition, and ai-Afghani stepped in to organize their Bahai were accused by the Turkish government of fear. trying to establish a "colony" of sorts in Syria that Like Khomeini today, Afghani organized the clergy cou�d then provide a beachhead for the British in the against "Western rationalism." Ottoman Empire. In 1904 and 1907 the Turks . In the early 19th century, the Scottish Rite of investigated the Bahais, and the report of the investi Freemasonry and British intelligence had started to join gation recommended that the Bahai cult be banished up with the various Sufi brotherhoods in direct from the Ottoman domain. But before the sentence partnerships. Among the chief British controllers of could be carried out, the British-Freemasonry-backed this operation were Wilfred S. Blunt, a leading Mason, "Young Turks" made their revolution and Abdul-Baha and Edward G. Browne. Blunt and Browne together was released from prison. were the case officers for ai-Afghani. From 1871 Immediately following his release, Abdul-Baha onward, ai-Afghani traveled from Afghanistan to began a world tour to London-where he met the elite Persia to Turkey to Egypt and Arabia, often visiting of that city-and to New York, for a tour of speaking Europe as well. During his long career, al-Afghani engagements in the United States. In the course of and his leading disciple Mohammed Abduh-Iaid the 1912, according to the official Bahai publication, foundation for the Ikhwan of Hasan al-Banna. Abdul-Baha in America spoke to "university students, soci During a visit to Turkey-so the story goes-a 1- alists, Mormons, Jews, Christians, agnostics, Esper antists, peace societies, New Thought clubs, women's Afghani was recruited into the Freemasonry by Wilfred Blunt, and then he was sent to. Cairo to organize the suffrage societies," and many other centers. Cairo Freemason Lodge. There he was sponsored by Finally, in 1918, Abdul-Baha was knighted. by the Mustafa Riad Pasha, a close collaborator of London Queen of England. financial interests and Lord Cromer of the Baring Throughout his lifetime, Abdul-Baha and the Bahai banking family. In Egypt, ai-Afghani organized the cult were at the center of the organizing of the British circle around Mohammed Abduh and Rashid Rida of Fabian Society, and linked to the world fe deralists, the Syria, whic h became known as the "Salafiyya circle." Esperanto group, and various British-led social reform It was this group into which the young Hasan al movements. Banna, properly selected and channeled, entered in the During the destabilization of the Shah of Iran in 1920s and created the Muslim Brotherhood. 1978, it was reported that in several instances the Bahai .' cult-which is hated in Iran even today, and is still The lah.is correctly considered to be an agent of the British According to several reports, ai-Afghani was secretly a Crown-funded secretly the Khomeini Shi'ite move member of the mysterious Bahai cult of Persia. ment! Many Iranians have reported that the Bahais are The Bahais, who today m�mber over 300,000 in still actively working for British intelligence. Persia (Iran) alone, are and always have been a tool of tile British Secret Intelligence Service. Although their Idris Shah lar�est number is in Iran, the largest temple of the Out of the British melting pot of Sufism, Bahaism, the Bilhai cultists is in Haifa, Israel, and the headquarters mystical brotherhoods like that of aI-Afghani, and so of the Bahai world organization is in Wilmette, Illinois. forth, the Muslim Brotherhood emerged. aahaiism began as a radical messianic cult in Persia As it emerged under British tutelage, the Sufi at the beginning of the 19th century. Assembling a movement cohered perfectly with the developing mish-mash of Islamic, Christian, and Zoroastrian ideas, strategy for a New Dark Age. Because the Sufist is the founders of the Bahai-with the full support of the especially focused on introspection and la na, or the British Freemasonry-built a Jim Jones-style cult that destruction of one's ego and self, the intellect is rapidly made itself the enemy of every government in suppressed in favor of the emotions and .sensuous the Middle East, especially the Persian Shah and the meditation. May a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 25 To communicate that anti-intellectual, mystic con funniest fraud since the Piltdown Man. In the list we cept in the modern context, the British virtually created find: overnight a phony Sufi intellect named Idris Shah. -Sir John B. Glubb Pasha Descended from certain Suficircles of the 19th century, -Sir Edwin Chapman Andrew, Knight of St. John, Idris Shah's father worked quite closely with London KCMG, OBE, KCSG; St. John's College, Oxford; and authored a book, Controlling the Mind of Asia. British Ambassador to Sudan, Lebanon; Council of the In simplest terms, Idris Shah, who is often cited as Anglo-Arab Association the world's foremost expert on Sufism, is a fraud and -Rev. Sidney Spencer, author Sufi Attitude; Pro an absurd joke. Among his "scholarly" books we find, �fessor of Comparative Religion, Oxford; Unitarian first, Oriental Magic, a serious study of witchcraft and Church; specialist in mysticism Th e Book of the Book, occult by a believer; and a 263- -Makram Ebeid, an Egyptian Copt; · author of page volume which is entirely blank! (The London Influence of Sufism on World Civilization; Victoria Sunday Telegraph, in its review, called the Book "an College; friend of Anwar Sadat and so forth. These are extraordinary psychological test"!) the perpetrators of the fraud of Idris Shah, Sufi. And Let us glance at the list of those whp attended a this is how cults are made. recent "Symposium in Honor of Idris Shah," the Iranian strongman Yazdi : a British creation The Executive Intelligence Review has compiled an profiled by his future controller, Richard Cottam. extensive dossier proving that Iranian strongman Cottam was an American Foreign Service officer sent Ibrahim Yazdi is the creation and tool of a string of to Iran with instructions to make .contacts with the Anglo-American intelligence agents operating out of Shah's opposition. Cottam also targeted and groomed the University of Pittsburgh, Georgetown, Princeton, another member of the resistance, Said Ghotbzadeh. Oxford, and Cambridge. Like Yazdi, Ghotbzadeh was to emerge as a key international coordinator of Ayatollah Khomeini's takeover of Iran. Ghotbzadeh is currently the director of the National Iranian Radio and Television under rXCtUSIVI ro .," Khomeini. For the next 20 years, Cottam maintained close ties Published here in full for the first time, the dossier with Yazdi and Ghotbzadeh, frequently meeting with traces the career of the man who is Ayatollah Ruhollah them for strategy in the United States, Europe, and Khomeini's personal controller and the moving force Iran. In 1970, Cottam visited Iran. "Ghotbzadeh set up behind the continuing wave of terror and bloodletting a lot of contacts for me while I was there," Cottam in Iran. Yazdi is also responsible for the drastic "anti recently reminisced. "But he did a sloppy job. I almost Western" reduction in Iranian oil production. blew some covers." The latest meeting with Yazdi and Behind Yazdi's cultivated image of pious sincerity Ghotbzadeh took place late last winter when Cottam lies the international network of the Muslim Brother traveled to Khomeini's headquarters in France. hood. Ibrahim Yazdi is not a sociological phenomenon Cottam's involvement in the Iran operation is that resulted from the "too-rapid modernization" of demonstrated graphically by his collaboration with an Iran, as the press portrays him, but an individual ultraleftist terrorist by the name of Derakshesh with deliberately selected, groomed, and deployed for his known ties to Britain, who, in the early 1960s, took current role. By focusing on Yazdi, the Executive over the Iranian National Teachers Association. In Intelligence Review, in the urgent interest of informing 1963, he deliberately led the National Teachers Asso pro modernizing political forces especially in the Middle ciation into a set-up strike situation that resulted in a East, intends to expose him not only as an individual bloody confrontation with the army, triggering a wave but as a type and to explicate the method used by of clashes throughout the country. In April 1977, British intelligence and its collaborators to carry out its Derakshesh traveled to France and then the United "Dark Ages" designs. States to coordinate the Khomeini operation, meeting with both Ghotbzadeh and Yazdi. He also met with What is Ibrahim Yazdi? Cottam. During the 1950s, while still in Iran, Yazdi, who was Derakshesh reportedly asked Cottam to intercede active in the Freedom Front resistance movement on his behalf in Washington for support from the around nationalist leader Mossadegh, was extensively Carter Administration, encouraged by Carter's stand 26 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 ) on human nghts. Cottam went to Washington and American University in Beirut, Ic;mg a bastion of discussed supporting the · Khomeini crew. with the Anglo-American intelligence operations in the Middle National Security Council. According to one account, East. Upon his arrival in Paris iii 1964, Yazdi went to Cottam returned "discouraged" from Washington and visit Ali Shariati, the Bertrand Russell Peace Founda told Derakshesh and company to "go it alone." tion-linked fantatic Iranian ideologue, whose notions Derakshesh promptly did just that. Immediately a letter of "Islamic socialism" were to form the synthetic signed by 40 individuals appeared in the press theoretical foundaitons of the Khomeini movement. protesting the Shah's censorship, followed by another Shariati and Yazdi discussed returning together to Iran letter one month later. The ball had started rolling. to extend their networks into Iran itself. It was decided, however, that Shariati would go first, to be followed by Khomeini's mindset Yazdi. Shariati was captured and arrested on the Yazdi's wife has described Cottam as "a ve�y close border, and instructed Yazdi, waiting. ' in Paris, not. to . friend of my husband, the one person who knows more follow him. about him than even I do." . During his stays in Paris over the next three years, Currently a professor at the University of Pitts Yazdi coordinated his activities with Ghotbzadeh and burgh, Cottam has become one of the most vociferous the network of French Anglophiles, existentialists, U.S. supporters of the Khomeini regime, hailing environmentalists, and anthropologists now lined up Khomeini as "the most important Islamic existentialist behind the Khomeini movement. in three centuries." Cottam denounces "the racist Returning to the United States in 1967, Yazdi attitudes of those people and groups who charge that moved to Houston, Texas, taking up a research and under Khomeini Iran is returning to the Dark Ages." teaching post at Baylor Medical College. "I doubt he Defending the tyranny of the Khomeini regime, Cottam did much teaching," stated Georgetown University insists: "You have to understand Khomeini's mindset." professor Thomas Ricks, the national coordinator of In 1959, Yazdi came to the United States, received the pro-Khomeini U.S. Peoples Committee on Iran and a doctorate from the Massachusetts Institute of a key Yazdi controller. "Every six weeks or so he was Technology, and joined the facuIty of Fairleigh always coming to Washington, meeting with all kinds Dickinson University in New Jersey in the early 1960s. of people, building up his Young Muslims Organization A fe w years later, Ghotbzadeh arrived in the United against the Iranian Students Association, and so fo'rth. States, enrolled in Georgetown University, and later He was always very discreet, very careful, about his flunked . out. Admits Cottam: "Ghotbzadeh was crazy. meetings. In fact, he still is." Ghotbzadeh left the United States, "I was a bit dissatisf ied with Yazdi," Ricks but traveled frequently from his new base of operations admitted. "He' was too vague and too general fo r me, in France to the United States, often entering the and a little bit difficult to get along with." country illegally without a visa and meeting with Yazdi With the Khomeini takeever in Iran, Yazdi assumed and Cottam. "The State Department turned a blind eye the post of Minister of Revolutionary Affairs. Late last to Ghotbzadeh's illegal entries," said Cottam recently. month, Yazdi became foreign minister and took over "They knew he was coming in and we, were meeting, the security apparatus. Yazdi's 4,OOO-strong komiteh but they just let it happen. Later on, they began issuing militiamen, responsible for the continuing bloodbath in him visas, so there was nothing illegal about it." Iran, were integrated into the national police force, Both Yazdi and Ghotbzadeh were active in building institutionalizing lawlessness and assasssihation up the Muslim Brotherhood in the Ul1ited States, throughout the country. recruiting Muslim students . and professionals into In Washington, Yazdi's son-in-law, Shariah Rou- . vari'ous Brotherhood front groups that they established. hani, a former regional representative for the Muslim In 1963, Yazdi helped set up the Muslim Students Brotherhood-controlled Muslim Students Association, Association, which, over the past 16 years, has extended became the official U.S. spokesman for Yazdi and the the tentacles of the Muslim Brotherhood throughout Khomeini "revdlutionary government." According to the United States and Canada. In addition to the MSA, his associates, Rouhani, who for the last lO years has Yazdi set up the Iranian Students Association. He later been working closely with Yazdi, is spending much of split away from the ISA, establishing the Young his time browbeating Iranians living in the U.S. into Muslims Organization as a "religious" alternative to dropping their opposition to Khomeini's fascist rule the more secular and increasingly leftist ISA. Operating and endorsing the "new Iran." from Paris, Ghotbzadeh set up an operation parallel to the YMO. On the road In 1964, Yazdi traveled to Europe, spending the next three years in France, west (Jermany, and at the May a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 27 Giscard, Brezhnev sign pact for peace A ten-year program for French-Soviet cooperation French President Giscard d'Estaing and Soviet Presi Giscard and Brezhnev established the principle of dent Leonid Brezhnev sealed a series of agreements in maintaining continuous bilateral consultations at var Moscow this week that commit the economic and ious ,levels to ensure the necessary quality of political technological resources of France and the Soviet Union cooperation. The consultations will be maintained to a full-scale mobilization to prevent war by raising through periodic meetings of the Soviet and French global living standards and solving, in their words, Foreign Ministers and the establishment of permanent "the problems of humanity." In the joint communique working contacts between officials of the foreign affairs issued by the two leaders, whose summit occurred ministries on all questions of common interest. during Giscard's visit to the Soviet Union April 25-27, Most important, the final summit communique the second industrial power of Western Europe and the asserted that the two respective heads of state will socialist sector's "superpower" broadcast their agree themselves meet on a regular basis ' once a year, a ment to coordinate political action to resolve the hot development unique in Soviet-Western relations. spots that threaten to erupt into nuclear war between The foremost aim of these summits and ministerial East and West. level meetings will be, as the communique emphasizes, Not one word about this vitally important summit mutual cooperation to prevent the outbreak of war. has so far appeared in the USA's purported "newspaper As with West German Chancellor Schmidt's earlier of record," the New York Times and the Washington agreement, Giscard's pact with the Soviets included an Post. array of planned projects for cooperation in their respective national development and for joint coopera The choices for Europe tion in Third World development. Another result of the The impact of French President Giscard d'Estaing's Giscard-Brezhnev summit of potential major interna visit to Moscow is comparable to the Bonn meetings tional significance was the provision in the communique last year between the West German and Soviet heads of pertaining to Giscard's standing proposal for a state. Those meetings initiated the launching of the European-wide disarmament conference. The need for European Monetary System (EMS) as a joint effort such a conference was noted in the fi nal document of between Paris and Bonn. Moreover, the meetings are the summit, indicating the Soviets' first stated consent strategically timed, coming when the EMS is under to the proposal. intense Anglo-American pressure to join a war con The communique also outlines agreement on some frontation with the USSR. The political aridec onomic of the major international "hot spots" such as the results of Giscard's trip will form the fo undation for a Middle East, where the Camp David formula was newly strengthened European opposition to the frantic renounced in favor of the overall settlement supported assaults of London and Washington against the EMS , by both Paris and Moscow. conception of ensuring detente through cooperative The combined impact of this series of agreements international economic development. makes the Franco-Soviet pact the political equivalent While Giscard was in Moscow, the Bilderberg Club of the formal nonaggression pact which Moscow had was meeting to finalize plans for the economic originally proposed-a point not lost on continental destruction of Europe through the use of terrorism and supporters of the London-Washington war action. the oil weapon. The followers of British Tory leader Trilateral Commission member and editor of the Margaret Thatcher and her continental allies grouped French daily Le Monde, Alexander Fontaine, on May under European Parliament candidate Otto von Haps I authored an attack on the "European Council" burg were also in conference over the role of Western created by Giscard and West German Chancellor Europe in an international assault on Moscow. George Helmut Schmidt whose foundation lies in peaceful Ball, a participant at the Bilderberg conference, wrote cooperation with Moscow. Fontaine co�nterposed the an Op-Ed for the New York Times deriding French Europe of the London-allied House of Hapsburg as the "illusions" in pursuing Gaullist policies of detente, model for a British-dominated Europe of the regions. threatening Europe with nihilistic violence if it refused -Vivian Zoakos to toe the Anglo-American war line. 28 International EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 T!he French-Soviet ioint communique Th e fo llowing is the text, with minor abridgements, of II. Cooperation in the international the " Program fo r the development of cooperation between arena France and the Soviet Union in the interests of peace and detente," signed in Moscow on April 28 by Presidents Considering that the prevention of war is of cardinal Giscard d' Estaing and Brezhnev. importance for all states, the Soviet Union and France solemnly declare that they will do everything that depends on them, for humanity to be rid of the threat · I. General principles of war. They stress the significance they attach to the The two parties are agreed that their political consul principles of the United Nations Charter and the Final tations and cooperation will be deepened through: Act of Helsinki on the nonuse of fo rce or the threat of • regular meetings at the summit level to be held, in force, the peaceful settlement of disputes, respe�t for principle, once a year; independence, the inviolability of borders, territorial • the continuation of confidential contacts through the integrity, and noninterference in internal affairs. exchange of personal mess�ges and, if necessary, use of ...France and the Soviet Union express their direct liaison between the Kremlin and the Elysee conviction that the policy of detente represents the only Palace; way to ensure peace and the institution of good • periodic meetings of the Foreign Ministers or their neighborly relations, harmony, and cooperation among representatives, in accord with the Franco-Soviet states .... France and the Soviet Union consider that protocol of 1970; the basiC way to deepen detente in Europe is the • development of the practice of working contacts implementation of all the principles of the Final Act of between the Foreign Ministries on questions of common the Conference on Security and Cooperation in Europe interest; (CSCE) by all the signatory countries .... • improvement of existing cooperation mechanisms in France and the Soviet Union stress that the policy the areas of economics, trade, science and technology, of force, of blocs, or of hegemony, is incompatible with especially mixed commissions and working groups ... peace and detente, as well as with the interests of the r Giscard and Brezhnev toast new relations A t the dinner offered by French President Giscard Giscard d'Estaing: The time has come to reach a new stage in contacts between the USSR and France. d' Estaing in Soviet President Brezhnev's honor on April 26, the two presidents offe red toasts which are ... Experience has shown the usefulness and impor excerpted below. Brezhnev's comments on China are tance of the contacts which have been progressively . particularly relevant at a time when the Chinese are established between French and Soviet leaders . . .. I again proposing to "teach Vietnam a lesson." would not betray any secrets by revealing that we have both gotten into the habit of exchanging, in on all the Leonid Brezhne¥: Recently, the world experienced between our meetings, personal messages what could be called a shock. A great power had great subjects of international policy that events recourse to arms and invaded a neighboring country, bring to the fore. ... I would like to take this cynically asserting that they proposed to teach them .opportunity to state here that France appreciated the restraint manifested by the Soviet Union during a lesson . ... Peace is a common patrimony . ... We ' are in favor of self-control ... but we are also in the recent events in Southeast Asia. favor of a firm response to aggresion when this becomes necessary. . .. I am certain that the present · talks (with the French President) will be substantial and fruitful. May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW International 29 peoples, and must not be encouraged in any way. • cOlJlplementarity of political detente and measures to .. .In the event of situations arising which, in the reinforce security and confidence in the military field; · opinion of the two parties, create a threat to peace or • necessity of continuing the efforts begun in the violate peace, or cause international tension, the framework of SALT, to put an end to the strategic governments of France and the Soviet Union will arms race and to proceed to their actual reduction; immediately enter into contact in order to coordinate • necessity for further efforts to prevent the prolifera their positions on all aspects of such situations and on tion of nuclear weapons ...; measures which would make it possible to deal with • necessity for a collective examination by the states such situations. which signed the Helsinki Final Act of questions The Soviet Union and France will apply decisive concerning the attenuation of military confrontation, efforts to help anticipat('and remove hot-spots of tension confidence-building measures, and ...armaments reduc and settle unresolved international problems. tion in Europe; The Soviet Union and France favor the reduction • use of part of the budgetary means thus freed to aid of tensions in Asia. They are for the stable and peaceful the developing sector countries. development of this continent. To this end, they believe that abstention from all acts of force by all states, respect for independence, sovereignty and territorial of III. Economic cooperation each of the states of the Asian continent, noninterfer ...The two parties have assigned themselves the goal of ence in internal affairs, and the right of each people to arriving at new and substantial progress in the next freely determine its destiny, are indispensable. years .... [They] will particularly favor the realization France and the Soviet Union will apply their efforts of major industrial projects. In addition, they will to eliminate the hot-bed of tension existing in the encourage the search for new fo rms of cooperation and Middle East. They are convinced that a genuinely just its extension to other areas.... The planning agencies and durable peace in this region can only be established of the two countries will carry out research so that the through a comprehensive settlement, with the direct long-term needs of the economies of France and the participation of all the interested parties. Soviet Union will be better taken into consideration in France and the Soviet Union firmly advocate the development of their cooperation .... respect for the principles of sovereignty, territorial . integrity and inviolability of borders in Africa, and a peaceful settlement of disputed problems by the African states themselves, with the aid, if necessary, of their IV. Scientific and technological own organizations, without outside interference. They cooperation favor the immediate granting of independence to those of 15 years of cooperation peoples who have not yet obtained it and the cessation Highly evaluating the results impressive of. ..aparthei d. in this area, where rapid and sometimes sides will further In the interest of their cooperation in the interna progress has been achieved, the two including tional arena, the two parties will encourage the provide for de epening this cooperation, most comparison of analyses and prognoses of the most through the elaboration of programs in the of nuclear important tendencies in world politics, through their promising areas, such as the peaceful use others. They appropriate scientific institutions and, when appropri energy, space research, basic research, and stronger link of the goals ate, their Foreign Ministries. will pay attention to the even of scientific and technological cooperation and the economic development needs of the two countries. Disarmament France and the USSR ...declare their intention to do everything which depends on them to arrive at real V. Military contacts progress [in disarmament], with the final goal of general and complete disarmament, including nuclear The two parties attach great importance, in the spirit of disarmament, under effective international control. detente, to military contacts established between the The two parties agree in stressing the following Soviet Union and France, including between the highest principles: officers of the two countries. They will continue such • the necessity ...to respect the right of all states to contacts and expand them, being convinced that this security . . . . ; wi\l strengthen the traditional feelings of respect which • coordinated cessation of the further quantitative and the armed forces of each country feel for the other's. qualitative increase in armaments and armed forces, including all categories of weapons with due consider ation of their specificity, and above all by the states VI. Cultural cooperation and with a major military capability; exchanges.. .. 30 International EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 VII. Cooperation on problems facing humanity French-Soviet trade in billions of francs The Soviet Union and France, aware that humanity 25 r------ought to show solidarity both with respect to the goal of preventing war and in the face of problems of a global nature which can only be solved by the joint efforts of the peoples , declare their resolve to coordinate 20 their actions-bilaterally, with all other states, and with international organizations-in the search for solutions to such problems as environmental protection, combat 15 ting disease and famine, raising the social and economic level of the developing countries, beginning with the poorest, research in the world ocean and space, the 10 discovery of new sources of energy, etc. The two sides have developed this program, proceeding from the conviction that its implementation 5 will open before the Soviet Union and France new horizons of cooperation for the good of the present and future generations of Soviet people and Frenchmen, o - and will broaden the opportunities of securing a firm 1970 71 72 73 74 75 76 77 78 79 85 and lasting peace . According to the agreements signed between France and the Soviet Union, French imports from and exports to the USSR are expected to triple over the 1974 level during 1979 and triple A ten-year program for again by 1985. Source: Min du· Budget, Direction Geo des Douanes et Droits Indirects. French-Soviet cooperation Giscard and Brezhnev signed two agreements on econom experience and cooperation with third countries. ic, industrial and scientific cooperation, one fo r the Within the bounds of their competence, the sides period 1980-1985, and the other, excerpted here, fo r will work to realize the cooperation projects. They have 1980-90. Additional agreements were concluded on (1) arranged that equipment and technological processes improving lines of communication between the Kremlin supplied must be up to the most advanced achievements of technology and must be offered on competitive and the Elysee, (2) encouraging study of the Russian and terms. French languages, (3) scientific and industrial cooperation in the areas of computer technology and electronics, and Recognizing the importance of financing for the (4) cooperation in oceanographic research. further development of economic, industrial and tech nical cooperation, the sides will make efforts, within the bounds of the respective legislation, to make credits From the Long Term Program for available under the most favorable and mutually deepening economic, industrial and acceptable conditions possible .... The sides believe that one of the most important technical cooperation from 1980-1 990. areas of cooperation between the USSR and France is • cooperation on the basis of balance and mutual cooperation in industry ... benefit; The sides note that the following branches of • conclusion of long term agreements and contracts industry are the most promising for the further between Soviet foreign trade organizations and French development of economic cooperation: energetics, firms; particularly new types of energy, the transmitting and • development of contacts between responsible economizing of energy; electronics, including informa Soviet organizations and French firms, particularly to tion and electronic computer facilities; machine-build ensure broad exchange of information on the concrete ing, including machine-tool construction; metallurgy, possibilities for cooperation. chemistry and petrochemistry .... The sides agreed to facilitate the development of The sides note that the development of agricultural new directions and forms of cooperation, making it production is an important factor for the economic possible to more fully utilize the technical, industrial, progress of both countries . . .. The sides believe that and natural potentials of each country. They will try to there exist favorable possibilities for deepening coop take into account the possibilities presented by the eration in this area, with the goal of ...rai sing the exchange of patents and licenses, scientific-technical productivity of agriculture .... May B-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW International 31 since the USSR and France will not be the only countries deciding. But one can nonetheless 'note that the formulation used consider�bly broadens the initial- · ·What the press is sayi ng ' idea of Giscard, since it is not made explicit that it will be (limited to) conventional weapons, and since the about the accords expression 'at�enuation of the military confrontation' A sampling of last weekend's press coverage of the new covers several Soviet proposals, in particular a ban on French-Soviet accords shows enthusiastic responses fr om first use of nuclear weapons, a non-aggression pact, , France and Italy, lies from Britain, and a total blackout etc." by the 'U.S. press L'Humanite, the French Communist Party daily, April In France 30, article by Max Leon entitled "Converging interest of the two countries": "If this last idea (of a "collective Le Figaro, April 28-29, editorial by Paul Marie de la Gorce entitled "Realism": "So much has been said examination" etc.) were followed through-we are still against the very existence of this policy baptized far from it-we could conceive of an interesting 'detente, entente and cooperation' by its first promoter, initiative, made simultaneously by France . and the Soviet Union which, addressed to the 33 countries General de Gaulle; IS years ago, and which the �urrent of President of the Republic has just rebaptized with the Europe, the U.S., and Canada that signed the final act same name. Yesterday, it was so many accusations of in 1975, would invite them to prepare fo r a new Pan complacency, of dividing the West, and as always, of European conference ...." nationalism. Today, it is reproaches of blindness on the Soviet menace; of negligence with respect to the In Italy increasing power of the USSR, of error on the results Corriere della Sera, April 28, article entitled Spectacular of detente, which we are told will . only benefit the offer from Brezhnev to Giscard : A French-Russian. Space Russians . ... It has also become fashionable to use the Team": .. It's the first time that one of the two )treat curious word 'finlandization,' a rather insulting term powers has offered a 'space ticket' to a country from used against a respectable country, a free country, an the other ideological camp ... without too much . expense, and without many risks, the Soviet Union can • admIrable people. . .. But reality has prevailed ... and this reality is very simply defined. If we don't want to demonstrate its willingness to share its own space be fighting a war against each other, we have to technology with a country that is an integral part of organize relations between rival nations to make them the political and economic alliances of the West. � .." as rational as possible, that is to say to ensure what is called detente ...." In Britain Financial Times, April 30: ..... Although Mr. Giscard Les Echos, April 30, article by Thierry Doelnitz entitled d'Estaing described the meeting as 'the most useful' he "The Franco-Soviet rapprochement should favor indus had had with the Soviet leader since he became trial cooperation": The Franco-Soviet summit ended on President in 1974, and although Mr. Brezhnev said the a note of optimism, inspired it seems by the will of the Soviet Union had every reason to be satisfied with the , USSR to improve its relations with the West. President outcome of the talk�, it was clear that Paris and Giscard d'Estaing declared that the commercial ex Moscow continue to disagree on a number of important changes between the two countries had gone through problems. The main bones of contention remain the a 'very clear upswing' during the first months of 1979. two countries' different policies on disarmament . ..." The goal of tripling trade in fi ve years will be 'practically achieved' this year, the joint communique In the United States affirms. Mr. Brezhnev declared that the 'perspectives New York Times, April 28: The full extent of coverage for cooperation between the USSR and France have of the trip consisted of a 200-word UPI blurb entitled become clearer and more confident,' ...". "Soviet Offers to Send Aloft An Astronaut from France." Le Monde, April 29-30, article by Jacques Amalric: "The communique devoted to disarmament calls for a Washington Post, April 30: There were no reports. Like 'collective examination by all the states that signed the the New York Times, its weekend headlines were Final Act of Helsinki. .. .' What would this 'collective devoted to "President (Carter) Likens Soviet Dissident examination' consist of? No one can say yet for sure, to Bible Figure." 32 International EXECUTIVE INTelLIGENCE REVIEW May 8�May 14, 1979 .ASIA ) Vietnam and China talk while preparing for a new war While Vietnam and China are talking in Hanoi, both remailling concentrations of Pol Pot forces and driving sides are preparing for a new outbreak of fighting that them into Thailand. With the rainy season approaching may this time involve the Soviet Union and the United in weeks, it looks as if they will have scored the January States. The impetus for the present talks, especially victory of the Heng Samrin Kampuchean United when the opening negotiating positions of the two sides National Front. are examined, clearly comes from the Vietnamese. The China, then, is in a strategic box. Their initial Chinese for their part, while obliged to.talk, are already invasion was aimed at saving their barbaric proteges in proclaiming, as Vice-Premier and Chinese strongman Cambodia and at destroying the Vietnamese who stand Deng Xiaoping did this past week, that China is ready as an obstacle to the Chinese designs of dominating the to "punish" Vietnam again if their "provocations" Southeast Asian region. If the Vietnamese are able to continue. With Henry Kissinger in Peking telling the consolidate their alliance with Laos and Cambodia, Chinese that their previous invasion was a "moral" and China's great power hopes will fade rapidly. China, "courageous" act, the Chinese seem to feel assured that from Peking's standpoint, must act-but is such action the Carter Administration and others here will back going to bring anything except a greater and more o them up. disastrous military and p litical defeat for the Peking Indeed Joseph Kraft, that noted mouthpiece for regime? high-level policymakers in Washington, made clear in a recent column that if China goes to try to "teach" Negotiations betray Chino's strategy Vietnam a lesson" again, the U.S. will not this time The conduct of the talks gives the Chinese game away. remain so distant fr om the conflict, and neither will the At the time of the invasion China sanctimoniously Soviet Union. proclaimed that this was limited response to Vietnamese The circumstances of the talks in Hanoi are shaped border provocations and offered to negotiate. After in large part by events in the region, particularly in the getting a healthy drubbing from Vietnamese fo rces, neighboring Indochinese states allied to Vietnam, Laos mostly irregular units, the Chinese withdrew, likely and Cambodia. The Laotians last week sent a note to under the shadow of imminent Soviet intervention. The the United Nations Secretary General and the Security talks began with the Vietnamese making a reasonable Council protesting Chinese incursions into their coun three-point proposal (printed below) which took seri try, including stirring up of Meo tribesmen who inhabit ously the Peking regime's own premise for its actions the area of northern Laos and stretch into China, and by proposing steps to demilitarize the border region warning of Chinese preparations fo r an invasion into and settle border claims. Laos. The Chinese response was to dismiss the border The Cambodia situation is the key to the present issues as relatiyely unimportant and instead call for �vents, however. The Chinese are clearly perturbed Vietnam to withdraw its forces from Laos and that, fo llowing the fai lure of their previous invasion Cambodia, recognize Chinese claims to ' two island which resulted in heavy Chinese casualties and much groups in the South China Sea (the Paracels and destruction of Vietnamese life and property, they made Spratley Islands), pledge no Soviet military presence in no dent in the core regular forces of the Vietnamese Vietnam, and generally acquiesce in China's domination army and did 'not force them to remove forces from of the area. The Chinese aims then are barely hidden Cambodia and Laos. More importantly, in the past and the rationale for their costly invasion is deftly put weeks combined Vietnamese and Cambodian forces (of into the desk drawer ... for now. the new Phnom Penh government) have carried out a The Vietnamese counterresponse was twofold. They major offensive which has succeeded in sm ashing denounced the Chinese lack of sincerity, warned about May a-May 14, 1979 . EXECUTIVE INTElLIGENCE REVIEW Asia 33 buildup of Chinese troops, Chinese incursions into pressure the shaky Thai regime to allow sanctuary and Vietnamese air and water space, and then reiterated actual aid to the remnants (allowing them to escape a their three-point proposal. Vietnamese Premier Pham Vietnamese-Cambodia trap at the border) in hopes of Van Dong told Western reporters accompanying U.N. keeping their brutal friends alive. On the other hand Secretary General Waldheim that the talks had not they play with the pathetic Sihanouk as the "neutral" broken down, that Vietnam is ready to keep talking. option, a man who is now reduced to dining with and He also rejected Waldheim's mediation offer as praising Henry Kissinger-the man responsible in large unnecessary-what he did not say on that was that the part for Sihanouk's ouster in 1970. It is highly unlikely, offer, which the Chinese have embraced, is obviously given Vietnamese determination not to give the Chinese part of an effort to rescue Peking from its dilemma. any maneuvering room, that such ploys will work. The Waldheim offer resembles the idea, floated by Peking then must choose-war again, a war that may Sihanouk in Peking, by Assistant Secretary of State become a global confrontation within days, or back Warren Christopher, and others, to hold a Geneva-style off. Presumably the top level leadership meeting "international conference" to discuss the "neutraliza reported going on now in Peking is making that ominous decision. tion" of Laos and Cambodia. The Chinese play it both ways-on one side they run guns to the Pol Potists and -Daniel Sneider d} The two sides shall exchange at once lists of people captured by the two sides during the war so that The Vietnamese peace proposal tpey may be returned as soon as possible. Th e fo llowing proposal. entitled ..Main Principles and I e) To set up a joint commission of the two sides to Contents of a Th ree-Point Settlement of the Problems supervise and control the implementation of the above Concerning the Relations Between the Two Countries. " mentioned measures. was put fo rward by the Vietnam government delegation in the first session between the Vietnamese delegation 2. Restoration of the normal relations between the two and the Chinese delegation negotiating an end to the countries on the basis ·o f the principles of peaceful hostilities between the two nations on April 18. 1979 in coexistence: respect for independence, sovereignty and Hanoi: territorial integrity; non-aggression, refraining from the use of force or the threat of the use of force; non I. Urgent measures to secure peace and stability in the interference in the internal affairs of the other side; border areas of the two countries and to ensure an settlement through negotiations of disputes and differ early reunion of the people captured during the war ences in the relations between the two sides, develop with their families: ment of economic and cultural relations in a spirit of a) To refrain from concentrating troops close to mutual respect and mutual benefit. the border-line, to separate the armed forces of the two On that basis, to restore railway, civil aviation, sides: the armed forces of all kinds of each side along postal, etc. relations. the entire border-line to pull back into their territory to To resolve the question of the aftermath of the war. a distance of three to five kilometres from the line of actual control prior to February 17, 1979. 3. Settlement of border and territorial problems be b) To stop all acts of war provocation and all forms tween the two countries on the principle of respect for of hostile activities violating the sovereignty and the status-quo of the border-line left by history and territorial integrity of the other side and threatening its delineated by the 1887 and 1895 Conventions signed security. between the French Government and the Tsing c) The zone lying on either side of the line of actual Government, as agreed upon between the Vietnamese control mentioned above and wherein the armed forces and Chinese sides; respect for independence, sovereignty of the two sides will be no longer present, shall become and territorial integrity. a demilitarized zone. The status of this demilitarized zone shall be agreed upon between the two sides. 34 Asia EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979. The making of John Con nally Presidential candidate woos Zionists at New Yo rk event On April 5, 1979 Republican presidential hopeful John Review is offering the full transcripts of the meeting Connally met behind closed doors with the .leadership and tapes of the event for $50.00. The tapes were made of the American Jewish Committee at their headquar available to this news service by a participant who was ters in New York City. The meeting had been arranged shocked at Connally's behavior. by Rita Hauser, a leading Zionist, a founder of the warhawk Committee on the Present Danger, and a What Connally said director of the American Ditchley Foundation, one of the most prominent planning groups of Anglo-Ameri On SA LT: We negotiate out of weakness ... We divide can geopolitical strategy. , ourselves before we even start. ... All the SALT Hauser has been seeking extensive exposure for agreement is going to do is lead the American people Connally among New York Jewish and Zionist circles, to think we have a recess, so' to speak, that we have a hoping to get their political" and financial backing for period of arms limitation .... his campaign. But as the material below makes clear, The thing that worries me about a SALT agreement Hauser's main interest is to wield the Connally is that we're going to lull ourselves into a sense of false campaign against that of former California Governor security. We've been known to do that, particularly Ronald Reagan. Once Reagan is out of the way, when there is pressure on us from all sides for money .... Hauser and her associates at the Council on Foreign , We 'are going to have to be alert, and vigilant, we're Relations, at Ditchley, and in the Bilderberg , group going to have to continue to be aggressive, and frankly intend to field General Alexander Haig. we are ' going to have to have a good defense Haig is intended to appear as the strongman establishment in this country. candidate for war abroad and austerity at home. The , On taking the dollar off the gold standard: Let me London gameplan for putting Haig into the White try to recreate the scene in 1971. In May of 1971, the House was voiced by Fletcher School of Diplomacy international monetary system became extremely vola Professor Scott Thompson in an interview published in \ tile. This continued all through the summer of 1971. I this magazine recently. thought we were approaching a crisis-which we did. Thompson, a member of the London-ba�ed Inter We'd been talking about it all summer and finally national Institute of Strategic Studies and a close friend on the weekend of August 15 and 16, the President of Haig's, declared it would take a crisis atmosphere to made his decision on what he was going to do and a sell the general to the population. Scott said that an fierce debate has l?een raging over the consequences ... "eyeball-to-eyeball" confrontation with the Soviet Remember, in 1971 we closed the gold window .. .. Union would help Haig appear as "the man on a white We had said to the nations of the world, "If you hold horse." dollars, we will commit to you and ... we will redeem But Connally's behavior at the American Jewish those dollars in gold whenever you want. ..." Committee meeting showed that he is anxious to We redeemed a few million from time to time. In convjnce Hauser's associates that he can fit the bill as 1971, when we were confronted with what I thought well ' as Haig. Connally wants to appear tough enough was a crisis then, we had approximately $10 billion in to wage trade war against Europe and Japan, steal gold in the treasuries of this country and $17 billion in Mexico's oil and gas reserves, impose domestic auster the hand of fo reign governments. There wasn't any ity, and "confront the, Soviets." And if his words sound way we could redeem their dollars in gold just on the faintly like that of a former Secretary of State, Connally basis of 12 percent, 12.5 percent, and 13 percent. So we boasted to some of the meeting's participants that he is decided to close the gold window, and we simply said . good friends with Henry Killsinger. if you hold dollars, "We're not going to redeem We produce here some excerpts of the meetings and them ...." A great many economists said during the the cocktail hour that followed. Executive Intelligence time these discussions were taking place, 'If you do May 8-May 14, 1979 EXECUTIVE INTElliGENCE REVIEW U.S. Report 35 , . . this, you will trigger a massive depression that will be nominate Reagan, and he has every possibility of far more pervasive than the depression of the I 930s ...." defeating him. On balancing the fe deral budget: I do not support the constitutional amendment Jerry Brown supports. I . Q: Do you' see his policy as consistent with those of the do support a constitutional prohibition against deficit Committee on the Present Danger? spending at the federal level, provided with an exception Hauser: Yes. I was one of the founders of that. Very In it that it can be lifted by the President and/or the much. He's not ready to say publicly that he would go Congress anytime they want to declare an emergency ... for or again!!t the treaty, but he's made his reservations I think the Congress has failed to live up to its very clear. I think the consensus now is, as the treaty is responsibilities in trying to provide any type of now drafted, it will not pass the Senate. If it passes, it intelligent fiscal management of our affairs .... will pass with major reservations which will have to go On his business relations with Saudi Arabians: For back to the Soviets. And I doubt that they . would accept every Saudi I know, I know 100 Jews, so I am 100 it with those reservations. times more nonobjective on behalf of the Jews than I am on behalf of the Saudis. Q: Do you see Governor Connally as being able to deliver So you know a few Arabs, I do. No question about . the Saudis and Mexicans ...? it, I know a few and I represeht a couple, my firm does. Hauser: That's what I had hoped. When the Saudi But we .represent scores of Jewish clients. The idea that question was asked, I was hoping he'd go a little you can't know people without being taken over by further. He hinted at it. He knows them, he likes them, them is foreign to me. I know good people, bad people, he can do business with them. But I would have liked black people, brown people, rich people, poor people ... him to expound more on this. On Energy: We have to make up our minds that the days of abundant and cheap energy, abundant sources Q: How do you bring the Saudis along? of oil and gas, are over. Energy is going to be Hauser: By American military presence in the area. I expensive; we are going to bave to be thrifty with it; we think that's what is importan. to the Saudis. are going to all have to be part of that thrift. We better � make up our minds that we have to find alternate Q: On the other hand, they make a lot o.fnoise that they sources of energy, and the faster we do, the better off don't need anybody. we are. Hauser: They would like to see a military presence by On Jerusalem: Jerusalem is going to be as big, if the United States in the area. not a bigger issue, than the creation of the Palestinian state. Here again, all of us have to face that we may be Q: Do you think John Connally could bring a military years in reaching a broader agreement in the Middle presence into th� Middle East? East than we now have ... and it's not going to be my Hauser : If he were President, I think he would have. position to try to dictate an answer .... Prime Minister Begin has said very clearly what he thinks in respect to the West Bank. And if that is his position, if the Israelis maintain that position, then I Such good friends ... think the negotiations will be long and difficult.... Th is interview took place at a cocktail party sponsored by the American Jewish Committee during which John Connally mentiontd in passing his relationship to Henry Behind every good man... Kissinger and Rita Hauser: Rita Hauser of the law firm Stroock, Stroock, and Lavan made clear her intention to use Connally.'s ambitions Q: When did you first meet Rita Hauser, Governor? against Reagan during a cocktail party sponsored by the Connally: Oh, I don't remember, I've known Rita for American Jewish Committee. Th is interview was made years. She's smart as a whip. available to the Executive Intelligence Review: Q: How do you get along with Henry Kissinger these Q: I thought the Governor was extremely interesting. days? Hauser: Thank you, I think he did an extremely good Connally: Great! job. He was forthright, he's intelligent. Q: Th ere are a lot of rumors that you've had trouble Q: Do you think he's doing well enough to top Reagan? with him. Hauser: He's doing beyond our wildest dreams. Reagan Connally: Na, Na. We get along fine, as a matter of is defending. ... I've known him for years and years, fact. !saw him recently and (we) had dinner two nights and I like him and one of my main motivations was in a row in Mexico, in the last month. We're great we've just got to kill Reagan! There's no way we can friends. 36 U.S; Report EXECUTIVE INTELLIGENCE REVIEW May B-May 14; 1979 ABOR PER/seop Rubber Workers target UniRoyal in strike bid Admitting that his union's bar gaining strategy had failed to make headway. in its effort to achieve a contract settlement with any one of the nation's big four Letting the other shoe drop rubber companies, Peter Bom marito, president of the United Sen. Edward Kennedy (D-Mass) ted to put something before the Rubber Workers (URW), 'an has begun circulating a draft bill Congress. With his clout and with nounced yesterday that the union to phase out all regulation of the Administration support, the bill is would embark on a selective strike trucking industry over a four-year given a fighting chance. "If Ken tactic in an effort to break the period and abolish the authority nedy went' it alone, he would have deadlock preventing an. agree of the Interstate Commerce Com won medals but there would be no ment. mission over the industry. Safety chance of passing a bill," says an Bommarito announced that regulatory powers would go to the aide. the union had decided to strike the ' Department of Transportation. Dan O'Neil, who heads the UniRoyal Company, financially Previous Kennedy legislation ICC, is fully committed to push the weakest of the big four, and only focused on abolition of rate ing deregulation "as rapidly as set a date for Saturday, May 5 for bureaus, the organizations which possible." The ICC, which is the strike to begin. The union has set rates in the regulated sections working with Kennedy people, been working since April 22 with of the industry. plans additional "unilateral ac out a contract. Negotiations have Kennedy people say they feel tion" if the legislative process been under way since then with the time is right to force "the larg bogs down. UniRoyal, the B.F. Goodrich er debate on the whole deregula Some people remarked that Company, Goodyear, and Fire tion question." Their move will the "liberal" Kennedy's new bill stone. give pro-deregulation people in is, remarkably sim ilar in concept A strike against UniRoyal the Carter Administration a and form to a draft previously would involve no more than 8,500 cHance to maneuver. Inflation circulated by the American Con of the total 55,000 UR W mem Czar Alfred "Genghis" Kahn and servative Union. Kennedy'S crew bers. A settlement with UniRoyal, others in the Carter austerity man is known to collaborate with the however, would set the pace for agement bureaucracy apparently ACU and the Heritage Founda agreements with the other com- made some promises to the tion. "We're all forfr ee enterprise, panies. . Teamsters and the trucking indus you know," .says a Kennedy aide. Bommarito, a member of the try that the Administration would right-wing social-dem ocratic go slow on deregulation if the re group Social Democrats USA, cently negotiated master freight * * * has laid the blame for the contract contract between the industry and deadlock with the Carter Admin the union fell within the Carter Steelhaulers end strike istration and interference from the guidelines. Kahn claimed that the An unauthorized and limited special Council on Wage and contract did, but inside sources strike by steelhaulers, members of Price Stability. The union has an say he is still committed to dere the International Brotherhood of nounced that it will go to feder-al gulation. Teamsters, ended this. week when court to seek a preliminary injunc Kennedy people also report dissident locals in Pittsburgh, tion against the government, ask that the recent deal which ended Cleveland and Canton, Ohio vot ing that it be barred from interfer the jurisdictional "conflict" on ed to return to work pending the ing in the collective bargaining trucking deregulation between ratification of the Master Freight process. Sen. Howard Cannon (D-Nev), contract. The contract, which also The union is seeking to win for who heads the Commerce Com contains'a special rider clause per its niembership-whos-e average mittee, and Teddy Kennedy, who taining to steel, will be presented wages compare relatively poorly heads the judiciary Committee, in the form of mail ballots to the with those of other industrial actually makes legislation a pos full Master Freight membership workers-a 30 to 40 percent wage sibility for this session. The "vic of over 300,000 drivers for. a vote increase excluding gains in bene tor" Cannon, they say, is commit- this week. fitsand cost of living scale. Congressional Calendar bor-intensive work programs-a caused the incident, and what hap O Pposition to Carter's pledge endorsed by Kennedy-ally pened subsequently at both the decontrol, a fraud House Speaker Tip O'Neill. At the plant and throughout the industry. Despite all the dustbeing kicked up same time, Carter has succeeded in "We are particularly interested in by Kennedy, over President Carter's bullying the House Commerce the Price Anderson measure," de decision to decontrol the price of Committee into reversing itself by clared one staff member, referring domestically produced oil, the a vote of 21-20, which sent legisla to the measure that established lim American population is going to tion out of committee giving the ited liability for nuclear plants in pay the bill for the White House's President the authority to impose a the event of an incident. oil-shortage hoax-regardless of gas rationing plan prepared by Dingell is wielding committee which side of this "debate" sounds Schlesinger. authority to destroy the Price An more convincing. Earlier this week came the an derson measure, which would make Senator Kennedy's crocodile nouncement that Carter has direct it virtually impossible for nuclear tears over decontrol hardly cov er ed Energy Secretary Schlesinger to plants to get insurance. his three-fold purpose: to build up limit the refining of crude oil-the Hearings on the Price Anderson a populist "Kennedy" image for quickest way to create a gasoline measure open in July and in S�p the 1980 presidential race, draw shortage this summer. Right in tember, hearings will commence on support for rationalizing the oil in step, highly vocal Kennedy backers the GAO study of the Three Mile dustry, and let Carter be the fall as Sen. Metzenbaum (D-Ohio) and Island incident. guy fo r the sameve rsion of national ex-Ralph Nader staffer Rep, Toby austerity and deindustrialization Moffe�t (D-Conn.) have repeatedly the Senatorhas openly pursued. made it clear they favor govern If both houses of Congress do ment gas rationing at ,the pump as not pass a continuation of oil con the preferred fo rm of imposing en trols before June I, Carter will au ergy austerity. Kenn edy himself tomatically be empowered to begin called for "equality of sacrifice" be Standby mandatory wage his "phased decontrol" plan. Yet, a fore a New York audience April 30. and price controls authority Kennedy bill cosponsored with introduced Senator Henry Jackson (D-Wash.) Senator George McGovern intro to maintain full controls on oil at duced legislation on April 28 giving least until 1980 "will not even get the President authority to impose out of Jackson's own (Energy) mandatory wage and price con committee," predicted a House trols. The authority for such con staffer wtto favors control contin Three Mile Island still the trols expired last year and has not uation. In the House, Rep. Donald lever for assault on nuclear been reinstated. McGovern has Luken (D-Ohio) has introduced industry , been toying with the idea for some H.R. 3621, a companion bill to the The Three Mile Island incident is time, declared an aide, but decided Kennedy-Jackson bill; yet, after , still the lever being used by a num to introduce the legislation last Fri two weeks, its proponents are still ' ber of congressional committees to day after the announcement of the "plotting strategy." investigate the entire nuclear indus latest high Consumer Price Index. Aside from the show of opposi try. The Interstate and Foreign McGovern took the occasion of tion, Kennedy's outbursts have al Commerce subcommittee on Ener testimony by "inflation fighter" , ready cornered Carter into willing gy and Power headed by Congress Alfred Kahn before the Joint Eco ness to tax the oil companies, if man Dingell, has initiated a Gen nomic Committee (who declared decontrol goes through, and funnel eral Accounting Office study on that the inflation problem was get the money into low-technology, la- Thr�e Mile Island, including what ting worse), to propose mandatory 38 u.s. Report EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 wage and price controls. roa.ds, which complains only that to the floor,bu t they were defeated, Already there is widespread this bilL will simply not allow com so it still remains in the committee. speculation that the Carter Admin'"' pani�s to get out of the railroad If the cuts are not vetoed by May f istration is going to further restrict business ast enough. 22, they take effect Oct. I. much needed industrial credit. As ' The major railroad unions, in reported in last week's Executive cluding the United Transportation Intelligence Review, there are strong Union and the Brotherhood of indications that Carter will seek to Railroad and Airline Clerks, ap implement the Credit Control Act �ai"to be maintaining some degree of 1969. According to one Senate of opposition. "The proposal seems ' aide, the auto companies and the to be, put forward by people who Arab boycott legislation tied UA W are already lobbying on have more concern for balance to export act Capitol Hill against this measure, sheets than a balanced, healthy, Rumors are flying about the trade which gives the President power to U.S: transport system," said a community that something is brew restrict any "nonproductive" credit spokesman for the UTU. "Many ing over what is known as the Arab he thinks necessary. shippers and many localities will ' boycott legislation. The measure, "I would not be surprised if • lose all servic� if the bill as written which has been law for sometime, Carter tries credit controls" de goes through." fo rbids U.S. companies to comply clared one congressional source. Asks UTU President AI Ches with the demands of Arab nations n that goods be certifiedas not direct ser, "Why ow; on the threshold of ly or indirectly originating in Israel a wotldwide ' fuel catastrophe, wciutd anyone want to undercut the and has severely hurt U.S. compa most fuel-efficient transportation nies lrading with the Middle East. system in the country?"-referring Nevertheless, the legislation is to a Department of Transportation expected to be included in its origi Railroad deregulation: short plim to eliminate nearly 50 percent nal form as part of the Export haul to transport breakdo�it Of Amtrak's rail passenger service. Administration Act which goes Acting on orders from Transporta" Yet, says the union, "we have into mark-up at the beginning of tion Secretary Brock Adams, Sen. no problem with deregulation in May and will be votea on by the full Howard Cannon (D-Nev) has in principle," and looks to modifica Senate by May 15. According to a troduced S. 796, a 'bill to deregulate tions of the bill at the time of mark staffer close to the issue, the Busi the American railroad industry. up sometime in the next 4-8 weeks, ness Roundtable, which had object The basic provisions of S. 796 to cushion its negative impact. ed to some of the provisions under ' will: I) phase out the Interstate "They don't have the votes right pressure from the business com Commerce Commission as a body now," said a UTU spokesma.n. munity-and the Zionist lobby with a jurisdiction over rate ques Companion legislation to cut have come to an agreem�nt, and the tions; 2) permit relatively unbridled 12,000 miles of Amtrak passenger legislation will go through Con swallowing of small and or ,finan train service, is pending in both the gress intact. In March, Secretary of cially vulnerable railroads by larger Seria.te and' House Commerce Commerce Juanita Kreps testified ones, via merger; and 3}, permit Committees. Under the terms of to the Senate Banking Committee , widespread abandonment of basic the legislation submitted by the that the boycott legislation had � o service, scrapping up to 70,000, Transpo ati n Department, the worked so well it should not be miles of track. . ' cuts become law on May 22 unless changed. The thrust of the bill is ex vetoed by either house. On May 1 -Barbara Dreyfuss pressed by statements made by the the Senate �ommerce Committee ' Association of American Rail- held two votes to send the measure May a-May 14, 1979 EXECUTIVE 'INTelLIGENCE REVIEW u.s. Report 39 Wo rld steel industryin crisis Part II: the U. s. steel cartel In 1950, the United States' position as the world's and uncompetitiveness of' U.S. Steel's steelmaking number one steel producer was unrivaled. The u.s. operations. In 1978, U.S. Steel's earnings dragged steel industry produced 97 million net tons of steel or down the average of the nation's top six steel 47 percent of world output. companies. Moreover, the 75 percent increase in U.S. Last year, nearly three decades later, the U.S. Steel's earnings over a severely depressed 1977 was due produced only 124 million tons, and its share of the almost entirely to the comp,any's nonsteel lines of world market had shrunk to 17 percent. The u.s. steel business. Only 14 percent of its operating profit came industry slipped to number two behind the Soviet from steel, while all of its steel plants lost money except Union in 1971, with Japan running a close third. Last Fairless Works, its only relatively modern, integrated year, Soviet production jumped ahead to 152 million plant, which produces high-grade steel products exclu net tons of raw steel, while total East bloc production sively. (the Warsaw pact nations) rose to 212 million net tons. U.S. Steel has a novel way of dealing with its The U.S. steel industry's technological edge has uncompetitiveness. Whereas the well-managed industri lagged along with its output. This point is best al corporation will expend every effort to outsell the illustrated by the fact that not one ton of U.S.-made next company by developing the latest and most steel went into the Mexican or Alaskan pipelines. U.S. efficient technologies, U.S. Steel's approach is to use its steel companies didn't measure up to the projects' political clout to reduce everyone else to its OWn tough requirements and, as a result, lost out on major technological level. Take U.S. Steel's continuing efforts, contracts at their own doorstep. in collaboration with Bethlehem Steel, to sabotage The major responsibility for the decline of U.S. Wheeling-Pittsburgh Corp.'s plans to construct a new steelmaking lies with the United States Steel Corpora rail rolling mill in Monessen, Pa., utilizing the most tion, the industry leader since the beginning of this advanced Japanese and French railmaking t echnology. century. U.S. Steel is a huge anomaly. It continues to The ultra-modern rail mill threatens the fifty-;.year old account for around 25 percent of the shipping capacity monopoly of U.S. Steel, Bethlehem, and CF&I Cor of the nation's steel industry, yet its top management poration, and ' challenges the unspoken agreement ranks are saturated with lawyers and accountants, among members of the U.S. steel cartel that no new whose bent has never been advanced technology or steel mills will be constructed in the United States. ' ,industrial production. U.S. Steel's new chairman, David . The only conclusion that can be drawn from all the Roderick, a member of the International Advisory quirks in U.S. Steel's behavior is that the U.S. Steel Cou�cil of Morgan Guaranty Trust, is known itt , Corporation is not primarily a steel company or even industry circles as a "financial" man. Edgar Speer, the a "diversified corporation,." Qut a political intelligence recently retired chairman, was by his own admission unit. U.S. Steel ,is currently backing a set of policies much more interested in the company's coal and other which add up to the New York Council on Foreign mining ventures than in steel production. U.S. Steel's Relations' "Haig option" for national autarky and top officers and directors-especially its Morgan confrontation with the Soviet Union. Guaranty-Aetna Life and Casualty-dominated finance This includes support in high places at U.S. Steel committee-are notorious for squelching any techno fo r the 1980 presidential candidacy of outgoing NATO logical innovations that are generated by the company's Supreme Commander Gen. Alexander Haig. The most engineering or production staffs . � active Haig supporter in the Pennsylvania region is The bottom line of management by bankers, H.J. Heinz II, paterfamilias of the "57 varieties" fa mily, lawyers, and accountants is the glaring obsolescence and a ranking member of the American Ditchley 40 Economic Survey EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 Whe> runs U.S. Steel? The board of the inappropriately named United States Steel Corporation reads like a who's who of the Anglo-Canadian-American financial and intelligence establishment. David M. Roderick, the newly named chair man, is a member of the International Co.uncil of Morgan Guaranty Trust, the financial institution which has been one of the chief conduits for British influence in the U.S. since the 19th century, and is also a director of the Morgan linked Aetna Life and Casualty Co. Roderick has a background in finance and accounting and was Foundation. Heinz also sits on the board of the British president of the company over the past several North Am erican Committee along with a very influ- ' years of eroding profits. ential Canadian director of U.S. Steel, Northern John M. Meyer, Jr., the eminence grise who Telecom chairman, Robert Scrivener. U.S. Steel, in sits on the executive, fi nancial, and audit commit fa ct, is already running with the key planks of the Haig tees of U.S. Steel, is chairman of the Directors • candidacy: Advisory Council of Morgan G uaranty. U.S. Steel is one of a core group of companies, Robert C. Scrivener, chairman of Northern including Britain's General Electric Corp., Ltd. and Telecom, Ltd. of Canada, is perhaps not as well Canada's Northern Telecom, that are on the inside known in the U.S. as some of U.S. Steel's other track on NATO's geopolitical designs to build up directors. Scrivener, a Commander of the Knights China militarily against the Soviet Union. In the first of St. John, is one of the key political spokesmen / week of this year, during China's "punitive" invasion for the "North American Common Market/' of Vietnam, U.S. Steel signed a major contract with the which in his conception is an anti-Soviet North People's Republic of China to build one of the world's American military alliance stretching from the , largest iron ore mines, with an annual capacity of 45 Arctic Circle to Panama. million tons. Scrivener has recently visited China to consol .. While lending support to the regime in Peking, U.S. idate a billion dollars in telecommunications Steel has barraged traditional U.S. allies such as Japan contracts with the Chinese. and Taiwan with intimidations and actions against William McChesney Martin is a member of alleged "dumping'" and "unfair government subsidies" U.S. Steel's executive and financial policy com to their steel industries. The real target of U.S. Steel's mittees. As chairman of the U.S. Federal Reserve attacks has been the concept of state-fostered capital Board from 1951 to 1970, "McMartin" oversaw fo rmation operative in those nations, especially as it the disintegration of the U.S. economy from its interferes with the International Monetary Fund's potential as the capital goods exporter to the opposing brand of "laissez faire" economics-austerity . world to a crisis-wracked "consumer-based" U.S. Steel was among the first supporters of economy. He also sits on the board of Royal Schlesinger's energy program in early 1977. The Dutch Shell in The Hague. Schlesinger program, with its emphasis on low-efficien Donald B. Smiley, chairman of the board of cy energy sources like coal and solar power, is the R.H. Macy and Co., is as little suited to run the appropriate energy policy for deindustrialization, the nation's largest steel concern as its other directors. policy U.S. Steel is openly committed to carrying out Not even an authentic retail store, Macy's through "rationalizing" steel capacity and diversifying reportedly makes more money on its consumer sive Otlt of steel -production altogether. Given its exten credit and dirty money operations than on holdings of coal reserves in the United States, U.S. merchandising. Smiley is also a director of RCA, Steel also stands to benefit directly from the Schlesinger which is closely linked to the Anglophile Lehman program fo r energy autarky. Brothers and Kuhn Loeb investment houses. Today, most of the U.S. steel industry is behaving Other prominent members of U.S. Steel's like U.S. Steer. After being sorely battered in 1977-the board include John D. deButts, chairman of year Bethlehem's earnings were $448 million in the AT&T, and John H. Filer, chairman of Aetna red-the industry embarked on a suicidal "cost-cutting" Life and Casualty. . binge which has done nothing to reverse the long-term EXECUTIVE INTELLIGENCE REVIEW Economic Survey Mgy 8-Mgy 14, 1979 41 Return on investment in steel: the u.s. comes in last 10 20 30 40 50 60 Approximate investment in steel making equipment from 1957-1 976* __...... 11 Production capabilities in 1956**t Production capabilities in 1976* * Production capabilities added, 1956- mrTiTTrTTiTiT1rTiTTrTT-n''mrTiTT"rTTiTiT1rTiTT"rn'''''-iT1rTiTT"rn'''''-,...,..,.,..,.TT1"T''T'.,...,-,j �976* * Total capacity added since 1956 Greenfield capacity. added since 1956** Capacity added �ince 1967* *t ' Capa�ity of the ten largest plants in 1M'TT"rn""'-iT1rTiTT"rn""'-iT1"T"T'TTrn+riT1rrT'TTrniTT"M""""'rT"rn.,..,..T'T"r"'I 1976* * "* in billions of dollors o U.S. "* * in millions of net tons tEfleclive capacity 11111 Japan :f:Beginning in 1977, the steel industries of all three sectors began cI�sing down their oldest copacity as part of continuing .. EEC "rationalization" programs. Source, Steel Industry Economics by Hans Mueller and Kiyoshi Kawahilo, Jan. 1978 Poor return on investment in steelmaking in the U,S, is due to one thing: bad investment and credit policies arrived at through the combined incompetence of the leading companies, the government, and the financial community, While both the U,S, and Japanese steel industries invelted approximately the lame amounts in Iteel facilities between 1957 and 1976, production capacity increased by 979 percent in Japan and only 34 percent in the U.S.! Two-thirds of the investment dollars in Japan went for the construction af greenfield planti-giant, fully integrated, and modern Ifeel complexes built from scratch. By contrast, only two greenfield plants have been built in the U.S, over the last 25 yearl-U.S. Steel's Fairless Works in Pennsylvania and Bethlehem's Burns Harbor, Indiana plant. The U.S. in'dustry sank mOlt of its investment dollarl into piecemeal "modernization" of aging plants and as a consequence the industry has been forced to divert an increasing Ihare of its outlaYI-now 20 percent-to nonproductive, antipollution devices for the antiquated capacity. Europe Itraddled a middle course, with the relult that while there was a considerable increase in capacity (10.8 million tons) between 1957 and 1976, there was relatively little greenfield capacity added, and large segments of the European industry are outmoded and unprofitable. The Japanese steel industry's superior technology was clearly the source of its high profitability, not better "cost-price relations" or low wagel. Japan's Iteel industry was designed to take full advantage of economies of Icale. In 1976, Japan's five largest plants had twice the capacity of the five largest in the U.S. Japan, moreover, adopted wholesale the perfected basic oxygen furnace (BOF) and other technological advancel made in the U.S., but whole adoption wgs slowed down or fully sabotaged by "cost conscious" finance committeel. The tables rapidly turned in technological superiority. Early this year Japan invited the U.S. to collaborate with it in a joint program to develop high-temperature gas-cooled reactor-based nuclear steelmaking, but was turned down by the Carter Administration. The cost benefits of giant (2,000 cubic meter and larger) BOFs, continuous casting, and other features of modern steel-making which predominate in Japan are seen strikingly in the high energy-eHiciency of Japan'sin dustry. In recent high output years, Japanese mills consumed 28 percent less coking coal.per ton of pig iron and 22 percent less energy per ton of finished product than U.S. mills. Unlike Japan, which has no natural resources but has more than compensated for its import dependence through advanced technology, the primary objective of the U.S. Steel Corporation-since its founding in f901 by British System admirer J.P. Morgan-has been to grab natural resources. 42 Economic Survey EXECUTIVE INTE�UGENCE REVIEW May 8-May 14, 1979 erosion of productivity and profitability in the industry. Lately, in a noticeable departure from their usual "free market" rhetoric, a number of steelmakers in the Pittsburgh area, including Richard Simmons, chairman Freemasons give U.S. Steel of Allegheny Ludlum,' have either endorsed by name the Davignon plan for European steel or have endorsed the thirty-third degree its concept. The Davignon plan is an official, govern ment-run cartel which sets quantitative limits on steel Informed sources in Pittsburgh say that the long imports coming into the European Community, at tradition of incompetence at the top ranks of V.S. tempts to set minimum prices for steel in a declining Steel is due to' the fact that upper management is market, and is carrying out plans to shut down around dominated by Scottish Rite Freemasons, the 20 percent �f what is left of European steel capacity conspiratorial secret society which President John after the 1974-75 recession. Behind the "face of free Quincy Adams denounced for treason in the . 1820s. Promotion to the pinnacles ofthe company trade,". the V .S. steel industry has been fu nctioning like a cartel,too. It has accepted as inevitable the "shrinking is determined not by expertise in the steel business, world market"-which is in fact a condition created by the sources say, but by one's degree a� the the IMF's restriction of credit to the developing sector Freemason lodge. for financing advanced sector exports of capital . The V.S. Scottish Rite Freemasons are the goods-and is responding predictably: by driving out bush league version of the Knights of St. John of competition from cost-efficient Japanese imports and Jerusalem, the exclusive secret society of the by attempting to maintain "stable" internal market European "black nobility." It is these circles in conditions through eliminating "redundant" steel ca Europe-exemplified by Viscount Etienne Dav pacity. ignon of the European Commission in Brussels and Sir Charles Villiers, chairman of British Steel�who are carrying out the Davignon Plan The current steel "boom" for ripping out the innards of the European steel industry-eliminating another 20 percent of the u.s. steel operations broke,through 94 percent capacity utilization in the first quarter of 1979, and plant order steel workforce through "rationalization." books are reportedly filled solidly through late spring. Total industry shipment� are expected to exceed an annual rate of 100 million tons for the first half of the year, surpassing 1978's 97 million tons. But what industry spokesmen are calling a "boom" in steel production, is really a final spurt, which is Peak steel capacity in the V .S., which was reached based on a package' of autarkic trade. and ,industrial - in the late 1960s, was around 160 million tons of raw policies. steel. In 1977, closings by Bethlehem and Youngstown The current high operating rate in the industry is Sheet and Tube alone subtracted 4 million tons of due primarily to what V.S. Steel and Bethlehem call capacity; additional scattered shutdowns have meant "fair trade practices." By early this year, the Treasury's further losses of an undefined amount. According to trigger price system had succeeded in bringing about a Iron Age, the recent utilization level of 94 percent-a dramatic, across the board drop off in imports and in little over 2.8 million tons per week-is probably close handing over a bigger market share and substantially to what the industry can produce at maximum on a higher prices to V.S. producers. Imports entered the sustained basis without major breakdowns or acci V.S. in the first quarter of the year at an annual rate of dents-not the theoretical 150 to 155 million ton range. just over 15 million tons, significantly below the 21.2 One of the ironies about the V.S. steel industry's .. million tons last year and 19.3 million tons in 1977. continuing vendetta against "cheap foreign imports" is Another factor in the current steel "boom" is the dependence of the V.S. economy on steel imports, significant hedge-buying in anticipation of higher steel which crops up in periods like the present. The Vnited prices and the likely development of steel shortages States is one of the only advanced sector economies resulting from the indus�rY's deliberate policy of that is not self-sufficient in steel-another is Great eliminating "excess" capacity. According to Iron Age, Britain, and its import-dependence .is increasing daily the leading trade magazine for the steel industry, after because of the V.S. steel industry's present "rationali four slack years, V.S. steel companies are having zation" strategy. Shades of 1973-74, when domestic trouble gearing up to meet increased demand for steel. steel supplies were tight and imports sold for a big Moreover, the attrition of the last several years has premium, are already returning. V.S. steelbuy ers are created doubts as to the extent of usable steel capacity. paying premiums ranging from $10 a ton above the May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Economic Survey 43 $355 trigger price fo r wire rods to $40 a ton fo r higher fate of the steel industry and the entire economy for grade steelbars and structurals, so as to be sure of that matter is hanging on the auto industry and the supplies. teetering mountain of consumer installment credit that The final element is hedge-buying in expectation of underpins U.S. auto sales. a year of escalating labor-industry confrontation, fo mented by the Administration's unworkable seven percent guidelines and confrontation seekers on the Where is the industry headed? labor and industry sides. On site reports indicate that The U.S. steel industry long ago scrapped all plans for steel-consuming industries such as electrical machinery constructing new greenfield plants-the giant, fu lly and auto-both of which have contract negotiations integrated and modern steel complexes that are the upcoming-were buying steel and building up inven secret of Japanese steel's superior profitability. "Con tories of manufactured goods through the first quarter neaut is dead," was one industry analyst's succinct of the year in anticipation of crippling strikes later on. prognosis fo r U.S. Steel's projected 4 million ton At this writing, a two-week old strike by Teamster greenfield plant on the Ohio-Pennsylvania border. steel haulers has caused the layoff of thousands of Spokesmen fo r U.S. Steel have said that the corporation steelworkers at mills in Pennsylvania, Ohio, and West would only embark on the construction if it could hope Virginia, and threatens more layoffs in auto and other for an adequate return on the proj ected $5 billion steel-consuming ind ustries in the Midwest and North investment, which according to various Wall Street east. sources would require an estimated 40 percent increase Steel industry analysts expect the nation's steel in steel prices under today's uncertain market condi industry to be severely jolted around Sept. 15, when a tions. UAW strike against General Motors is more than likely. The auto industry accounts fo r about 20 percent 'Rationalization' of U.S. steel shipments, and General Motors alone The only type of planning that is going on in the U.S. consumes around 12 percent of U.S. steel output. While steel industry today is planned shrinkage, the policy the steel industry's public relations spokesmen claim known as "rationalization." The short-sighted accoun that the steel "recovery" is becoming increasingly tant's strategy behind rationalization is to recoup "broadbased," orders from steers capital goods mar profitability by closing high-cost facilities, and intro kets remained depressed through the end of last year ducing limited modernization at less hopeless facilities . and have not turned around since then. The short-term This is hardly a strategy fo r sustained profitability. Domestic steel shipments by major markets in millions of net tons 1978 1975 1974 1968 Steel service centers 17.4 12.7 20.4 14.1 Auto industry 21.3 15.2 18.9 * 19.3 Construction 13.4 12.0 17.6 14.2 Shipbuilding 0.844 1.4 1.3 1.0 Aircraft and aerospace 0.062 0.069 0.079 0.090 Oil and gas industry 4.1 4.2 4.2 5.3 Machinery 9.9 8.4 1 0.9 9.4 Container and shipping material 6.6 6.1 8.2 7.9 Total 97.9 80.0 109.5 91.9 Source: American Iron and Steel Institute. * The peak year in auto was 1973, with steel shipments at 23.2 million tons. The percent change is computed from this year. 44 Economic Survey EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 I Bethlehem Steel, however, the nation's number two investment in new basic steel capacity in the V.S. by his company, recently elevated to a top executive post the or any other company; "You are better off ,putting man who as vice president for ' accounting in 1977 your money in the bank." At the same time. he fo resees executed the company's plant-closure program. The that the result could be serious shortages of steel and promotion of former Price Waterhouse accountant greater import-dependency by 1980. Donald Trautlein to executive vice president last winter National Steel stepped up its diversification push by was part of Ii major management reshuffle at Bethlehem purchasing Vnited Financial Services, a major Califor undertaken to expedite the rationalization program nia-based consumer finance company, earlier this year. that was initiated in 1977. Then Bethlehem padlocked National Chairman George Stinson, a former law to percent of its capacity and fired more than 20 partner with the New YOI:k firm of Cleary, Gottlieb, percent of its employees, management and R&D explained that National is eager to get out of steel and personnel, as well as production workers. Two of the into "less cyclical" industries like fi nance. hardest hit plants were at Johnstown, Pa., and Allegheny Ludlum, a specialty steelmaker which has ,Lackawanna, N.Y., where a total of 8,000 steelworkers benefited from several years of specialty steel, quotas, were laid off over the year. Both plants predate 1900. acquired a controlling stake in Wilkinson Match, Ltd. In the company's annual report for 1978, Bethlehem in 1977 and now makes razor blades and other Chairman Lewis Foy, who is also a director of Morgan consumer products in addition to its traditional steel Guaranty, said the company would not shirk from products. shutting down less profitable plants. The rationalization and increasing cartelization of Mergers, community-worker "buy outs" the V.S. steel industry are taking place through other Last December, the Lykes Corp. and LTV, two of the less apparent ways as well-through diversification, more notorious conglomerates of the 1960s, merged to through industry mergers, and through the capricious form the nation's fo urth largest steel company, the new enforcement of Environmental Protection J\gency Jones and Laughlin Steel Corporation. LT V had pollution standards. acquired J&L and Lykes had acquired the now defunct Youngstown Sheet and Tube Steel Corporation during 'Diversification' an earlier shakeout in the steel industry. The fact that Diversification out of steel has been company polic'y at the weakness of the two steel subsidiaries which V.S. Steel since 1901. propelled the parent companies into the current merger Today, upwards of one-third of V.S. Steel's sales was due in large part to the "bleeding" of the are in nonsteel areas, including chemicals, cement, real operations by the conglomerate parents has raised estate (including office building and shopping center suspicions about the prospects for the new steel firm. A management), and "resource development." V .S. Steel post-mortem study conducted on Youngstown Sheet prides itself on being one of the biggest independent and Tube's Campbell Works after Lykes discarded 'the mining companies in the world. 5,OOO-worker facility in September 1977, showed the Diversification has had a disastrous effect on V.S. result of this policy of deinvestment: revenues per ton Steel's ability to run profitable or even basic steel of steel at the antiquated steel mill were as much as 30 operations. percent below list prices over 1976 and 1977. V.S. Steel was forced to bow out of its contract The new J&L steel firm is already embarked on a with the Mexican state oil company in early 1978, when policy of triage. It has ruled out-a spending program to production problems at its Baytown. Texas plant were refurbish Youngstown's Mahoning Valley operations compounded by blockage of V.S. Export-Import Bank last fall as "prohibitively expensive." Early this year it credits to the project and by Schlesinger's sabotage of made plans to close down Youngstown Sheet and the V.S.-Mexican natural gas negotiations. A group of Tube's Brier Hill mill, where 1,000 workers are European and Japanese companies ended up providing employed, as part of its program for �hasing out all of the high-grade steel for the pipeline. unprofitable operations and eliminating "redundan Despite the visibly negative results of V.S. Steel's cies" in the two companies' steel operations. J&L is diversification policy, a growing list of companies are operating under the gun of $189 million in debt service fo llowing in suit. payable this year, the legacy of the prior companies' In its 1978 annual report, Armco boasted that it is heavy debts. , now "stronger than steel." Only about 54 percent of J&L's cost-slashing tactics are serving to advance , Armco's sales revenues derived from its carbon and the equally questionable aims of Gar Alperowitz of the ,specialty steel operations in 1978. Other lines of "radical" National Center for Economic Alternatives business included: oilfield equipment, coal. and finan in the Youngstown area. For the last year and a half, cial services such as insurance and chattel mortgages. Alperowitz has been trying to sell the steelworkers and Armco President Harry Holiday, Jr. predicted with community of Youngstown on the idea of "buying assurance this past winter that there won't be any major back" and reopening the Campbell Works facility, MtJ¥a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Economic Survey 45 ". which was run into the ground by Lykes. The plan, 20 percent of the industry's capital outlays (which run which is to be financed through worker and community around $3 billion), according to a recent report by the savings and federal loan guarantees, is a ,pilot project White House's Council on Environmental Quality. This in fascist local control and another new direction the is the highest percentage for any industry. U.S. steel industry could do without. According to the In a report released this past March, EPA said it blueprints, steelmaking costs are to be cut by 21 percent . intends to impose fines of as much as $260 million on at the reopened facility through the waiver of union the steel industry before 1983 for noncompliance with seniority rights and the' rehiring of a reduced workforce the Clean Air Act. EPA also states that given these of 2,600 to man the plant. In what can only be fines, the industry's weak financial position, and its ' interpreted as a suicidal impulse, USW President Lloyd large capital requirements (simply for maintenance McBride sent a letter to President Carter in late March costs), the industry will find it extremely difficult to , endorsing the project and asking for positive action on meet its future external financing requirements! the pending Commerce Oepartment loan guarantee The 1977 amendments to the Clean Air Act, which program. are set to go into effect this summer, pose an even greater threat to the nation's steel industry. They place The Environmental Protectiqn Agency Racket an embargo on new construction in states that have not Air and water pollution-control costs have been a satisfied EPA's environmental standards-no in'dustrial major cause of plant closings and layoffs throughout states have-or submitted new antipollution plans. To . U.S. industry since the early 1970s. According to EPA's date the only steel-producing states which have met the own estimates, around 25,000 jobs were either lost or EPA deadline in submitting pollution-control plans are threatened in the primary metals industries between Colorado and Utah. This meaI!s that unless the industry 1971 and 1978 as a direct result 'of EPA-mandated succeeds in persuading Congress to postpone the pollution. abatement expenditures. deadline, there will be a ban on all steel industry plants The steel industry has suffered the highest toll. EPA and equipment expenditures in most of the nation's has enforced both industry shrinkage and concentra steel-producing states as of midsummer. tion, since only the largest producers can afford to -Lydia Schulman meet the mandated standards. Youngstown Sheet and Tube's vintage 19th century Campbell Works was one such "marginal" plant to fall by the wayside in 1977 in the face of escalating pollution-abatement costs com U.S. steel industry expenditures on bined with depressed market conditions. Other steel pollution-abatement ,( air and water) facilities in Ohio's Mahoning Valley, one of the nation's oldest steel districts, and in the neighboring western millions of $ Pennsylvania and West Virginia belts have been living 90 .------under the continual threat of strict enforcement of EPA clean-air and water standards. 80 1------The industry has threatened that strict enforcement of EPA regulations could force it to junk as much as 26 70 1------million tons of old capacity by the end of 1982, because the industry deems it unprofitable to install mandated 60 1------antipollution equipment at those facilities. The stupidity of the EPA regulations is seen in the SO 1------...... fact that the mandated "antipollution" expenditures actually perpetuate ' antiquated and polluting steel 40 1------capacity. By claiming an increasing percentage of the steel industry's capital expenditures each year, antipol lution spending locks the industry into a vicious cycle 30 of diminishing investment on new, nonpolluting capac 20 ity, and .escalating pollution-control costs and fines 1W4 1975 1976 1977 1978 against aging cake ovens and steel mills. Pcillution Source: Bureau of Economic Analysis, Deportment of Commerce. abatement expenditure by steel fi rms has now captured 46 Economic Survey EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 Trigger Price Me�han is'm: a case, study ' "The only thing the trigger price mechanism has postwar investment strategy, Japanese steel costs were triggered is inflation" significantly lower than either American or EEC costs, This was how one steel firm representative in the and American manufacturers were more than willing to New York City area described the effects of the Carter import Japanese steel that, in many cases, cost $100 Administration's trigger price mechanism. Under TPM, less per ton to produce than American steel. Except for imported steel cannot be sold below an artificially high basket cases like British Steel, most European . steel price-set by the U.S. Treasury,-without "triggering" companies made steel more efficiently and cheaply than an 'Iantidumping" suit against the fo reign steel mill. U.S. mills, until the oil price hike of 1973 and the steel "But the TPM is really a joke," the executive went bust of 1975 destroyed their markets and marginal on. "It has simply become a method under which advantages. American steel mills just raise prices to suit themselves. Predictably, U.S. steel imports rose from being 6.1 And it has' not kept foreign imports out-1978 was percent of steel consumption in 1959 to 13.5percent in their best year yet. 1975 and i4.l percent in 1976. By 1977, after several "Nobody in Treasury knows anything about steel, years of the present depression had wiped out the so Undersecretary Solomon just went to big American domestic American postwar boom in construction, cars, steel companies, which can afford a very expensive and highway construction (the three major steel lobby in Washington, and they probably wrote the consuming areas), American mills latched on to a TPM for him. It's ,been great for them, but it's caused protectionism campaign aimed at the Japanese. stagflation for everyone else ....I could understand a real quota to keep fo reign steel out, but not this." TPM The TPM, activated by the Carter Administration Under TPM, the trigger price or minimum price for 'in January 1978 under the guise of fighting "cheap" imported steel was pegged far above the actual cost of foreign steel, gave American steel companies the producing steel in Japan and shipping it to the U.S. opportunity to raise their selling prices by $50 to $60 Although Japanese companies stated that in 1976 they per ton on average. were able to produce and ship basic carbon steel to the What this means for the American citizen is that U.S. for $285 a ton, the trigger price was set at $333 a every time he purchases a manufactured product using metric ton for commercial quality cold rolled sheets, · steer, everything from a toaster to a car to a house, he the largest import category, for the first quarter of · has to pay an additional $50 to $60 per ton over what 1978. From that point on, Japanese steel import prices he would have paid in 1977. And this surtax did not go were to be much closer to American prices, to protect toward capital investments in the steel sector, but Americaq sales. Any prices below the TPM, which is funded windfall profits for steel companies, nonprod revised quarterly, would immediately "trigger" dump uctive antipollution devices in steel mills, and diversi- ing investigations by Blumenthal's Treasury. Because ,fication out of basic steel into such speculative, quick of the steady appreciation of the yen over 1978, trigger profit areas as real estate, as well as chemicals and' prices rose by around 30 percent. By the first quarter of textiles. 1979, the trigger price for cold rolleft sheets had been Steel executives in major companies like U.S. Steel, hiked from $333 to $436 a ton. who swear that the TPM is the only thing ,saving them European nations did not object to the treatment for cutthroat competition with 1apanese steel mills, dealt to the Japanese because they realized, and British should realize that using artificially high protective Steel was one of the first to catch on, that this prices as tariffs is nothing new, nor would the resulting artificially high trigger price allowed them to legally · economic disaster for American steel be unprecedented. "dump" steel at a price that-although high by · During the 1920s and 1930s, backward British industry, Japanese standards-was still lower than some of their ., the home laboratory . for Fabian economist John production costs. In other words, they could no longer Maynard Keynes, fo llowed' liis advice and created be undersold by the Japanese in the American market! price-fixing cartels with alleged anti-import devices like But, instead of stopping foreign steel dumping in the TPM. The present bankrupt, . nationalized, and 1978, the trigger price did the exact opposite! Japanese inefficient state of British Steel Corporation, or British steel exports to the U.S. did decrease by 17 percent, but Leyland, should be enough of a warning. EEC steel exports increased by 10 percent, while Canadian, British, and Third World steel exports to the Get the Japanesel U.S. skyrocketed. By 1977, the U.S. steel sector had reached the point of -James Cleary a 'self-created collapse. Because of Japan's superior Mdy a-May 14, 1979 EXECUTIVE INTElliGENCE REVIEW Economic Survey 47 ( SPECIAL REPORT "The fu nction of the hospital has turned fu ll cycle. Thirty years ago the slogan was 'get people into hospitals!' The present watchword is 'get people out of hospitals. ' The fu ture requires that we keep people out of hospitals ...." -Rufus Rorem, first chairman of Blue Cross, 1961 Senator Kennedy's health care plan: The one issue for the 1980 U.S. presidential campaign cutbacks in existing services as a result of inflation. that has managed to stir up popular ferment is that of However, at the American Newspaper Publishers a comprehensive national health care program. As Association conference last week in New York, tightening austerity and inflation increase voters' Kennedy said, "The only people who care about cost anxiety over actual or potential medical care needs, containment are the people opposed to it-the hospitals Sen. Edward Kennedy has come forward as the and the AMA. The only way to get cost containment standard bearer against "big business" interests of is to pass the national health insurance bill." organized medicine and allegedly on behalf of the 2. Reform and reorganization of the Food and Drug "consumer" patient. Administration.This is a bill written in collaboration by Kennedy, whose undeclared candidacy for the the Kennedy staff and staff of Health, Education and Democratic presidential nomination already has the Welfare Secretary Califano to reshape the pharmaceut nod where it counts-behind the · closed doors of the ical industry away from basic research toward the New York Council on Foreign Relations-has been production of palliatives, and to undermine its scientific organizing a consumer and paramedical constituency standards of evaluating the efficacy of new drugs in in favor of his national health care bill, and he has the favor of "consumer input." support of nearly every trade union in the country. 3. The institutionalization of the hospice "right to In the opposition camp, the bill's most vociferous die" movement by designating Medicaid and Medicare critics are generally pushing a "free enterprise" line funding for centers where the "terminally ill"-a term that claims self-t'0licing will accomplish the same which would embrace a growing number of diseases austerity aims as the · "socialistic," British-modeled would be fed nostrums and panaceas until they expire, Kennedy approach. and advanced medical care would be actually forbic:tden. This polarization of the debate between classic "left 4. National compulsory health insurance. This bill, versus right" constituencies has disguised what is really described in the article below, would enforce barefoot afoot around the Kennedy effort. Like everything else doctor medical standards on the entire population. that has been packaged to make the bumbling This total impact-amounting to a shutdown of Massachusetts Senator work as a "media event," advanced scientificmedicine and medjcal research-has . Kennedy's purported aim of providing every American been carefully disguised by a piecemeal legislative with comprehensive I,ealth insurance coverage is a approach. The Kennedy he2flth measures were designed public relations front. The core of the issue is a and marketed to slip through this Congress and the campaign to strip American medicine of its world next as a series of legislative fragments, each of which fa mous high-technology effectiveness. contains a piece of the practical policy to be imple The real Kennedy health plan consists of: mented. Thus with the assistance of duped trade unions, 1. Carter's hospital cost containment bill. Kennedy a hangdog American Medical Association, and mis claims to oppose this measure which would put an guided free enterprisers willing to institute "compro absolute lid on hospital costs, thus barring the mise" austerity measures in the hope of staving off the introduction of any new technologies and forcing major spectre of HEW-Kennedy "socialized medicine," the 48 Special Report EXECUTIVE INTELLIGENCE REVIEW May a-May 14, 1979 ------) shut it down entire fiscal austerity apparatus would be put into place than 50 years of planning, as our report demonstrates. by the time Kennedy makes his bid for the White These "planners" now believe they have created a House in 1980. sufficient climate of distrust in science to convince the Like the closely related campaign to shut down the public that its self-interest is best served by undermining V.S. nuclear enerID' industry ,the Kennedy "health" advanced medicine, and replacing it with a system of plan is part of something 'bigger that gets lost in the consumerist cost containment and palliative treatment. debate over "cost containment" versus skyrocketing The purpose of modern scientific medicine is to inflation. Ironically, the increasing cost of health care increase the productive lifespan of a precious citizenry. as a percentage of total social expenditure is largely a The grim, but logical consequence of denying an result of the V.S. economy being oriented away from increasing proportion of the population a productive technologically-advancing productive investment. life is to award both the medical profession and a large The Kennedy health package is the product of more number of patients the "right to die." r Call for blue ribbon commission Lyndon H. LaRouche, Jr. , a candidate fo r the 1980 be made the issue of what is to be delivered. After presidential elections, issued in December 1978 a the fight for the quality of health services is won, we froposal io defeat what he termed Kennedy's "Kool can settle the issue of financing delivery properly .... J4id fo r the aging" approach to health insurance. LaRouche, chairman of the U.S. Labor Party, The duty of the medical profession-and of proposed the creation oj a blue ribbon commission. national policy-makers-is to encourage the medical That proposal, excerpted here, includes an outline of profession to promote high rates of expansion . of the commission's responsibilities: services and high rates of improvement · in basic research and in high-technology equipment. It is the The primary focus of the commission's work should economy which is sick, not the medical profession. be the service of those ethical principles for which all . With a return to emphasis on generalized scientific honorable profes�ionals stand in essential agreement, and technological progress, and an emphasis on despite secondary divergences among them on the high-technology forms of employment in production ' issue of financing the delivery of a quality of of useful tangible goods, the economy will begin to professional service on which all honorable profes be cured of its own disease, and with that develop sionals are generally agreed .... ment the burden of medical services will begin to The issue to be emphasized at this mom(fnt must evaporate .... May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Special Report 49 The nati ona l hea lth insurance plan During congressivnal hearings in October 1978, Senator in the United States by 1980. In New York, the Edward Kennedy said: "We must fa ce the hard reality. Administration has done away with 15,000 beds since Th e current nonsystem of medical care is a fa ilure. If January 1976. left unchecked, that fa ilure will become a disaster. ..." Second, the Hospital Cost Containment Bill, intro He proposed, in its stead, a national health insurance duced into Congress by Kennedy in 1978, proposes plan and predicted that "the next Congress will be known that hospitals place a 9 percent ceiling on their total ' as the health insurance Congress. " spending, resulting in a 3 to 5 percent cut in hospital Th e fo llowing report is based on a preliminary services annually. unveiling of that national health insurance plan as Third, the Hospital Systems Agency, established by ' reported in the Oct. 2, 1978 issue of the Washington Blue Cross to oversee hospital costs, is calling for an Insurance Newsletter. across-the-board elimination of IO percent of all patient beds in both voluntary and nonprofit hospitals. The Kennedy Health Security Act will create a national The passage of the Kennedy , bill itself would result health insurance program which will: in the closing of hundreds of hospitals across the 1 . Make comprehensive health services available to country. all Americans. Th e mandated benefits will provide fu ll Under the Kennedy bill: coverage fo r in-patient services, physicians' services, in 'Immediately upon enactment. the legislation will and out of the hospital, home health services, x-rays, and impose overall revenue and expenditure limits on hospitals lab tests. and revenue limits on physician services. Budget caps will 2. Control runaway health care costs through a be used to restrain current rates of increase in these prospective budgeting system. Upon enactment of the services. Future increases in health care costs will not be bill, budget caps (ceilings) will immediately be used to control hospital and physician costs. How does the bill presume to provide every American with proper health care at the same time that it cuts costs? The answer is simple. It can't. The bill states that it will lower the country's national health bill per year by $31.1 billion: Total costs of health care will be less within a fe w years of the national health insurance program than they , '�t��uiC' o�.tbe Congress to pass would be under current programs, because of the �ct bas aJready been feltjn the pn)setltl nlltion's legislators � a immediate and long-range cost controls applied. For ' 'Of series example. total costs will be an estimated $361.6 billion 'enc(.}mpa'S$ing many important as[lecl:S in 1985 without national health insurance, and $330.6 K.C'llnedY's pveral1 plan. This tll ts�an(]"'P1e billion, or $31.0 billion less with national health insurance. p�(.}�ch not 'only ' prepares tb� New on-budget costs fo r coverage of the poor and , legi,SIators and ci tizens alike wHI unemployed, and fo r improving Medicare. would be $14.1 ,!<,¢nnedy bHl itself, but is a fo rces billion in 1978 dollars. Kennedy in circumventing The Kennedy bill is not concerned with cost lllaster plan. Among the bills containment but, if passed, would enact a nearly 15 actively , being campaigned fp r by their percent cut in national health services. There is only one way to cut the national health bill _1:" .0" " ','. Th. Hos"ital Cost · Containment by 15 percent-by 9ismantling the national health S. 510 is a Carter Administration bill system. impose ·· mandlltory , immediate controls on �ital cost increases, .' with · Il 9.7 perce.!'lt Closing the nation's hospitals ,permissible annual · 50 Special Report permitted to exceed rises in the costs of other goods and Hospitals and doctors will not be permitted to charge services. patients more than the insurance plan pays. Placing such a budget cap on hospitals means first Since, as we shall show, the designated care for no improvement in health care and services. Second, diseases is no longer under the direction of the doctor since the system would carry an additional load of 20 but the agencies established by the bill to oversee its percent of the population currently without access to implementation, there is no room for improvement of hospitals, the overall quality of hospital care would be medical care. greatly lowered. The intensity of hospital care would Under the Kennedy bill: diminish. Third, since most of the nation's hospitals are Fee schedules will be designed toward equalizing currently operating on a slim margin, the combined cut differences in rates of physician reimbursement fo r the in reimbursements for care would simply drive many same illness or category of service. voluntary hospitals out of business. The effect of this provision is to put a maximum Under the Kennedy bill: cap on treatment. It would constrict vital clinical In advance of each fiscalyear of benefits, negotiations research and innovations in treatment of disease. between representatives of hospitals and doctors, on the Patients would not be offered the options of using new one hand, and the Public Authority, private insurers, and methods of treatment; they would not be available. health maintenance organizations on the other, will Despite the fact that the Kennedy bill claims to determine hospital budgets and schedules of payments of enable a greater percentage of the population to be physician fe es. admitted into the hospital system, admissions to No longer, therefore, will care and its cost be based hospitals would be more stringent through a claims on need and capability, but on a prearranged schedule review process under Blue Cross that would screen of reimbursements. This provides not only a disincentive hospitalization requests before entry. for hospitals to improve care but is a disincentive for Once the patient is admitted to the hospital, the the admission of patients. usual battery of tests ordered would no longer be given Under the Kennedy bill: routinely but only with a specific order from a doctor. On Feb. 7, Walter J. McNerney, president of the Blue Cross-Blue Shield Association, declared that payment will be phased out for 31 surgical and 10 diagnostic services unless ordered by a physician in writing on an individual basis. This would eliminate routine blood counts, urine analyses, chest X-rays, and electrocard i- - ograms-tests that often catch the irregularities signl!-l ing serious disease. This would deny health care particularly to the elderly and also those 21 million citizens who are referred by group plans and therefore have no individual doctors. In summary, by placing strict ceilings on expendi tures and adding millions to an already overburdened system, the Kennedy bill would legislate many hospitals out of existence through bankruptcy. By tightening requirements for hospital entry, the Kennedy bill would deny care to those who ne!!d it. By enacting strict fee schedules for the treatment of disease to those who are permitted entry and by holding a ceiling on allowed expenditures, the Kennedy bill would guarantee that the hospitals could no longer supply the kind of improved care that has greatly lowered the nation's mortality rate in the last decade. 'Alternatives' to hospital care The logic behind the Kennedy bill was stated simply by David Rogers, M.D., president of the Robert Wood Johnson Foundation, who has prepared the provisions in the bill for medical education and wrote in Daedalus magazine in 1977: "While we can probably make hospitals more efficient, the continuing technological advances of medicine dictate that the costs of a day in a hospital bed will continue to rise. But there is good evidence to show that a well-organized ambulatory-care system for certain groups can significantly reduce the amount of hospital care needed per person. A program that would cut hospitalization for each patient now admitted to a hospital in the United States each year by just one day would save $2 billion. Obviously, logic suggests that we strive toward a system in which less hospitalization is required, if we are to contain the costs of medical care within tolerable limits." Rogers suggests, and the Kennedy bill provides for, the reversal of the increased specialization of medicine methods to treat disease since the late I �th century and and a new stress on "primary care"; reliance on Health particularly in the last two decades has produced - an Maintenance Systems in lieu of hospitals for service; increased specialization in the medical field. No longer the elimination of "unnecessary" surgery; the creation is the ordinary doctor a general practitioner who is of neighborhood clinics to replace closed hospitals limited in his knowledge and experience of many \ especially in cities; accelerated creation of hospices for diseases. The increased division of labor in the medical the elderly and dy.ing; and stress on "preventive field, like the development of high technologies to medicine. " detect disease and treat patients, has increased the Under the Kennedy bill: intensity of health care delivered. It has saved lives. \ \ Fee schedules will be designed ... to encourage more The Kenn�dy bill, does not propose an interdisci primary care physicians. particularly in medically under plinary approach to solve coordination problems served areas. among specializations, but seeks to lower the level of The increased ability through vaccines and advanced medical skill to the lowest common denominator. 52 Special Report EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 The Kennedy bill would mandate priorities in medical education toward primary care and less specialization. Already, Secretary of Health, Education and Welfare Joseph Califano has proposed that fe deral grants to medical schools be predicated on an "incentive « �OUld 'tie in closely with th�'};;\ system" that would reward schools which admit a �paniU O' n' of OSHNsrole as a center fo r " higher percentage of students for tracking in primary providing evidence agains� : , care. Many of the country's 114 medical schools )fal:10l1ts that th e introduction of , new,, } currently operate on the financial margin afforded by government grants and would thus have to change ' plants and factories is harmful?;;' ,,' ,: : " " . " was their orientation toward primary care or close. , the intention of th� ':; :, 'a(l'cl , $afety Hazards Administratio1:i::, The U.S. health system does need more family "Ii1 the heaJth�care sector specifically ::,: practitioner specialists-a designation that requires 'wU[ (orce government intervention ,:), three years of hospital residency. Dr. Rogers, however, 1�It;StIUI;:ture of private insurancecarriet:' .·,'\<" , suggests the training of two types of physicians-"first cQverage is "inadequate." i;��' class" physicians would be trained like those today; 9litl!l files could . be used tQ ;:I; "second class" doctors would be "rapidly trained :¢gmcJtate" 'white-collar employees are: :,:' practitioners." i by hospitals s nce they h�\I�,;; The Kennedy bill further mandates: " plans and are admitted fQ r;;; : Regulation of major surgery and other specialist d :1ru j-g'e ry .and excessiv�£(' services. Tbls would provide the rationale1Q :l: : ' It is the contention of many backers and supporters to ,compani,es lower their bene of the Kennedy bill that since the number of types of come, un � thclr: , corporate clients operations varies from region to region, then some of the �xpert PSHA committee. , ," f::;;i this surgery must have been "unnecessary." Califano ' <.;/ , , ' . being.' proposed for this expert. ,-,? �: ,;, ,�. has established an HEW program "to get a second opinion free" if a doctor should order surgery. But, it ':1",.tl:l,l..�U \;;o.;1I1. vice president of the Oil.,:,'," has been shown that in cases in which surgery h�s been International :q: '�J��,IC Workers U nion <:., delayed-for example, removal of the gall bladder-the $upporter , of the Kennedy health bilL " , problem has recurred, making surgery necessary when ,a at professor oflaw Columbi�;: : the patient is older and less able to withstand it. "!, ,,'#�" ''' , , Jllember of thf' ArQ.erican Civll,;( It might be arg ued that some surgery could be ', ',I"""" " an ' and advocate of the antitrusb eliminated through the development of new drugs. sponsored ,Seti8tor Kennedy has ill However, the Kennedy-Javits bill for Pharmaceutical Revision Reform Code introduced in 1978 acts to deprive pharmaceutical companies of their research and development capabilities through divestiture of drug patent rights after a 60-month period. Harvard's Dr. John Knowles, a likely candidate until his recent death to sit on the bill's national Public Authority, has claimed: "Ten billion dollars could be of saved and made available for such (preventive) pro grams, if by miracle all unnecessary surgery were abolished." The claim' that $10 billion a year is spent Dr. Rogers even goes so fa r as to suggest the "use on "unnecessary" surgery is a ruse to rationalize the of nonphysicians to deliver most primary medical care. closing of the country's hospitals and pave the way for '" Such a system would probably be, at least initially, the "ambulatory" service that the bill's backers say will most acceptable to the two areas that currently have do just as well. the most serious problems in general medical care d rural areas of low patient density and heavily congested, Un er the Kennedy bill: inner-city areas now deprived of physicians." Health Maintenance Organizations and other nontra ditional fo rms of health care delivery, such as neighbor A lowering of the standards of health care is not hood health centers, will be fu lly supported and their only projected fo r low income areas. The Kennedy bill development encouraged through incentives. mandates: As originally conceived, Health Maintenance Or National licensure standards and requirements fo r ganizations were designed to provide a group of continuing education. people-through business, school, or union-with May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Special Report S3 health insurance, and · an interdisciplinary team of In October 1978, Edward Kennedy and HEW doctors and medical personnel. Under the Kennedy Secretary Joseph Califano were the two keynote bill, HMOs become a barrier to the patient's entry to speakers at the first annual National Hospice Organ the health system, and particularly surgery. According izing Meeting in Washington, D.C. The model for to one of its designers, the Kennedy-funded George Kennedy'S hospice program-which is also privately town Health Policy Center, the purpose of HMOs is funded through the Joseph and Rose Kennedy'Institute "to eliminate the second visit, that is, to make sure the for the Study of Human Reproduction and Bioethics at patient doesn't come back." Primary screening and Georgetown University-is the St. Christopher's Hos diagnosis of patients would not be performed by pice in London, created in 1967. Here, "patients" are doctors but by nurses and paraprofessionals. The administered a "painkiller" called the Bromptom HMOs are thus intended to serve as poor substitutes Mixture. It consists of heroin, cocaine, alcohol, for hospitals. tranquilizers, and chloroform water. It is administered Under the Kennedy bill: every three hours until the patient dies. Special provisions will be made fo r neighborhood The establishment of such hospices in the United health centers, community mental health centers, half States is already underway through state legislation. In way houses and other organized methods of delivering New York, the State Assembly passed a resolution in health care. Programs which are usefu l in reaching April 1978 that legally changed the definition of underserved populations will be covered. "hospital" to include "hospice." It mandated three Like the provisions for the HMOs, this would hospice pilot projects to be established in the state by decentralize health care and thus diminish' the intensity no later than 1980. Senator Hevesi, the bill's sponsor, of health services delivered to each patient. More is also the cosponsor of pending state legislation that ominously, the handing over of health facilities to the would legalize heroin for "medicinal purposes." "community" takes major responsibilities for health In addition, the 1978 Kennedy-Javits bill for a services out of the hands of medical professionals and Pharmaceutical Revision Reform Code provides for the places them in the hands of the "consumer." This creation of a special center to study heroin, LSD, and policy is explicit in tho enforcement �ection of the bill. other mind-destroying drugs for their use as "painkill Under the Kennedy bill: ers." This dovetails with an ongoing program of the A resources development fu nd will be established to . National Institute of Medicine, in conjunction with support a nationwide program of demonstration projects Califano's HEW, to enroll doctors at the National fo r the development of services designed to assist the Institute on Drug Abuse in courses on "pain manage elderly and chronically ill to remain in their own homes ment" instead of cure. rather than to be institutionalized. Under the Kennedy bill: The Kennedy bill thus legislates into nationwide Preventive care fo r all members of the population will existence the British-spawned Hospice Movement be actively encouraged and fu lly covered. otherwise kngwn as the "Right to Die" movement. Under a national health program that was con In the case of the elderly, it can be shown that the cerned with ensuring the advancing health of the increased hospitalization of those 65 and over has population as the guarantee for a steadily advancing decreased the mortality rate. With the enactment of the economy and technology, this provision would include Medicare program for the elderly in 1965, increased national immunization for diseases, regular guaranteed health care expenditures for the over-65 population checkups for early detection of diseases, and foremost, _ included a 47 percent increase in real hospital services raising the standard of living for the' population as a from 1965 to 1975. The death rate for the elderly during whole. How can there be preventive medicine under a 1965-1975 fell 11.2 percent, compared to only a 2.4 health system determined to cut health care by 15 percent .decrease during 1950- 1965. Thus, increased percent? hospitalization correlates with greater longevity. The The motivation behind this provision in the Ken Kennedy bill would reverse this. nedy bill is explained by Dr. John Knowles, who makes The Kennedy bill provision for hospices legislates clear that "preventive medicine" is predicated on a the nontreatment of the terminally ill. In most cases, decrease in the standard of living. In 1977, Knowles this involves those degenerative diseases like cancer, wrote in Daedalus magazine: "I will not berate the heart disease, stroke, diabetes, and chronic kidney medical profession, its practitioners and its professors disease that constitute the frontier of medicine today. they reflect our culture, its values, beliefs, rites, and It is here that a breakthrough is required in medical symbols. Central to the culture is faith in progress · science through basic research and the continual through science, technology, and industrial growth; innovation in detection and treatment. By relegating increasingly peripheral to it is the idea, vis-a-vis health, these patients to a hospice treatment of waiting to die, that over 99 percent of us are. born healthy and are the Kennedy bill shuts the door on the advancement of made sick as a result of personal misbehavior and medical science. ' environmental conditions. The cost of sloth, 54 Special Report EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 gluttony, alcoholic intemperance, reckless driving, through the combination of public and private programs, sexual frenzy, and smoking is national, and not an control the rapidly escalating costs of medical care, and individual, responsibility. This is justified as individual to effe ct major reforms in the provision of health care fr eedom-but one man's freedom in health is another by bringing private and public financing into conformity man's shackle in taxes and insurarice premiums. I with the goals of the legislation .... believe the idea of a 'right' to health should be replaced Th e Public Authority will contract with each state by the idea of an individual moral obligation to and territory to establish State Authorities as agents of preserve one's own health." the fe deral agency to implement national policy. Th e Knowles proposes that the individual has a public SA 's bipartisan members will be nominated by the State ' duty to maintain a low cholesterol and caloric intake Governor and approved by the PA . Consumers will and to desist fr om smoking and drinking. Curiously, comprise not less than one-halfof the membership .... he makes no mention of the fact that over 48 million Thus, the national Public Authority has absolute Americans are habitual users of mind-killing and life-and-death control of the national health system. physically destructive drugs such as marijuana, heroin, Who will sit on this Public Authority? Those who and cocaine. have been involved in drafting the Kennedy bill say Knowles proposes support for a "far . greater that the board will likely include: national commitment for research in health education • Senator Edward Kennedy. and preventive medicine with emphasis on epidemiolog ., Joseph Califano, Secretary of Health, Education, ic studies, benefit-cost analysis, and the most effective and Welfare. and least offensive ways of changing human behavior." • Isidore Falk, M.D., currently Professor Emeritus The emphasis on preventive medicine and the role . of Public Health at Yale University who has spent a of th-e "environment" in producing disease has already lifetime organizing for the nonhealth system mandated damaged the treatment of cancer. Through agencies by the Kennedy bill. like the Environmental Protection Agency and the • David E. Rogers, M.D., President of the Robert . Occupational Safety and Health Administration, the Wood Johnson Foundation in Princeton, New Jersey. "environment," particularly industry, has been blamed The Foundation is recognized by the New York Health for cancer. This has had three effects: first, the closing and Hospitals Corporation officials as being most down of plants and particularly nuclear energy facilities responsible for the ongoing shutdown of the city's 18 because of alleged environmental hazards; second, a municipal hospitals through its "private" .collaboration ' decreased stress on the basic biological research into with Mayor Koch. the function of cells, etc. where the source and the-cure • Robert Sigmund, director of the New York State -- of cancer is to be found; and third, in New Jersey, an Blue Cross Association. He is closely tied with the accompanying dismantling of state cancer treatment Milbank Foundation, which has funded lobbying for facilities, according to medical sources there. compulsory health insurance since the formation of the Cdmmittee on the Costs of Medical Care. • Max Fine, director of the Zionist lobby-controlled Im�lement and regulate Committee on National Health Insurance. He would The Kennedy bill would take the planning and represent labor on the Public Authority. Fine has overse�ing of the national health system out of the pioneered the formation of Health Maintenance Orga hands of the medical profession and place it in the nizations and has been instrumental in gaining labor hands of the Department of Health, Education, and support for the Kennedy bill. Welfare and coopted representatives of "consumers" • Ralph Nader, consumer advocate. Nader's role in and the health insurance industry. attacking industry and high technology is well known. Within HEW, the bill would be implemented by a He was instrumental in the passage of the Environmen Health. Security Board under the direction . of Joseph tal Policy Act, which in turn has enabled the campaign Califano. against industries that allegedly cause cancer. He is a Secondly, under the Kennedy health bill: major spokesman against "unnecessary insurance" for Universal coverage will be assured through a bipar many illnesses. As a director of the Public Interest tisan fe deral Public Authority (PA) whose members will Research Group, he advocates the passage of the be appointed by the President, subject to confirmation. Kennedy-Javits Pharmaceutical Revision Reform Code. Not less than one-halfof the members will be consumer These are the gentlemen likely to head up the representatives .... nation's health system, if the Kennedy bill is passed. Th e PA will regulate and oversee the operations of Theirs is the body count method of health care. the certified insurers and consortia and will consolidate Under the Kennedy bill: the administration of Medicare, a fe deralized Medicaid Programs such as state rate review agencies, health program, and several other existing fe deral programs. Its systems agencies, and professional standards review major objectives will be to assure universal coverage organizations, will be used to the maximum extent. May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Special Report 55 In short, doctors will be policed to ensure that no physician oversteps the prescribed guidelines of what is necessary. The bill particularly relies on the Professional Standard Review Organization, composed of local What's behind the rising cost bodies of other doctors who monitor a physician's activity and behavior. Established in 1972, persistent The variety of health care reform programs that have resistance from the American Medical Association has promised cuts in the rising costs of health care are rendered them ineffective. Under the Kennedy bill, generally based on two interrelated myths. The first is their use would be mandated by law. that the U.S. economy is a fixed pie with health care allocations regulated to a fixed percentage of the pie, not to be exceeded. Secondly, much of the new health The insurance enforcers proposals are geared away from high-technology care, Under the Kennedy Health Security Act, private fo cusing instead on keeping the patient "comfortable." insurance companies will be given a role enforcing the The assumption is that "expensive'" high-technology drastic cutbacks in both quality of patient care and the health care has only a marginal effect on the overall amount of investment in hospitals. And, despite the well-being of the population. carefully neutral tone of the legislation, Kennedy's staff stated this March that the Blue Cross Association of Why is health care so expensive? ' America and the Blue Shield Association will oversee It is true that the cost of services, particularly hospital the entire insurance consortium along the following and laboratory services, has increased greatly over the lines: past several decades. In 1950, 4.5 percent of the GNP ... The insurance industry will offe r uniform, com was spent on health, while by 1977, this figure had prehensive insurance benefits at earnings-based premiums increased to more than 8 percent. In recent years, the equal to or below the maximum set by the Public annual increase in national health spending has grown A uthority without experience rating ... provide only by 12 to 15 percent, a good deal above the calculated those other fo rms of medical insurance or disability consumer price index of 9 to 10 percent. income benefits which do not duplicate or conflict with Where is the money going? Nearly half of it is for the uniform health insurance benefits offe red by the improvements in the quality and quantity of services, fe deral program ... reimburse health care providers (both not in so-called excess profits on the part of health care institutional and profe ssional) fo r all services�overed by providers. In fa ct, the increase of health care costs as a the uniform comprehensive benefits, and at fe es and rates result of price rises for the same services is actually not to exceed those established in negotiation with the lower than the general rate of inflation. providers and approved by the State Authority. Consider hospital costs. If the cost per service is ... Allow the Public Authority or its designees access rising slowly, then why are the base daily rates for to financial and management records as they pertain to hospitalization climbing so quickly? The answer lies in the administration of the mandated benefits package .... the increased intensity of services provided for the ... Develop medical care profiles on treatment patient by the hospitals as part of the base hospitali provided and fa cilities used to rapidly detect any zation day. The American Hospital Association calcu minimizations or excesses which would conflict with the lates a Hospitalization Intensity Index (HII) that rendering of quality care and the efficient delivery of combines more than 40 aspects of hospital care, medical services .... including number of doctors per hundred patients, The insurance provisions are thus some of the more number of nurses, number of lab personnel, quality of revealing sections of the act. They describe a set of self other services such as food, and so on, to produce an policing structures as a result of which no insurance overall measure of intensity of services. company will be allowed to provide coverage beyond Between June 1977 and June 1978, daily hospital that the Public Authority determines is permissible; any rates increased on average $22.42, or 12.2 percent. Of firm that does will be hounded out of the industry. This this increase, $12.89 (or 56 percent of the increase) was means standardized upper limits will be set on insurance due to increased costs (inflation) of goods and services coverage for the patient and fo r the hospital performing purchased by the hospitals, while $9.53 (44 percent of the treatment. Patients accustomed to the now prevalent the increase) was due to the increase in intensity of method of reimbursement on about 80 percent of total services. When adjusted by the HII factor, the price hospital costs above an initial deductible sum are in for segment of the increase for 1969- 1978 amounts to on. ly a rude shock. 8.1 percent annually. -Karen Steinherz and Linda Frommer The question of medical technology As for medical research and development, it cannot be argued that the qualitative and quantitative advances 56 Special Report EXECUTIVE INTElLIGENCE REVIEW May 8-May 14, 1979 ,,:of health care ' of society have both produced and benefitedfrom those Nixon's war on cancer, but now is declinirig in. real technological qevelopments that improved the quality . dollar terms. and longevity of life. The cost of continuing such While domestic cuts in R and D have affected technology should, theoretically, cheapen, since it equipment important to disease detection and research, . increases the productivity of society. But this is not the similar effects have been felt in the area of instrumen case how because of a relative collapse in industrial tation. The decline in physics and engineering has research and development and a tapering off of increased costs or has made certain technologies investment in physics research. In the past, biology has unavailable. Some of the cases in which bioinstrument relied heavily on physics for technology, particularly in suppliers have had to go it alone include laser the development of diagnostically valuable X-rays, X application for studying photosynthesis and vision, X ray diffraction for crystallography to characterize ray diffraction used to study biochemistry, and the biomolecules. Physics also played a key role in the chemical research applica.tions of nuclear magnetic development of other diagnostic and testing equipment resonance to biology. such as the powerful electron microscope, computers In summary, the lack of development of a rigorous for data analysis and experimental disease simulation. theoretical framework necessary to. the continuous The problem is that research and development for refining of precision equipment has cost us all dearly. the country as a whole peaked in the mid-1 960s and The lack of scientific research and engineering have . then plummeted. Basic bi910gical and biomedical reduced the productivity of biomedial research and thus research held out longer largely as a result of President increased medical costs. The 'opposition' The time has come for corporate planners and Th ose hospital administrators. insurance brokers. and other organizations to adopt a five-year plan of their others inclined not to support the Kennedy Health own to avert a doomsday scenario in 1984. And the Goodthink today has to be "cut medical costs!" ... Security A ct should be wary of the recommendations being given by two "conservative" organizations-the Before things get really out of hand and the American Enterprise Institute and the Heritage federal government steps in to run the whole show Foundation-on hoty to defeat the bill. Th eir "free ("Badthink"), employers have to get a move on to enterprise" counter-proposals would simply put the keep costs in check. And the first place for them to problem of controlling costs into th� hands of the start is in their own back yards-their health benefit private sector. Nowhere is the quality of health care plans for employees. discussed. The fo llowing are excerpts of an article ... One small corrective step would be adopting that appeared in Business Insurance entitled " Medical a strict coordination of benefits program so that Cost Containment" by Kenneth Keane. who is a senior employers can provide adequate (not duplicate) vice president and director of the Johnson and Higgins coverage coupled with cost efficiency. insurance brokerage firm. ... Employers might want to think about involv� ing the employees financiallyin the outcome through greater deductibles and higher employee contribu George Orwell's book 1984, which was released back tions .... in 1949, depicted a time and a place then considered Emphasis can be placed on encouraging employ unrealistic and farfetched by those readers inspired ees and their-physicians to opt for less costly medical by the work ethic and freedom of enterprise code. treatment.... A revised plan could increase the 1984, spawning a cult of doomsday sayers, is now deductible or coinsurance if the employee has more only half a decade away-the year, that is, not the expensive and lengthy treatment on an in-patient situation depicted in the book. Or is it? Orwell wrote basis .... about a society controlled by the state, that lived by ... Private enterprise, and not the 'state, can five-year plans, and communicated with' a vocabulary . effectively control costs. If it can't, then government called "Newspeak" which consisted of such words' run National Health Insijrance may become a reality as Goodthink' and Badthink. by the middle of the next decade. May 8-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Special Report 57 Th,e road to n ationa lized health care Nationalized medicine of the sort advocated by In 1929, Blue Cross was established to act as the presidential aspirant Senator Edward Kennedy has middleman between the hospital, the patient, and the been a longstanding project of the British oligarchy. doctor. Under this structural resolution to the "prob- . But unlike Great Britain which early adopted the pro lem" of "nationalizing" health care, physical control gram of "socialized medicine" as part and parcel of lover access to health care was created. postwar welfare state austerity measures, nationalized Among the founders of the Blue Association were health care and cost containment in the United States many from the core group that began the campaign for has been a half century in the making. compulsory national . health insurance: Isidore Falk, Why? M.D.,· the Rosenwald Foundation, the Russell Sage Most Americans understood that such a program family, Edgar Sydenstricker of the Twentieth Century · . 'for "compulsory health care" does not of necessity Fund, and a representative from the Commonwealth mean a plan for improving the quality and quantity of Fund which to this day is the primary source of Anglo health services provided. Every scheme put forward American influence over medical issues. The fund fi more or less proposed a structure for demographic con nances the World Population Council and the Fund of trol. Legislation for nationalized health care was Funds and lists the Queen of England as the chairman successively voted down in Congress. of its Scholarship Fund. But today, a package of very similar proposals, in In the meantime, reports were still being written the form of Kennedy's Health Security Act and related and proposals drafted for a national health program. piecemeal legislation, has been or soon will be passed One such report came from the Committee on the Costs into law. The 50-year operation went through four of Medical Care which presented fiverec ommendations: phases. 1) Better organization of personal health services, especially through comprehensive group practice. Phase one 2) Strengthening the public health services. In 1916, the core group which would begin the cam 3) Group payment of the costs, whether through' paign for compulsory health insurance in this country nonprofit insurance, taxation, or combinations. was forged. The policy, not surprisingly, parallels that 4) More effective coordination of the services. being put forth today. As one of its founders, Dr. 5) Improved professional education with increasing Isidore Falk, put it: "The transformation of the existing emphasis on the teaching of health and the prevention system by government controls, rationalization of the of disease. existing health manpower and conservation ... the Isidore Falk, a founder of the CCMC, hailed these exploding mass of new knowledge and technology was recommendations, addressed primarily to communities thus incorporated into medical education and training; and neighborhoods, as the "first formulation of a na and medical practice became inevitable . ... There were tional health program in a pattern reflecting the circum growing apprehensions that the change in the medical stances, the needs, arid the perspectives of the times, care system were rich in potential promise for improve with implementation to rest mainly on voluntary ments ... but not without perspective dangers." actions." The founding organization was the American Asso ciation of Labor Legislation which counted among its Phase three members Louis Brandeis, Jane Addams, and Woodrow In 1965, Medicaid and Medicare were passed by the Wilson. U.S. Congress, enabling Blue Cross to become increas ingly involved in health care policy-making at the feder Phase two al le*el. As the largest group health insurer in the In 1927, a coalition of the American Medical Associa United States, the Blue Cross Administration demanded tion and the American Hospital Association effectively the contract to be the claims processor for the program. blocked the passage of any legislation for compulsory Under the federal legislation, standards were set for health insurance and so phase two was initiated. Adjust Medicare and Medicaid admissions, enforcing shorter ments in the strategy were made to begin implementing stays. The institution of data bank profiles in the aspects of compUlsory health care through the private administration of Medicare and Medicaid led to the sector. creation of the Hospital Systems Agency in the late 58 Special Report EXECUTIVE INTELLIGENCE REVIEW May 8-May 14, 1979 1960s which analyzes hospital performances, using cost confronts ' a government-supported system of ' cutting guidelines. Furthermore, the legislation set health care with a need to limit the costs and ' reimbursement standards in such a way as to cui off kinds of care patients receive. The Institute private charities as a source of funding for hospitals. believes that this highly charged issue should be Now hospitals could receive only government and Blue approached as soon as possible, so that a Cross reimbursements, leaving no surplus for invest framework of rational analysis and carefully ment in new technologies. defined options will be available when the debate More telling is the reimbursement track record ' of 'goes public' as it must one day." the Blue Cross Association. • The Commonwealth Fund initiated and funds In 1974, Blue Cross was the strongest lobbier for o the tune of $82 million..,-the LABM program to the National Health Planning and Resources Act, ! mtegrate liberal arts into the medical school curriculum. which intends to reduce by 10 percent the number of This program is being carried out at the Pritzker hospital beds in the United States by 1980. Blue Cross is also in the process of implementing �chool of Medicine at the University of Chicago which stringent claims review procedures such that patient IS also the home of Billings Hospital where Hospice requests to enter hospitals will be screened twice before leader Elizabeth Kubler-Ross was based until recently. being accepted. Accompanying this move, Blue Cross The theory behind the LABM project is that if medical schools, which enjoy independent funding from the is lobbying in Congress for strict application of the 1965 legislation they drafted, known as CONREVIEW. medical community, can be fo rced to "integrate" with . This bill requires states to eliminate "duplicate services the regular "humanities" schools, their power base can . and those in excess of local community needs." Finally, be broken . at the Oct. 6, 1978 First Annual National Hospice • The Encyclopedia of ,Bioethics is the most am Organization Meeting in Washington, D.C., featured bitious antitechnology proj ect against medical science. speaker and Blue Cross Vice President Neil Hollander . �e coordinati�n and study that went into planning gave Blue Cross's seal of approval to licensing hospices thIS encyclopedIa of "troubling philosophical issues in as a reimbursable form of health care. today's medicine," published in 1978, pulled hundreds of professors of law and philosophy and medical doctors into discussions and writings on the issues of Phase four Running concurrently with the half-century effort to cloning and dying with dignity. The effort was based at legislate compulsory health care is the process of de the Georgetown University's Kennedy Institute for stroying medicine as science, interjecting phony "e.thical Bioethics, which is funded by the Kennedy Foundation. and moral issues" into the debate over medical science • The Commonwealth Fund provided the seed ,breakthroughs and new technologies. The "popular money for the attack on DNA research,' which pro ,uprising" against the medical profession today stems moted the "human issues" of molecular genetics and directly from the policies and programs of the 1916 fed the media scares around biological and genetic research. The campaign began at' the 1977 conference initiating group, but this final phase of generating a on "Ethical Issues and Scientific Issues Raised by " 9PulL,,( mandate" for nationalized health is largely P Human Uses of Molecular Genetics," sponsored by the the work of the Commonwealth Fund. Hastings Institute of Society, Ethics, and the Life The Hospice Movement grew out of the Institute of Sciences and the New York Academy of Science. Society, Ethics, and the Life Sciences at Hastings-on pproximately 350 scientists, philosophers, sociolo Hudson, founded in 1969. The Commonwealth Fund � gISts, and lawyers were in attendance. gave it a major financial push in J972 t9 study "bio • The Commonwealth Fund prqvided the funding ethical" issues-"dying with dignity." States the Com for the projects to develop doctors' profiles at both the monwealth Fund Report: University of Connecticut and Harvard University , called "Knowledge Performance Gap Among Physi "The Institute will begin a study of the 'Limits to cians." These projects led to the establishment of the Medical Care,' an assignment suggested by mem Professional Standard Review Organization which is bers of the Senate Health Subcommittee. The an organization that monitors a physician's activity and study will address ethical issues raised by the con behavior. cept of national health insurance, with a par -Karen Steinherz ticular effort to defineju stifiableli mits of govern !Dent support for certain classes of patients. The mcreasing array of expensive medical technology . ,is giving medicine the ability ' to keep some seriously ill patients alive almost indefinitely and , May a-May 14, 1979 EXECUTIVE INTELLIGENCE REVIEW Special Report 59 ( ENERGY Mexico, France map world energy meet Lopez Portillo 's principle is expanded production to meet world needs Mexico and France announced last week that they will an editorial'in the Mexico City daily EI Nacional begin immediately an urgent round of consultations defined it, the centerpiece of the Paris talks was a with oil producing and consuming countries to analyze discussion of world energy policy, and implementation world energy problems and organize support for a of the Lopez Portillo proposal for a solution to the world energy conference, as proposed by Mexico's energy crisis based on the premise that energy is the. president Jose Lopez Portillo. The two nations will set "patrimony of humanity.�' Mexico is urging creation of up a system of "permanent consultation" to jointly international agreements, probably in the framework monitor the progress of their "consultations," which of the U.N., that will wrest the control of world energy an April 25 official communique characterized as production and distribution out of the hands of the "indispensable to 'avoid the creation of a dramatic London-based Seven Sisters oil monopolies and specu- . situation that could provoke grave consequences for lators, and use energy as a motor of development of world political and economic equilibrium." the advanced and developing nations, rather than as a The "grave consequences" referenced are nothing weapon for international economic warfare. This short of World War III, as Lopez Portillo bluntly stated proposition is Mexico's answer to the U.S. Schlesinger in his March call for international cooperation to solve oil grab and energy austerity policies, expressed in the the energy crisis. Warned the Mexican president, unless current Administration maneuvers to rope Latin Amer energy sources and technology are used to promote ica into a Western Hemispheric "strategic reserve"-a global development, the world is headed for "apoca raw materials war chest at the. service of Washington's lypse." war confrontation drive against the Soviet Union. The commitment expressed in the Paris communique There is no doubt that the Mexican government was buttressed by plans to · implement accords for views its global energy initiative as a strategy to usher French aid in Mexican nuclear energy and industrial . in a new world economic order, and is embarked on an development proj ects immediately, in exchange for international drive to mobilize sufficient international Mexican oil. Projects targeted for joint collaboration support to outflank the Washington-London austerity- . range from ports, agriculture, mining, electrical energy war confrontation axis. France shares this view. generation, railroads, automotive, to specific areas of Industry Minister Giraud stated that "interrtational oil production. cooperation is the only possible response to the present This Franco-Mexican initiative, a model North dangerous situation," noting that the aim of world South political-economic alliance, capped an intensive energy conference was to promote "economies of round of "working meetings"-ll in three days-held energy," and discov�ry and exploitation of new energy in Paris April 22-25 between a high-powered 12-man sources." President Giscard d'Estaing personally gave Mexican delegation headed by Pemex state oil company his "broad and definitive" support for a world director Jorge Diaz Serrano and Natural Resources conference, during a· lengthy meeting with the Mexican and Industrial Development Minister Jose Andres de delegation. Oteyza a�d their French counterparts, led by French President Lopez Portillo's proposal has already Industry Minister Andre Giraud. The meetings were received broad international backing, most recently action-oriented, working off the international policy from the Latin American nations gathered at the U.N. and bilateral economic cooperation accords signed Economic Commission on Latin America's General . during the early March state visit to Mexico of French Assembly in Bolivia two weeks ago, which issued a President Valery Giscard d'Estaing. resolution calling on all nations of the world to make While important measures were taken to concretize a "universal effort" to "exploit, distribute and consume the Mexico-France bilateral economic "association," as energy with equity and justice . ..." The European . I . 60 Energy . EXECUTIVE'INTELLIGENCE REVIEW May B-May 14, 1979 ------) Economic Community endorsed the proposal in a as much as consumers, big countries as well as small, public statement in March, at the urging of Giscard capitalists and socialists, and that, consequently, it d' Estaing, while Iraq and Saudi Arabia, two key OPEC must be approached in that dimension." co untries, have both issued parallel appeals for a consumer-producer conference. The Soviet Union could Bilateral economic "association" be expected to throw its political and economic weight Last week's Paris meetings set up the mechanisms to behind the French-Mexican organizing effort. Lopez begin to implement the broad-ranging accords fo r Portillo first introduced his proposal during a state cooperation in Mexico's industrial development signed visit to Moscow in May 1978, and Giscard discussed during the Giscard visit. Based on oil for technology, the need fo r a conference with the Mexican delegation the Mexico-France economic "association" is exem to Paris on the eve of his departure on a state visit to plary of Mexico's strategy in using its oil wealth. As the USSR. Pemex chief Diaz Serrano stated in Hamburg, where he Mexico's international organizing, and the working travelled from Paris, Mexico will give preference in oil alliance forged with France last week, is undoubtedly sales "only to those nations which help (Mexico) to ai med at the U.N. General Assembly sessions next develop its own industrialization." September, where, Lopez Portillo has o fficially an At the suggestion of Mexican Ind ustrial Develop nounced, he will put his "energy fo r development" plan ment Minister Oteyza, "industrial proj ect committees" before the nations of the world. Another likely forum will be set up to evaluate and promote a vast range of is the scheduled September World Conference on Oil in joint development projects. France especially is inter Bucharest, Rumania, which Pemex director Diaz ested in aiding in Mexican port expansion, which Serrano will attend. would fa cilitate increased oil exports. Both Diaz As the Paris daily Le Monde noted, Mexico and Serrano and Oteyza spoke before 200 members of the France are in a unique position, because France, while French National Business Confederation, whose presi an oil importer, is not a member of the consumers' dent, Francois Ceyrac, promoted investments in mixed cartel set up by Henry Kissinger in Paris in 1973, the enterprises in Mexico because it "offers the best International Energy Agency; and Mexico, while a conditions of stability and potential development in major exporter, is not an OPEC member. In other Latin America." words, their effo rts cannot be construed as motivated Of particu lar importance was the decisi on to step by narrow "self-interest," and cannot be manipulated up French aid in developing Mexican nuclear energy into a classic Kissingerian "consumer vs. producer" capacity. While no specific plant construction deals confrontation scenario. Mexico's "global" approach have been signed , France has offered technical aid, was well stated by Minister Oteyza, stating that Mexico technician training, and supply of enriched uranium, does not intend to join OPEC, but that does not mean should the U.S. renege on its uranium supply contracts "in any way, (a) hostile attitude on our part toward with the Lopez Portillo government. The chief of that organization." "Our idea," Oteyza said, "has been France's Atomic Energy Commission will visit Mexico different. ..consisting in (the belief that energy) is a this month. matter of universal importance that affects producers -Mary Goldstein EXECUTIVE INTelLIGENCE REVIEW May S-May 14, 1979 E nergy 61 FACTS BEHIND TERRORIS LEAA, Cooper was the President of the Non-Governmental Orga nizations Alliance of the UN-an organization that provides safe houses to the terrorisJ support groups of fivecontine nts. In 1977,1 Terrorism 'expert' Cooper Cooper visited Italy as an official "consultant" to the government confesses to terrorist ties on antiterrorist policies. At that time, an investigation into the role An internationally known terror co Aiberoni-all ieading PSI "in of the PSI intellectuals was ism "expert" presently officially tellectuals" who, as this publica dropped. employed as a consultant to the tion has documented, are the lin Law Enforcement Assistance guistics specialists who recruited Administration and the Interna zombifiedstud ents into the terror Environmentalists, Maoists tionaly Association of Chiefs of ist Red Brigades and Autonomi. threaten violence Police has admitted that he is a It should be obvious to Amer As this issue goes to press, there close personal associate of arrest ican law enforcement officials are strong indications that the two ed Red Brigades controller Anto especially those who read our de days of demonstrations planned nio Negri and a half dozen other tailed coverage last week of the for the nation's capitol on May 5- Italian . radical professors now successful new investigative ap 6 are being run along hues similar being charged with complicity in proach adopted by the Italian and to the luly 4, 1 976 Peoples Bicen tJte kidnapping-assassination last French authorities in their latest tennial operation which drew summer of former Italian Premier crackdown on terrorists-that thousands of often well-armed Aldo Moro. Dr. Cooper "doth protest too Maoists and environmentalists to H.H.A. Cooper, a British na much." For the past five years, Philadelphia and Washington, tional presently based out of Cooper-an operative reportedly D.C. Washington, D.C. and Dallas, still in the employ of British intel On Saturday, May 5, an esti stated in an interview with a re ligence-has insinuated himself mated 500- 1,000 members of the porter from this magazine one into the U.S. law enforcement Revolutionary Communist Party (form erly the Revolutionary week ago,that the Italian govern community as an "expert" on ter Union) are staging a national ment's crackdown on the control rorism. In 1976, he was the staff May Day march to the capitol. elements behind the terrorist un director of the LEAA's National derground is "a repression move Advisory Committee on Criminal , This group, headed by Robert Avakian, has made no bones in ment aimed at denying theprof es Justice Standards and Goals Task sors who are theoreticians of Force on Disorders and Terror recent issues of its newspaper Rev change the right to organize and ism. He directed the preparation olution that it models itself on the recruit their students ... I person of' a 600-page report that white Italian Autonomi terrorists and ally know Professor Negri and washed tons of evidence linking the Symbionese Liberation Army. many of the other arrested aca the Institute for Policy Studies, - Dozens of its members in Hous demics and I can say for certain the Ford Foundation, the Stern ton, Atlanta, Seattle, and Wash that they have nothing to do with • Fund, and other U.S.-based enti ington, D.C. have been arrested . terrorism . .. 'You just cannot go ties to the creation 'Ofthe Weath in the past six months on charges . after the professors who are natu ermen, the Black Liberation ranging fr om illegal weapons pos rally the theoreticians of social Army, the FALN, and other ter session to .inciting to riot. change and connect their theories rorist groupings. Instead, he de Indicative of the potential fo r to acts of violence ..." clared that terrorism is. a "socio trouble in Washington this week Cooper's remarks are nearly a logical phenomenon" that will end is the response from terrorist verbatim repetition of the line put inevitably grow more serious and expert H.H.A. Cooper to a ques- _ out by a number �f Italians, espe more difficultto contain. tion on the possibility ofterrorism cially grouped around the leader Cooper's confessed associa from the environmentalists: "I ship of the Italian Socialist Party tion, with the man about to be don't expect any violence-that is (PSI), who are now scrambling to proven in the Italian courts to if there are no provocations fr om destroy the evidence that couL ,have masterminded the Moro ca the police." Shades of Chicago, lead to their arrests. Included in per sheds a gr�t deal of light on 1968? this grouping are Norbeito Bob his past performance . From 1973- bio, Roberto Vacca, and Frances- 75, while already an advisor to the -Jeffrey Steinberg MER/CAN SYSTE needed that we ourselves should remain at peace, avoid taxation for the maintenance of fleets and armies , and become rich and pros perous .... Doing these thillgs, the addition to our population by im migration will speedily rise to mil lions, and with each and every , year the desire for that perfect Henry Carey: Two systems freedom of trade which results from incorporation within the are before the world' Union, will be seen to spread and The 1976 inauguration of Jimmy Carey on the di fference between increase in its intensity, leading Carter as President ushered the the American and the British sys gradually to the establishment of members of the Council on For tems, titled Th e Harmony o/ Inter an empire the most extensive and eign Relations "Project 1980" ests. magnificent the world has yet into the White House. Since then, Henry Carey, one of the fore seen, based upon principles of on energy, every road to clean, most economists of the 19th cen maintaining peace itself, and safe, efficient nuclear power has tury, joined with Abraham Lin strong enough to insist upon the been roadblocked by the Admin coln to found the RepUblican Par maintenance of peace by others, istration and choked with mobs of ty. Theirs was a political fight to yet carried on without the aid of Schlesinger-encouraged anti pro revitalize the national commit fleets, or armies, or taxes, the sales gress environmentalists. On eco ment to continue the policies of of public lands alone sufficing to nomics, Carter's program for na the Founding Fathers, and espe pay the expenses of government. tional austerity has been necessi cially the industrial development "To establish such an tated by the tight-credit, wildly policies launched by Alexander empire-to prove that among the inflationarypolicies from both the Hamilton, a figure named by the people of the world, whether ag Treasury Secretary and the Fed Council of Foreign Relations as riculturists, manufacturers, or eral Reserve. On foreign policy, an enemy. merchants, there is perfect har U.S.-USSR military showdown " ...Two systems are before the mony of interests, and that the has become the lawful end of trade world . ... One looks to pauper- happiness of individuals, as well wars, import-export restrictions, ism, ignorance, depopulation, as the grandeur of nations, is to be and raw materials looting from and barbarism; the other to in promoted by perfect obedience to the developing sector. And the creasing wealth, comfort, intelli that greatest of all commands, glue to hold this national leader gence, combination of action, and 'Do unto others as ye would that ship insanity together is Dope, In civilization. One looks toward others should do unto you,'-is corporated, the City of London's universal war; the other to univer the object and will be the result of worldwide dope business deter sal peace. One is the English sys that misson. Whether that result mined to send this nation's popu tein: the other we may be proud to shall be speedily attained, or lation into economic depression call the American system, for it is whether it shall be postponed to a "high as a kite." the only one ever devised the tend distant period, will depend greatly The Council on Foreign Rela ency of which was that of el,evating upon the men who are charged tions "Project 1980" has absolute while equalizing the condition of with the performance of the duties ly no precedent in the American man throughout the world. of government. If their move System. This Dark Ages blueprint .. Such is the true mission of the ments be governed by that igno stems from only one model: Th e people of these United States . ... rant selfishness which leads to the British System. To diffuse intelligence and to pro belief that individuals, party, or The conflicting nature of the mote the cause of morality national interests are to be pro world views of these two systems throughout the world, we are re moted by measures tending to the is not well known to Americans quired only to pursue the course deterioration of the condition of living in the 20th century. And for that shall diffuse education others, it will be late." that reason this week's American throughout our own land . ... To System column presents excerpts improve the political condition of from a pamphlet written by Henry man throughout the world, it is -Barbara Gould WORLD TRADE REVIEW New trade deals. France and Saviet Union Two economic cooperation agreements. First agree- ment calls for tripling of trade by 1985. Second agree- NAv NAv ( 1 ) ment calls for economic, industrial, and technological cooperation, 1980-1990. China from Canada China is seeking electronics, data processing, and communications equipment from Northern Telecom $1 bn. (2) Soviet Union from France Technip to supply petrochemical equipment 2.5 bn N/A (2) Turkey from France Turkish government-controlled telephone authority Francs signs contracts wit.H Le Material Telephonique, subsidiary 700 N/A (7) of Thomson CSF for joint creation of electronic phone mn Francs component firm with annual capacity of 200,000 tele- phone lines. Saudi Arabia from Japan Mitsubishi will construct an offshore crude oil loading terminal 200 miles north of Jeddah for Petromin $125 NAv (3) Thailand from World Electric power project mn 8ank NAv $80 mn (4) East Germany from Mitsubishi and Toshiba will supply two lamp facto- loan Japan ries: an incandescent lamp plant producing 80 mn bulbs $60 NAv (5) per year (Berlin) and a fluorescent lamp plant producing mn 27 mn tubes per year (50 km west of Dresden) Indonesia from World flood control project in West Java Bank NAv $50 mn (6) Mexico from U.S. Purchase of 1,300 International Harvester tractors loan $29 Eximbank (7) mn $17.4 mn loan to Banco Nacional de Iraq from Japan An affiliate of Iraq's Ministry of Industry and Min- Credito Rural erals has purchased a million ton per year cement plant $1 1.5 NAv (8) from Kawasaki Heavy Industries (hardware and engineer- mn ing) and Marubeni Corp. (Later, material supply and administrative services) Zambia from Italy AGIP SpA will prospect and develop uranium mines Francophone Africa from Consortium of French-speaking African countries Air NAv NAv (9) Western Europe Afrique orders 3 Airbuses (1 A-300 54 and 2 A-3 10s), to N/A N/A (5) be delivered in 1981 and 1983 respectively NAv Not Available. (1 ) Statement of intention. See article elsewhere this issue for further details. (2) In negotiation. (3) Agreement reached, according to news reports. Loan issued. (4) (5) Order received. (6) Loan approved. (7) Signed. Contracts issued. (8) Letter of intent received by suppliers. (9) Deal signed. [THIS PAGE IS INTENTIONALLY BLANK] .-1.80 The dollar April 30 1.7210 in Swiss francs May 1 1.7205 -1.75 New York late afternoon 2 1.7235 3 1-1.70 A� - 4 1,,- � '-1.65 The British pound April 30 2.0683 2. 10 in dollars May 1 2.0605 New York late afternoon 2.05 2 2.0704 �'" 3 1- 1.95 4 '-1.90 I 3;12 3/19 3/26 4/2 4/9 4/16 4/23 4/30 5/,\