This document is free for all non-commercial reuse, reprint and rebroadcast, on the net and elsewhere The Global Political Economy of Israel Jonathan Nitzan and Shimshon Bichler Pluto P Press LONDON • STERLING, VIRGINIA First published 2002 by Pluto Press 345 Archway Road, London N6 5AA and 22883 Quicksilver Drive, Sterling, VA 20166–2012, USA www.plutobooks.com Copyright © Jonathan Nitzan and Shimshon Bichler 2002 The right of Jonathan Nitzan and Shimshon Bichler to be identified as the authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0 7453 1676 X hardback ISBN 0 7453 1675 1 paperback 5 The Weapondollar–Petrodollar Coalition I warn you, that when the princes of this world start loving you, it means they’re going to grind you up into battle sausage. – Louis-Ferdinand Céline, Journey to the End of the Night Although economically isolated from its neighbours in terms of trade and investment, Israel’s political economy has nevertheless been deeply embedded in the larger saga of the Middle East. The twentieth century, with its endless thirst for energy, made the region crucial for its oil exports. Since the 1960s, however, oil outflows have been complemented by the newer and more precarious movement of arms imports. And as the ‘petrodollar’ earnings from oil and ‘weapondollar’ profits from arms grew increasingly intertwined, there emerged in the region a pattern of ‘energy conflicts’, a series of oil-related wars and revolutions which again and again rocked the Middle East, sending shock waves throughout the world. Enigmas Unfortunately, most of those who tried to understand this link between oil and arms have willingly put themselves into the familiar straitjacket of aggregates. The theories are numerous, but their story is almost always about ‘states’, ‘policy makers’ and the ‘national interest’. Economists writing in this vein, such as Chan (1980) and Snider (1984), for instance, tend to concentrate on the issue of ‘recycling’. The problem, as they see it, concerns the balance of payment. Energy crises jack up the cost of imports for oil-consuming countries, while creating trade surpluses and accumulated reserves for the oil- producing ones. A relatively efficient way to ‘re-balance’ these imbalances, they continue, is for oil importers, mostly developed countries, to sell weapons to oil exporters. Politically, this is easy to do. Consumers in the arms-exporting countries don’t care much since the shipments do not require new taxes, whereas rulers in the oil-exporting countries like the trade since it boosts their 198 THE WEAPONDOLLAR–PETRODOLLAR COALITION 199 self-image and sense of security. The resulting arms race is perhaps unpleasant, but largely unavoidable; unless, of course, the producing countries agree to lower their oil prices. The same universal language dominates the ‘realist’ literature of international relations. The underlying political anthropology here portrays a menacing Hobbesian environment, with each nation seeking to endure in a largely anarchic world. Survival and security in this context hinge on economic prosperity, national preponderance and military prowess, which are in turn critically dependent on the differential access to advanced technology, raw materials, and of course energy. According to the ‘materialist’ strand of this literature, such as Nordlinger (1981) and Waltz (1979), this dependency explains both why central decision makers insist on handling raw material and oil themselves, rather than leaving the matter to private business, and also why they seem almost trigger-happy whenever access to such resources is threatened. True, many conflicts cannot be easily explained by material interests. And yet even on such occasions, argue the realists, the national interest is usually paramount. One reason, they explain, is that the national interest could be ‘ideal’ as well as ‘material’. And indeed, according to Krasner (1978a: Ch. 1), after the Second World War, U.S. state goals have become more ‘ideological’, emphasising broad aims such as ‘competition’ and ‘communist containment’ over strict access to resources (see also Lipschutz 1989). The other reason is that state officials can be wrong, misunderstand the true nature of the situation, or they can simply miscalculate the costs and benefits. But here too, even when policy seems ‘nonlogical’, the driving force is still – as always – the national interest (Krasner 1978a: Ch. 1). Naturally, this type of theory can explain almost everything. The process is simple. Take any policy, and begin by looking for materialist explanations. If you find none, don’t dismay. Look for ideal ones. And if that too fails, there are always errors, so you can never go wrong. Moreover, the national interest itself is a very strange concept. Since society is full of conflict, adherents of this concept argue it represents not the sum of individual interests, but rather the overall interest of the nation. In the language of Stephen Krasner, it is not the ‘utility of the community’ which matters, but rather the ‘utility for the community’, as determined by its central decision makers (1978a: 12, original emphases). However, since the decision makers themselves rarely agree on the matter, it is usually the researcher who ends up deciding the national interest for them (or for the reader). And the way this interest is phrased is often so loose, that it can be made consistent with virtually any line of action. Now, to be fair, other grand narratives are also vulnerable to such ambiguities. Take the ‘interest of the capitalist system’, a notion often invoked by func- tionalist Marxism to rationalise developments which, on surface at least, appear contrary to the immediate interests of individual capitalists. A typical example for this is the welfare state. On the face of it, this institution undermines capitalist power. Yet, if we were to push this to the ‘final analysis’, the 200 THE GLOBAL POLITICAL ECONOMY OF ISRAEL conclusion would be the opposite: by making life more bearable for the workers, the welfare state ends up keeping capitalism as a whole viable. But is this really true? Or rather, can we prove it is true? Another example is green-field investment. Many Marxists consider such investment as synonymous with accumulation, and therefore good for capitalism. But if so, is the century long shift from building new capacity to mergers and acquisitions, illustrated in Chapter 2, bad for capitalism? And what about a high price of oil? Or war in the Middle East? Are they good or bad for capitalism ‘as a whole’? The truth is that these questions cannot be answered, and for a simple reason. The ‘capitalist system’, much like the ‘state’, is an encompassing myth. It provides the broader framework for the discussion, and therefore cannot be simultaneously used for validating or refuting a specific hypothesis within that discussion. The problem is illustrated in Bromley’s otherwise insightful analysis of world oil. His conclusion in that study is that the post-war order, and particularly the emergence of OPEC and higher prices, have in fact helped strengthened the ‘general preconditions of capitalist production’ under the overall auspices of U.S. hegemony (1991: 59). But what exactly are these ‘general preconditions’? And if OPEC and the oil crisis have indeed boosted the system of U.S.- dominated capitalism during the 1970s and 1980s, why haven’t the cartel’s disintegration and lower oil prices undermined this system during the 1990s? Or have they? Surely, the world has changed in the interim. But then, it always does, so how could we ever know? The international flows of oil and arms have been examined also from the more disaggragate perspective of the underlying industries, but here, too, there is a considerable lack of unanimity, even on substantive issues. Writing from an implicit ‘instrumentalist’ view, Blair (1976) and Engler (1977), for example, contend that, intentionally or not, the energy policies of parent governments (particularly the United States, Great Britain and the Netherlands) have had the effect of assisting the international oligopoly of world oil. An almost opposite view is expressed by Turner (1983) and Yergin (1991), who, in line with a more realist perspective, argue that there was a gradual but systematic erosion in the primacy of international oil companies, and that, since the 1970s, these firms were in fact acting as ‘agents’, or intermediaries between their host and parent governments. Studies on the international arms trade have been equally controversial. According to Sampson (1977), the absence of any inter- national consensus on disarmament created a void, which was then filled by the persistent sales effort of the large weapon makers. And since arms exports become particularly significant in peacetime as domestic defence budgets tend to drop, the end of U.S. involvement in Vietnam during the early 1970s redirected attention to the Middle East, causing military shipments into the region to rise. Other writers, however, such as Krause (1992), reject this inter- pretation. The impact of private producers on arms sales policies, he claims, should not be overstated, at least not in the case of the United States, where the THE WEAPONDOLLAR–PETRODOLLAR COALITION 201 volume of arms exports is small relative to domestic military procurement and the contractors’