Tuesday, 14 September 2021

World Power

Few countries can exert much power in the rest of the world. There are just five permanent members of the United Nations Security Council, the ones who can cast vetoes on important UN decisions. Or take the G7, a US-led political forum of rich countries that has, well, seven members. The concentration of global power is extreme, and it rests upon the different ways a country can have influence over how the world works.

Some of these ways are obvious, for example, using military power to force another country to submit. Many are not, especially those that are linked into the system that envelops the world economy. Five dimensions of international power can be used to gauge the status of countries.[1] These show not only how the US is far more prominent in the hierarchy than suggested by a simple measure of economic size, such as GDP. They also map the relative importance of other countries and throw new light on a major geopolitical issue today: the rise of China.

China rising

China was once seen mainly as an important supplier of cheap goods and a valuable dynamo for the world economy. Now the US looks upon China as the biggest threat to its global interests. Every year, many hundreds of pages on this topic are published for the US Congress, adding to a steady stream of material directed at US policymakers from think tanks and lobby groups.[2]

In 1990, China accounted for just 2% of the world GDP. Since then, that share has doubled every decade and China will likely account for 18% in 2021.[3] This has worried the small group of countries that dominates the world’s key institutions, because quantitative changes can also bring about qualitative shifts. Will they be able to stay in charge as they had done, now that a country from outside the rich club has risen to the fore? That question is posed especially for the US. All those institutions – the United Nations, the IMF, the World Bank, the World Trade Organisation and others – have been shaped by it.[4] The first three also have headquarters in Washington DC or in New York.

Russia – formerly, the Soviet Union – is the traditional US political enemy. Yet, it is principally a military obstacle, notwithstanding the more recent US belief that it can influence Presidential elections through buying Facebook advertisements. China, by contrast, presents a much wider challenge to how the US sets the rules for the world, as seen when it ignores US-inspired sanctions against countries such as Iran. US political rhetoric and economic measures against China picked up with President Trump, and they have continued unabated with the new Biden administration. All the international meetings held by Biden and his officials since the start of the 2021 – at the G7, at NATO, in Europe and in Asia – have had a strong anti-China theme.

Measuring power

Power has many dimensions. Here are five aspects of economic and political power that are relevant for a country’s international influence.

Economic size is one measure of a country’s weight in the world, usually measured by its GDP. That GDP number is broadly related to the size of its domestic market, how many big corporations it has, and how important it is in international trade. The US is the world’s biggest economy, accounting for roughly 24% of world GDP. G7 countries – the US, Japan, Germany, the UK, France, Italy and Canada – together account for 45% of world GDP, despite having only 10% of the world’s population. GDP counts for more than people when it comes to power and influence.[5]

 

By 2020, China’s GDP was just under three-quarters of that for the US. Japan’s GDP was roughly a quarter the size of the US, Germany was at nearly a fifth, and the UK and France were each at roughly one-eighth. All countries have been affected by the Covid-19 pandemic, and it has had little effect on their relative positions. However, US sanctions will have curbed China’s growth to some extent in recent years.

A country’s foreign assets are another important measure of power. Such assets include the ownership of companies operating in other countries, together with holdings of financial securities, such as equities and bonds, and ownership of real estate.[6] These indicate how much control it has over resources in other countries, and the size of the assets is related to the potential revenues it can gain from them.[7]

At the end of 2020, the US had by far the highest stock of foreign assets, at roughly $22.7 trillion. Germany was next in line, but well below that with ‘only’ $6.3 trillion, and the Netherlands, the UK and France followed. China and Hong Kong’s foreign assets amounted to just under $5 trillion.

These asset ownership numbers, as much other published information, do not allow for the flows of finance between major countries and tax havens. Tax havens are registered as the owners of significant foreign assets in official data, yet most of their funds originally come from major country investors.[8] This should not have much effect on the top level calculations used here.[9]

International lending and borrowing by banks is a third measure. These data show how much a country is involved in channelling funds around the world, and are also linked to how far that country is a finance hub that can profit from international dealing. London is the largest centre for international banks. While it may be a surprise that London is bigger than Wall Street on this measure, that is because much US banking business is oriented towards the domestic US economy, not so much internationally.

Nevertheless, Brexit has had some impact on UK international banking. With the UK outside the single market for financial services in the EU, some banks have shifted their operations from the UK and into EU centres. France has gained most ground because of this, and jumped into second place just behind the UK by the end of 2020, moving ahead of the US, which was in third place (see the next chart).


How much a country’s currency is used in foreign exchange (FX) deals for trade and investment is another aspect of its economic status in the world. Directly or indirectly, this also adds to its global power. This is most evident for the US with the dollar, which is involved in 88% of all currency deals.

Most commodities and important industrial goods, including oil, metals, grains, technology, pharmaceutical and aerospace products, are priced for trade in terms of US dollars. The same is true for many investment and financial deals, helped by the US having the world’s largest stock and bond markets, with international private and official funds buying those securities. Even the China-led Asian Infrastructure Investment Bank conducts its business mainly in US dollars.

US power in this FX dimension relies on the fact that nearly all deals involving US dollars must be settled through the domestic US banking system. Images of drug dealers and criminals crossing borders with bags of cash may be good for the cinema, but they do not represent what really happens to international transfers of funds.

This means that if the US government doesn’t like you – whether you are an individual, a company or a country – then it can try to prevent you from doing currency deals, even if you are not based in the US. If a bank nevertheless does deal with you in dollars, or even in another currency, then the US can fine that bank and threaten to shut it out of the huge US market. The US government’s Treasury Department has a special agency for this purpose, appropriately named the Office of Foreign Assets Control.

Other countries with important currencies could try to exert power in the same way, but their currencies have far less international significance. For example, the euro’s share of world FX markets is just 32%,[10] with the Japanese yen half of that in third place and the UK’s pound sterling in fourth.[11] So far, China’s renminbi currency has remained very minor in terms of global trading, at around 4%.[12] This is based upon the relatively late inclusion of China in financial markets, together with many more government controls on the flow of capital than is the case for other major countries.

The amount of military spending is a simple gauge of how far a country can use force against another, or threaten to use it, and is the fifth measure of power used. The US is once again in the top rank here, and it also has military bases in over 50 countries. By contrast, China has bases in just three other countries (Djibouti, Myanmar and Tajikistan).

Even if much US military spending is, in reality, more of an indirect subsidy to the domestic US economy and corporations, or is on equipment with inflated prices, its total spending of a huge $778bn in 2020 still gave the US plenty of scope to project power. This sum was more than three times bigger than China’s and twelve times bigger than Russia’s. The US lead over other major countries in military spending has increased in the past two years.

Power outcomes

Each of the five factors has some limitations regarding its accuracy or coverage. But together they give a good summary of power and are available for a large number of countries. This measurement of global power is endorsed by how the results for the top 20 countries include the five permanent members of the UN Security Council, all of the G7, and most of the G20 countries.

A country may have a high score on one component and very little on another, but all except a few countries in the world have a negligible score on all of them. The US has an index score of 93.2, with China well below in second position at 37.7. Only six other countries have an index score above 10.0. More than 150 countries score less than 1.0. This picture of the extreme hierarchy of power is a challenge to anyone who uses the term ‘international community’!

 

Sources & notes: See the first chart for details.

This calculation of power depends upon individual country values and does not consider the effect of alliances between countries, or factors that are not as easy to quantify, such as cultural influence. If included, these would only add to the power of the US and generate a more towering image. Consider NATO, for example, which accepted that the ‘North Atlantic’ security region extended into Afghanistan, the first US target after September 2001. Or consider how US social media companies dominate the Internet, how the world’s youth wear baseball caps, like, backwards, and how even India’s massive film industry calls itself ‘Bollywood’.

What next?

The US is worried about the rise of China’s economy, although US power extends much further than a simple economic measure would suggest. A look at the power index for the major countries over the past two decades shows how China has also built some non-GDP dimensions of power, notably in military spending, international banking and the ownership of foreign investment assets.

 


Sources & notes: See the first chart for details.

In recent years, China dislodged the UK in number two spot on this ranking of world power. The UK is the world’s fifth largest economy, but has its status boosted by its role in international banking. That reflects its position in world finance, although the form that this takes is also changing with the rise of China and other Asian countries, and the relative decline of European economies.[13] The more that international business grows outside of the traditionally dominant group of countries, the less important are the rules that they impose for how the world economy must work.

The US sees the rise of China not just as unwelcome competition, especially in the technology sphere, but also as a serious future threat to its hegemonic status, one that must be dealt with today. Other countries closely linked to the US, and especially other Anglo members of the ‘5 Eyes’ spying network (UK, Australia, Canada, New Zealand) are in a similar position, because they have been an integral part of a system that has dominated the world since 1945. That is why the rise of China inevitably becomes a geopolitical issue.

Some countries in Europe, particularly Germany, have a different perspective. Politically they are pro-US, and they are also economically cautious about China. But they would also like to have an alternative to relying solely upon the US, or US permission, whether that is for technology, for energy, or for other vital supplies. They are right to be concerned that the US is inclined to unilateral policy moves that can go against European interests. That remains true under Biden, although his administration stepped back from its former hard stance against the completion of the Nord Stream 2 gas pipeline from Russia.

Not surprisingly, China has responded to the US policies over the past decade, and the risk that as a result of these policies it could be pushed to the edges of a world economy controlled by hostile countries.[14] A key part of its response has been to press ahead with the massive trade and investment programme begun in 2013: the ‘Belt and Road Initiative’. This involves more than 130 countries, mainly in Asia, Europe and Africa, but also extending into Latin America. Faced with US sanctions and political manoeuvres, China is building up a network over which the US and its allied powers have far less control.

These developments will foment divisions in the world that every country will have to deal with. In the next few years, we will live in interesting times as the established powers led by the US fight to maintain their domination.

 

Tony Norfield, 14 September 2021

  

APPENDIX


 



[1] This article updates my analysis of September 2019, where I showed that the Index of Power had put China in #2 position. See here.  The Index calculation here adds a country’s foreign portfolio assets to its direct investment assets, to get a better measure of its total foreign assets. (Previously, I only counted FDI, but I have since found good data on portfolio assets.) It also makes some adjustments to eliminate possible double counting of intra-China relations between China and Hong Kong, which are treated as separate countries in all official data. See the Appendix to the article for more details.

[2] For example, the US-China Economic and Security Review Commission has issued annual reports since 2000. Its December 2020 report was nearly 600 pages: https://www.uscc.gov/annual-report/2020-annual-report-congress

[3] Sources for GDP and other data used are given in the Appendix to this article. The US share of the world economy has fallen from 30% in 1990 to 24% in 2021.

[4] The former institutions, or its predecessor, the GATT for the WTO, emerged from the post-1945 political realignment led by the US. The President of the World Bank is almost always a US citizen, while the Managing Director of the IMF is always a European. The WTO has had a more diverse list of Directors General. Decisions by each institution are rarely passed if the US disagrees, a result helped in the case of the IMF by a voting allocation that always enables the US to block any IMF action.

[5] GDP numbers can be calculated in various ways. Here, the nominal value of GDP in a single currency is used to compare countries.

[6] In standard official statistics, ownership of 10% or more of a company in another country is considered foreign direct investment. Ownership of less than 10% of the company’s equity is considered a foreign portfolio investment, as are holdings of foreign debt securities. These are all added together here to give the measure of a country’s total foreign assets.

[7] Large corporations, usually from rich countries, can also profit from their commercial domination of producers in other countries via so-called supply chains, for example, Apple’s relationship with its suppliers, or western fashion companies getting their products made in Asian countries. However, these relationships are difficult, if not impossible, to measure.

[8] One study shows, for example, how a nationality-based measure could greatly increase the registered US and other major country holdings of bonds and equities in particular countries. These holdings are under-estimated by the usual residency-based measures in official data, as the residency can also be a tax haven. See pages 44 and 48, especially, of: https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_2019118_Revised.pdf

[9] This is because the data I use measure total outflows from a country, which should include the funds first sent to tax havens before being resent elsewhere. However, the ‘round tripping’ of funds to escape tax would not be counted properly. For example, if US investors sent funds to a company registered in the Cayman Islands for the purpose of investing back in US assets, that first flow would appear as a foreign asset of the US when it is not.

[10] The euro’s share of global FX markets is divided up among the 19 euro country members according to their relative GDPs. Germany has the biggest share of that, followed by France, Italy and Spain.

[11] Note that the total shares of all currencies add to 200% because there are two currencies in each foreign exchange deal.

[12] Less surprisingly, the separate Chinese currency of Hong Kong also has only a small role in world FX trading. Its currency value is tied very tightly to the US dollar’s.

[13] See Tony Norfield, The City: London and the Global Power of Finance, Chapter 9 and the Afterword to the paperback edition, Verso, 2017.

[14] For a discussion of these topics, see my articles ‘Racism & Imperial Anxiety: US vs Huawei’, 16 April 2019, here, and ‘China and US Power’, 14 July 2020, here, each one on EconomicsofImperialism.blogspot.com.

Sunday, 12 September 2021

Imperialism & the Working Class

 


 

Discovering Imperialism: Social Democracy to World War I is an anthology put together by Richard Day and Daniel Gaido, in which they translate many articles not previously available in English.[1] They also give valuable introductions to the authors and the political times in which they lived. Their book raises many issues arising from contemporary imperialism, and shows the political consequences of the different ways in which imperialism was understood. Lenin’s Imperialism: the Highest Stage of Capitalism, written in 1916, is not included in the book, but it is clear that this work, although the best, was just one of a large number of publications on the question.

Many articles and debates the book covers, from the 1890s up to around 1916, remain relevant today. This is especially true for those relating to nationalism and imperialism, even though the forms taken by imperialism have changed a lot in the past century. However, the book’s articles, and its editors, do not explore a critical feature.

How was it that the anti-imperialists often had the better arguments – and sometimes even won – but they were nevertheless beaten by social forces, both inside and outside the debating forums of social democracy? A devastating, murderous war was the result, in which the working classes of the major powers fought alongside their rulers. Only in Russia was there a practical, political and successful response to the outbreak of war – led by the Bolsheviks in the 1917 Russian Revolution.

Here I want to focus on one issue that arises from a quotation the book provides from Friedrich Engels in 1885:[2]

“The truth is this: during the period of England’s industrial monopoly the English working-class have, to a certain extent, shared in the benefits of the monopoly. These benefits were very unequally parcelled out amongst them; the privileged minority pocketed most, but now and then even the great mass had at least a temporary share. And that is the reason why, since the dying-out of Owenism, there has been no socialism in England. With the breakdown of that monopoly, the English working-class will lose that privileged position; it will find itself generally – the privileged and leading minority not excepted – on a level with its fellow-workers abroad. And that is the reason why there will again be socialism in England.”

Here, Engels notes the absence of any socialist movement in England, sensibly disregarding the largely irrelevant, small socialist groupings that were around at the time. Both Marx and Engels recognised that this absence needed to be explained, since England was the most capitalistically developed country in the world and had a large proletariat. Why was this proletariat not drawn to socialism by their experience of capitalism? Comments from Marx and Engels elsewhere did note the bourgeois politics of the English ‘labour movement’, but here Engels here pins down the cause.

The monopoly of England in the world economy went well beyond industry. It was also heavily backed up by domination in the areas of international commerce and finance – shipping, warehousing, trade finance, insurance, loans, etc. For example, from 1874-193, Britain actually had a deficit on its balance of trade amounting to around 5-6% of GDP per year: exports of goods were well below imports, though the latter were principally raw materials and foodstuffs. Massive revenues from services, particularly financial ones, and from foreign investments, offset this big deficit, and gave Britain a current account surplus of around 5% per annum.[3]

All these revenues, not industry alone, gave England its economic fortune and allowed relatively favourable conditions for the working class. While Engels notes that it was the more privileged sections of workers who benefited most from this, the benefits also extended to the mass of people. This is not to say that they were always having a great time. The point was that these – even potential – benefits acted as a dampener on anti-capitalism.

This is the critical issue. The usual argument from the left is that it is the trade union or labour movement/party leaders who corrupt the masses, compromise with the bosses and back capitalism. While the practice and political outlook of these leaders support such an assessment, it also ignores how the masses themselves can be open to being politically ‘corrupted’. Workers were not ignorant of wider developments in the country or where their immediate economic interests lay. In Britain, especially, the popular press was full of stories about the colonies, foreign markets and Britain’s status in the world.

The political problem is not this so-called labour aristocracy (though this mistaken argument was also used by Lenin); the problem instead is far more fundamental. It is one where the political and economic experience of the mass of people makes them see benefits in being loyal to the rich capitalist state to which they ‘belong’.

Popular loyalty to the state is expressed very directly whenever that state is under threat or challenged by others. That is because those threats or challenges are also threats and challenges to ‘our way of life’. People may not go on a march to call for war, but they will almost always agree with potential military action, overwhelmingly support military spending and extol ‘our boys’ when they go to fight.

Getting a popular endorsement for military aggression is fairly easy when there seems to be little risk involved. In the 2001 invasion of Afghanistan, that country was not in a position to fight back. The 2003 invasion of Iraq was a little trickier for popular opinion, given stories that the evil dictator might have had ‘weapons of mass destruction’. If the opponent is a major country, then the build up of popular opinion in favour of action takes a bit longer. Still, as shown by the example of the British-German naval arms race in the early 1900s, there was enough support on both sides of the conflict-to-come to continue an escalation into war.

I would excuse Engels for his attempt in 1885 at revolutionary optimism, thinking that a future breakdown of England’s monopoly would once again lead to socialism in Britain. At least he took proper account of the current situation. If we did the same, we would be able to recognise what has happened to the mass of people in many richer countries – especially in the US, the UK and in the rest of north west Europe. It has not been a move towards socialism as their privileges in the world economy are challenged. Instead, a nationalist and pro-imperialist mentality has become more aggressive in defence of those privileges.

 

Tony Norfield, 13 September 2021



[1] Published by Brill in 2012. The book is over 950 pages; while the hardback is on sale for a ridiculously high price, the paperback edition is much cheaper.

[2] This text is taken from an article by Engels in the German Social Democratic Party’s Die Neue Zeit in June 1885, ‘England in 1845 and in 1885’. That article was originally published some months earlier in the English paper, Commonweal. The article is available in Marx & Engels’ Collected Works, Volume 26, p301.

[3] See P J Cain and A G Hopkins, British Imperialism: 1688-2000, Pearson 2002, p165.

Tuesday, 6 April 2021

Cryptocrap

 

These points are about private ‘digital currencies’ like Bitcoin, not about central bank e-currencies, on which I will write another time. In what follows, the term ‘Bitcoin’ is used to refer also to other types of cryptocurrency.

Bitcoin’s growth from just being a tech curiosity was driven by popular discontent with banks and banking systems, mainly in the US after 2008.[1]

 


 

Supply & Demand

One aspect is a digital ‘coin’, whose supply is generated by a computer algorithm that is progressively more difficult to solve and which supposedly reaches an absolute limit. (Supporters hope computing technology does not catch up too quickly!)

Demand for this coin could drop to zero, but instead has been boosted by a prolonged period of extremely low, even zero-negative, interest rates and erratic stock markets and commodity prices. These made other outlets for surplus investor funds look less attractive, and have led to a big jump in speculative interest.

The market for Bitcoin and published prices are now run through relatively new exchanges, some of which have been hacked with the loss of coin accounts of users. Financial companies have also moved into offering Bitcoin-related funds to their clients, as another way to collect management fees.

Transfers

Another important aspect of Bitcoin is the ‘blockchain’ transfer mechanism for shifting ownership of the coins. This is a form of Internet-based system, running outside of the private banking system of any country. This has also been an attraction, especially for those annoyed with bank charges. But central banks, and others, are now copying blockchain systems for the secure transfer of information and titles of ownership. Official e-currencies will also be a challenge to Bitcoin.

Even students of idiotic populism are bemused that some people have placed trust both in an algorithm and in a transfer mechanism they do not understand, and over which they have no means of redress or protection (like deposit insurance) if anything goes wrong.

A small number of sellers of goods and services have begun to accept payment in Bitcoin, largely as a marketing and PR exercise. But the Bitcoin amount to pay still depends upon its price versus the currency in which the goods and services are priced. No wages or salaries are paid in Bitcoin; neither can any taxes be paid in Bitcoin.

Price risk

The sharp trend higher in Bitcoin prices since October 2020 has continued to fuel demand, despite the dramatic volatility. ‘Buy on dips!’ is the speculative mantra for now. But a strongly rising trend means that nobody would be foolish enough to borrow Bitcoin and make it a long-term liability. This will certainly limit any wider use of Bitcoin in the economy, though it would add to its attraction as a speculative asset. If Bitcoin prices fall, that could easily prompt an extreme depreciation, given the nature of the demand for it so far. Even a flattening out of Bitcoin prices would risk an abrupt reversal; especially if/when global interest rates begin to rise.

 

Tony Norfield, 6 April 2021



[1] In my previous article about Bitcoin here, I underestimated how far low interest rates and speculative mania would boost its price, but the key points I made there remain valid.

Wednesday, 20 January 2021

The UK’s Singapore-on-Thames Delusion


I will not spend much time on this topic because it is so ridiculous. But the notion that the UK can become a ‘Singapore-on-Thames’ seems to underlie some Brexit fantasies. Do these have any foundation?

First, here are some basic facts. The UK’s GDP is roughly 8 times bigger than Singapore’s; its population is more than 10 times bigger. Singapore used to be a British colony, and developed from being a key Asian trading hub for the East India Company. The UK is a declining imperialist power. It once had a go-between role for the US in Europe, and still remains a major backer of imperial oppression around the world, but now has its pretensions at diplomatic expertise seen as very irritating.

Singapore sling

In the field of finance, the UK was already a multiple of Singapore’s weight in the world economy before it finally left the European Union: 6 times bigger in international banking, 5 times bigger in FX trading and 30 times bigger in financial derivatives turnover. Whereas Singapore has a regional niche in global finance, the UK has been a leading global player.

It will be difficult, not to say impossible, to further extend the UK’s financial position outside the EU. Any belief that messing up links with the major trading bloc in Europe is a good economic decision – while remaining outside USMCA, RCEP and other trading blocs – would also need to undergo a sanity check.

Some reports have suggested that City of London financial companies contributed a great deal to the Vote Leave campaign in the 2016 UK Brexit referendum. Quite likely some did, though these seem mainly to have been hedge funds and so-called venture capitalists. By contrast, the overwhelming majority of City business, from banks, to life insurance companies, to pension funds and other asset managers, to legal and accounting firms, were clearly pro-Remain.

All City business has benefited from the existing UK tax laws developed over decades. But the hedge funds and so on would have been far less dependent upon EU-related business relationships, or will have dealt more directly with ‘offshore’ centres and Switzerland. That will account for the divided opinion. In the broader corporate arena, with one or two exceptions, businesses were pro-Remain, with only a section of small businesses being pro-Leave. Nevertheless, big companies did little to voice that opinion before the 2016 vote because they did not want to annoy half of their customers.

The end result was that, for reasons explained elsewhere on this blog (see here and here), despite capitalist opinion being greatly against it, the British working class helped enable Brexit, by 52% versus 48% in 2016. A more up-to-date measure of that political outlook can be seen in maps showing the large December 2019 Conservative election majority vote in England.

Where does this leave Singapore-on-Thames?

Singapore has exports that are some 90% bigger than its GDP, whereas UK exports are ‘only’ around 30% of GDP. So, onwards and upwards to Singapore-on-Thames? As you might expect, there are a few problems with this perspective.

Singapore is a small country and an entrepôt centre, with lots of re-exports. This produces a total exports number that is much higher than GDP because it is not based on the value-added measure that goes into a GDP calculation. In theory, the UK could also become an entrepôt centre, but the economic benefits of such a move are very limited.

More than that, any such move implies enforcing a low labour cost economic strategy. Evidently, that implies cutting labour costs. This is at the heart of capitalist economics, and has been explicitly embraced by Conservative pundits.

To use the UK political cliché, the EU would also be very clear in protesting against this kind of policy for being in breach of the ‘level playing field’ of fair competition between the UK and the EU post-Brexit. The EU was once grateful to the UK for proposing policies to cut labour costs, but now that is seen both as destabilising an already shaky EU economic system and as an unwelcome, aggressive trade policy from an ex-member of the club.

One could imagine some benefits of a Singapore-on-Thames – for example, free wifi and a good transport system, like in the real Singapore. But stupidity is its own reward, and the reality is going to be much harsher.

Tony Norfield, 20 January 2021

Friday, 11 December 2020

Airbnb's As and Bs


 

You would think that in a capitalist market one person’s million dollars would count the same as another’s. After all, money is the measure of all things, as is shown by the nonsense of putting a price on carbon emissions, or by economists judging how much you value having access to water by the price you would be prepared to pay for it. But in the mechanism of imperial finance, such equality does not hold.

This is most clearly shown in what is allowed by the powers that run the financial system. For example, the US makes sure that its dollar-dominated international banking network only accepts or pays funds from companies or countries that do not face its many sanctions. That is evident to those who read the news media. What is far less obvious are the ways in which, even among the rich, and even within the US itself, the financial system offers other means of reinforcing the inequality of wealth and power.

Take Airbnb’s recent sale of shares on the market in its IPO. The company raised around $3.7bn by selling a small stake in its ownership via 51.55 million so-called Class A shares, and that valued the whole company at around $47bn. A big jump in its shares from the offer price of $68 to around $140 gained market news attention, but a more interesting story was in the background, one that concerns what a Class A share represents.

Class inequality, even among capitalists

As I have pointed out before in reviews of Google, Facebook and other Big Tech companies, contrary to common prejudice, Class B is better than Class A. The A shares give the holder just 1 vote each. By contrast, Airbnb’s B shares have 20 votes each. This is an extreme divergence, even by Google/Facebook standards, where the B/A ratio is 10/1. The B shares were not on sale, and they are principally held by the company’s three founders and an American ‘venture capitalist’ firm, Sequoia Capital.[1]

So, the 51.55 million A shares have that many votes, while the more than 300 million B shares have around 6 billion votes! It also implies that no matter how many further share offers there are of A shares, it is very unlikely that the small number of holders of the B shares will ever lose control of the company.

I should add here that I don’t care about this. I just want to point out a growing practice that favours monopolistic control of business resources, and one that gets little coverage.

More usually, the news media will focus on other things, such as the elaborate schemes employed by such companies to avoid taxation. Recently there has also been discussion of the monopolistic barriers to entry set up by such companies, and the ‘buy or bury’ tactics used by Facebook and others.

By contrast, this is a more hidden feature of the contemporary capitalist markets that flagrantly contradicts notions of ownership implying control. It is nevertheless quite consistent with the other aspects of the monopolisation of economic power seen today.

 

Tony Norfield, 11 December 2020



[1] There are also Class C and H shares, also with no voting power, but these are not relevant to the points made here.

Wednesday, 2 December 2020

The Mao-Roosevelt No Meeting, 1945

 

In January 1945, Mao Tse-tung[1] sent a message to US President Roosevelt asking to visit the US and discuss future relationships with China. The message got blocked by a US diplomat in China, and Roosevelt apparently did not receive it. But its existence is not disputed. Mao’s request was even referenced by the same diplomat in his telegram to Roosevelt some days later.

By 1945, Mao’s armed forces had gained the upper hand in the fight against the Japanese in China, outdoing the Koumintang troops run by Chiang Kai-shek, despite the latter getting much more military support from the Americans. The US was basically backing both sides in China at this point. It knew that Chiang was a self-aggrandising crook (his nickname among American diplomats was ‘Cash My Check’). Some US diplomats were also open to the ‘communists’, seeing them only as focusing on agrarian reform and economic development, and also recognising their military prowess. Remember too that this was a time for the Americans when rabid anti-communism had not yet fully taken hold, and it was in any case focused on the Soviet Union.

According to an important article by Barbara Tuchman,[2] the previously mentioned diplomat, Patrick Hurley, was following the basic line of American policy. This was to get unity of the two Chinese forces, but under the control of the Kuomintang. The growing relative strength of Mao’s side was underestimated, and US officials believed that a ‘democratic’ – and pliable – China was there for the taking after the defeat of Japan. They did not anticipate the anger with which the apparent US rejection of the request from Mao would be received.

The relevant text of the message relayed by US military observers in Yenan to the US office in Chungking was as follows:

Yenan Government wants [to] dispatch to America an unofficial rpt unofficial group to interpret and explain to American civilians and officials interested the present situation and problems of China. Next is strictly off record suggestion by same: Mao and Chou will be immediately available either singly or together for exploratory conference at Washington should President Roosevelt express desire to receive them at White House as leaders of a primary Chinese party.

One can speculate on what might have happened if Mao and Chou En-lai had made the trip, which would have been Mao’s first trip outside China. Tuchman recognises that many other domestic US and world political events made it very unlikely, even if the original telegram had got through, and even if Roosevelt had lived longer. But she notes that there might have possibly been a different future course of events, including for Korea just a few years later.

There is a lot of mythology about the history of Chinese communism. China was backed into a corner by imperialism, war and the threat of further intervention. But Mao would have been happy to come to some kind of deal with the US – not the colonial British and French – to get support for economic development.

The images below are from pages 10 and 12 of a long telegram from Hurley to Roosevelt on 13 January 1945.

 


 


Tony Norfield, 2 December 2020

(updated with message text on 3 December 2020)



[1] Here I shall refer to the old anglicised spellings of the Chinese names, given the telegrams noted below from 1945.

[2] ‘If Mao Had Come to Washington in 1945: An Essay in Alternatives’, Foreign Affairs, October 1972. Much of the information here is taken from this article, which also gave good references allowing a search of the US official archives. I could find no online copy of the original message from Mao to Roosevelt that was relayed via US military observers in Yenan to the US office in Chungking, China, but note its message in the main text, using Tuchman's article. I did find a copy of Ambassador Hurley’s later telegram to Roosevelt in January 1945 that confirmed such a request had been made, shown in the two images above. An amusing biographical profile of the ‘erratic’ Hurley is available on Wikipedia.



Wednesday, 26 August 2020

The Lebanon Complex


In the wake of the devastating explosion in Beirut, the western media has had an almost universal response. That is to focus on corruption and incompetence in Lebanon’s ruling groups and to demand change. Lebanon’s populace is also exasperated with the political elites, and many protestors have even threatened to kill them. But an examination of Lebanon’s political system shows not only how it has been shaped by its former colonisers; its workings also follow from the limits that imperialism today places on economic and political development.

Confessional modes

Lebanon’s political system falls outside of the standard democratic model lauded by the Anglosphere, because there is an allocation of political positions according to the different religious groups in the country. Yet, looking a little more closely at the reality of the former model, one will find how the middle classes manipulate the system in their favour, how it depends on mutual favours, how rich families have multi-generational power and how they have legions of hangers on. But different strokes for different folks, so let us consider the evolution of Lebanon’s confessional one.
This mode of having a government shared out among different religious groups has a history dating back to the first half of the 19th century.[1] Lebanon was then a minor province of the Ottoman Empire and made up of a number of different religious communities, principally Maronite Christians but also Islamic sects. There were clashes between such communities in the Empire, sometimes ending in bloodshed, even massacres, and religious labels often fundamentally confused what was really a class struggle, particularly between peasants and landlords. Being aware of the different groups, the Ottoman’s policy was essentially one where people could follow their own religion and were left alone, as long as they paid their taxes to the Sublime Porte in Constantinople (later called Istanbul) and didn’t cause trouble.[2]
In May-June 1860, a massacre of Christians in Lebanon was the pretext for European powers to get involved and to take advantage of the declining Ottoman Empire. In an early version of today’s imperial hype of ‘responsibility to protect’, the Europeans, especially France, put pressure on the Ottomans to grant Mount Lebanon special status. France had interests in the Eastern Mediterranean region and had already developed links with the Catholic Maronites in Lebanon.[3]
A conference of European powers and the Ottoman Empire met in September 1860 to determine how Lebanon should be governed. The outcome was to create an autonomous sanjak or province of Mount Lebanon, with a non-Lebanese Christian governor chosen by the Ottoman sultan, assisted by a 12-member council chosen on a confessional basis. This was under the protection of the six powers – Britain, France, Russia, Prussia, Austria and Turkey. This new ‘autonomous Lebanon’ excluded Beirut, Tyre and Sidon on the coast and the Bekaa Valley to the East.
After some debate, in 1864 the 12-member council was amended. Instead of each of the six main religious groups having two members each – which under-represented the Maronites, who made up the majority of the population (perhaps 60% of the total)[4] – the Maronites were now to have four seats. Three seats were allocated to the Druze, two for Greek Orthodox Christians, one for a Greek Catholic, and one each from the Sunni and Shia communities. This gave the Christians a majority of 7:5, as well as a Christian governor. It also set the course for a sectarian representative system in Lebanon, rather than a system being based on political leaders chosen by the whole country in a democratic vote.

Political reallocation

There was a problem with France’s new pied à terre of Mount Lebanon. It was too small to be economically viable and even the Maronites, although happy to be in a majority, were concerned that there might be shortages of food and little room for development.[5] Feeling ever so free to reorganise somebody else’s land, like other colonists, France later dealt with that situation when it joined the British in carving up the Ottoman Empire.
France gained a Mandate from the League of Nations after World War One to rule the former Ottoman regions of Lebanon and Syria. Being worried about the viability of Mount Lebanon, and also worried about resurgent Arab nationalism in Syria, it decided to expand Lebanon at Syria’s expense. By adding the Beirut, Sidon, Tyre and Bekaa regions to Mount Lebanon, the geographical Lebanon we know today was born as Le Grand Liban, or Greater Lebanon. This reduced the numerical preponderance of the Maronites and other Christian groups versus the Muslims, but that was an easy price to pay when you could also fix the politics.


In 1926, France imposed a constitution for Lebanon that set up a bicameral parliament and a president. Seats in parliament and in the cabinet were distributed on the basis of religious affiliation: the president was always to be a Maronite, the prime minister a Sunni and the president of the Chamber of Deputies a Shia. There would always be a Greek Orthodox and a Druze member of the cabinet, while the Maronite president had the right to choose the prime minister.
So far so good for the French, but it was far from a lasting fait accompli.

Economic and political evolution

Arab nationalists in Syria and elsewhere opposed French control of Lebanon. Just as importantly, in Lebanon there was discontent with France’s limits on what the government could do and with whom it could have political and economic relationships. What made this troublesome for France was its weak position by the 1930s, when it had little to offer, while within Lebanon there was a growing cooperation between the Maronite and the Sunni elites.
What brought the latter together was a joint interest in developing commercial and financial relationships with other countries. Even the ‘Greater Lebanon’ was still only a very small state, with few natural resources and a tiny population of less than one million people. It was never going to be a base for significant industry or agriculture. However, Lebanon had several key ports, especially in Beirut, was well positioned on the eastern Mediterranean and had long been a trading centre with financing available. The Maronite elites had traditionally looked westerly, while the Sunni merchants had stronger relationships in the Arab hinterland. France had played a useful role for them both as a sponsoring power, and France had better ties with the Maronites, but they would both be open to other deals.
This came to a head by the early 1940s, prompted by the disruption of the Second World War. Lebanon got a version of independence from France in 1943, and the ‘Free French’ who had invaded Lebanon in 1941 to oust the Vichy regime left Lebanon in 1946 under pressure from the British.[6]
In 1943, a National Pact was agreed. This was a version of earlier deals in which the Maronites held on to the main sources of political power. The 1943 Pact gave the Christians a slightly lower 6:5 ministerial advantage, but still an advantage despite Christians no longer being a majority of the population. The previous rule was kept that the president was to be a Maronite and the prime minister a Sunni; the parliamentary speaker was to be a Shia. The wider political agreement in the Pact was that the Christians would no longer look to France and Muslims would not look to Syria or to Arab union. Ties with the west and with Arab states were allowed if Lebanon’s independence were recognised.
This continuing advantage of the Christians might look anomalous, but the Pact signalled the fundamental
‘unity of the Christian and Muslim [mainly Sunni - TN] members of the commercial-financial bourgeoisie … By working together in an independent Lebanon, the Muslim and Christian bourgeoisies could build a trading and banking centre which would serve as an entrepôt for the West and the Arab world.’[7]
It was in the Arab bourgeoisie’s interests to keep Christian majority rule. This was both because the ability to pursue their common interests with the Christians might otherwise be threatened, and also because increased Muslim representation, including more for the Shia, would have limited the Sunni control of state institutions. This had the desired effect. For example, the Sunni poor tended to see the rich as only the Christians, and they kept to an Arab/Muslim loyalty, rather than a class one. The Christian-dominated state and President in Lebanon were more likely to be the focus of their discontent, not capitalism or their own confessional leaders.

Some redistribution, on confessional lines

While the confessional form of government and political authority helped to hide class divisions, it also had a downside for the different ruling elites. They now had to deliver for their particular communities, and any inter-communal conflict would also put them on the spot: ‘what are you doing to defend us?’ To make the system workable, there had to be agreement between the different groups on sharing out jobs, privileges and influence, and to make sure that those in the weakest position would not cause trouble. This was reflected in the National Pact of 1943, and also in the various other forms of agreement that came after.
In practice, this still meant a strong position of the Christians, especially the Maronites, given their economic prominence. However, the Maronites depended upon the presence of other Christian sects to add to their number, and they too saw that a deal with the Muslims was essential.
On the Muslim side, the Sunni group was in the most favourable economic position. They had done relatively well in the Ottoman Empire and remained probably the largest of the Islamic sects up to the 1970s. The Shia, the second largest Muslim community up to that point (after which they probably outnumbered the Sunni) tend to be lower down the economic scale, and have made up most of the poor in rural, suburban and city areas. At least partly as a result, they have been the most under-represented in Lebanon’s political system. This is not saying that every Sunni is rich and every Shia is poor, but the characterisation holds for each group as a whole.
The result of this political evolution was a peculiar ‘welfare state’ managed largely through the different confessional groups. This is the origin of what the western media likes to disparage as ‘corruption’, but is the type of government that arose in an ex-colony that was unable to create a single, or a more united ruling class to lord it over the rest of the population.

No escape from the imperial environment

Lebanon had a prime position in the regional economy as a commercial and financial centre after the Second World War. Heading into the post-war boom, what could possibly go wrong? It turned out that the delicate balance of internal forces was easily disrupted even in the absence of direct colonial power, both by external forces and by internal ones. These combined to produce a bewildering array of multi-faceted and changing alliances – something that one might have expected, given the disparate nature of Lebanon’s domestic political groups that were also in the process of changing. This article will not attempt to cover all these issues, but to discuss only the most important ones.
On the external side, a very significant event for Lebanon was the turmoil caused by the big powers setting up the state of Israel in Palestine in 1948, and Israel’s expulsion of Palestinian refugees.[8] Broader events in the Middle East region likewise had an impact on Lebanon. For example, pro-western Christian President Camille Chamoun did not break relations with the French and British who, along with Israel, had invaded Egypt in the Suez adventure of 1956. He also seemed to be open to US and British plans for an anti-Soviet military alliance, the Baghdad Pact set up in 1955. In 1958, he opposed Lebanon joining the newly created (but short-lived) United Arab Republic of Syria and Egypt, and he invited the US to intervene with troops in the 1958 crisis that is sometimes called Lebanon’s first civil war. The Maronites were worried about the security of their position in the country, while at the same time going against a lot of Muslim opinion.
Together with the former ‘external factors’ – the quotation marks reflecting the more-than-usual artificial nature of country borders in the Middle East – Syria, Saudi Arabia and, after the 1979 revolution, later Iran, also had interests in Lebanon.

Palestinian refugees and repercussions

More than 100,000 Palestinian refugees went across the northern border to Lebanon in 1947-48; many more followed in later years, particularly after the war in 1967. This influx of mainly Muslim refugees was a problem for a country with less than 1.5 million people in 1948 and still only around 2.5 million by 1975.[9] Apart from being an economic burden, this further exacerbated Christian worries about Arab nationalism. As Palestinian militants fought back against their dispossession by Israel, this also made other Lebanese communities, particularly those in the south of the country, fearful that Israel would attack them too.
By the mid-1970s, the results were toxic, and also not entirely predictable. Many Shia in southern Lebanon resented the presence of Palestinian fighters and one group, the Amal Movement, principally made up of Shia, turned against and attacked them in 1976. However, Maronite forces were the main opponents of the Palestinians and their armed groups, the most important of which was the Palestinian Liberation Organisation (PLO).
The principal Maronite political group was the Phalanges Party. It started as a paramilitary youth organisation in 1937, modelled after the Spanish and Italian fascist parties, and had a version of Lebanese nationalism that was opposed especially to pan-Arabism. It came to greater prominence from the 1950s. Until the 1980s, it ran the most organised militias in Lebanon, fighting both Palestinian and leftist groups. Its record shows how it gained a gruesome expertise in large-scale killings, with implicit or explicit help from other forces.
Events in Lebanon often have a murky chain of causation and even outcome, and there are sometimes plausible claims of ‘false flag’ attacks or assassinations to provoke a response between different armed groups in Lebanon. However, there is little dispute about the Phalange militia being involved in the 1975 bus massacre that killed 27 people and wounded 19, mainly Palestinians but also Lebanese. Many writers have even regarded this as the start of the prolonged 1975-1990 civil war.
Palestinians in Lebanon did not only face the Phalangists. In 1976, Syrian troops entered Lebanon on the invitation of the Lebanese president, and shortly began operations against the PLO whom they blamed for destabilising the country. In August 1976, supported by Syria, Maronite forces attacked the Tel-al-Zaatar Palestinian refugee camp in East Beirut and murdered 1,000-1,500 civilians.
The Maronite militia had been supplied with weapons and military advisers by Israel, which was pleased with the result. This relationship continued in an even more outrageous crime in 1982; one that has had a more prominent place in the history books, so it need only be noted briefly here: the massacres at Sabra and Chatila.
In 1982, after their second invasion of Lebanon (the first was in 1978), Israel moved to eliminate the Palestinians in Beirut, targeting areas where they claimed PLO fighters were based.[10] Principally, the Israelis used their Phalangist allies for this. The direct Israeli action was shelling the Sabra refugee camp and the Chatila neighbourhood, blocking off exits and illuminating the area with flares, then allowing the Phalangists to go to work. Killing and massacre are words too clinical to describe the murder, mutilation, gang rape and torture that resulted. From 16-18 September, anywhere from 1,400 to 3,500 people died, overwhelmingly civilians, both Palestinians and Lebanese Shia.[11]
Israeli intervention in Lebanon was undoubtedly a critical factor in the fracturing of Lebanese politics, but it was far from being the only one. Israel managed to engineer the expulsion of the PLO from Lebanon, but it was unable to cement a lasting alliance with the Maronites, who themselves were losing political ground in the country. The result of the 1982 episode of war, after Israeli troops eventually pulled out (except for their continued occupation of the Shebaa Farms area), was the increased presence of Syria and the rise of Hezbollah.

Syria

The rationale for the Syrian government’s intervention in Lebanon was its fear of regional disruption caused by conflict with the Israelis, including in Syria. This was together with its concern about growing Sunni influence via the PLO. Syria backed anti-PLO Palestinian and Lebanese groups and sought more influence in Lebanon. Syria’s political system, like Lebanon’s, was an uneasy compromise between rival groups. But in contrast to Lebanon, it was one that had resulted in a stronger central government.
From 1976 to 2005, Syria had more than 20,000 troops in Lebanon, and initially the Arab League endorsed these as a peacekeeping force. Although Lebanon had asked Syria to leave in 1986, Syria’s presence gained some legitimacy by 1991 and the two countries signed a treaty and a security pact. These gave Syria responsibility for the defence of Lebanon from external threats, while Lebanon promised that it would not be a threat to Syria. Over time, however, Syria’s military presence in Lebanon came to be opposed both by internal and external forces, and Syrian troops pulled out in 2005.

The Taif Agreement

Syria’s military exit was its delayed response to the 1989 Taif Agreement. This was a plan negotiated in Taif, Saudi Arabia, for ending the civil war and the implementing political changes in Lebanon. As one might have expected, a number of other countries were involved in drawing up the Agreement, otherwise known as the National Reconciliation Accord. These included Saudi Arabia, Egypt, Syria, France, Iran and the US.
The Agreement took away some of the Lebanese (Maronite) President’s powers, enhanced the power of the Sunni prime Minister and, a little more in line with demographic reality, gave the Christians and Muslims an equal number of seats in the Chamber of Deputies. This abolished the advantage previously favouring Christians, but they were still over-represented. Various studies have put the Christian share of the population at well below 50% at that point, and still lower today, partly due to emigration, but there has been no official government breakdown of the population by religion since 1932. Some statistics are just too dangerous, because they might contradict the (only?) political deal that the ruling elites find manageable.


One other important aspect of the Taif Agreement was how it called for the disarmament of the many armed groups within Lebanon. Such militias were rife, since a divided bourgeoisie does not often have a national army it can rely upon. However, there was an exception to the rule on militias: Hezbollah.

Hezbollah

If you were religious, it would be difficult to think of a better name for your political group than the ‘Party of God’. Due to Hezbollah’s important role in fighting Israel from 1982 and its wider significance in Lebanon, especially among the Shia community, the Taif Agreement allowed it to keep its arms as a ‘resistance force’.
Hezbollah began after 1979 as a rival to the older Amal Movement in southern Lebanon and was backed by Iran after the Islamic revolution of that year overthrew the Shah. It grew to have support in many areas of the country, with the key points of its 1985 manifesto gaining resonance: to expel the French and Americans from Lebanon, to bring the Phalangists to justice and to allow people to choose the form of government they want. Naturally, it also called on people to choose an Islamic government, but that did not stop it getting support from people who did not want one.
Together with Amal, Hezbollah today represents most of the Shia in Lebanon, but just noting that would greatly underestimate its political clout. It is a key player in Lebanon’s parliament, including having alliances with other parties, even Maronites; it has the most effective military force in the country and it runs an extensive social welfare programme in Lebanon, including hospitals and educational facilities.
In military terms, Hezbollah has many claims to fame, although it has not said that all the things attributed to it were its responsibility, and they may not be. Notable are: the April 1983 suicide bombing of the US Embassy in Beirut, with 17 US dead, including two senior CIA officers; in October 1983, more than 240 US marines and 58 French paratroopers were killed by a truck bomb in Beirut; in March 1984, the kidnapping of William Buckley, CIA station chief in Beirut (he died in captivity in June 1985). There were many more.
Perhaps the biggest episode was the war with Israel in July-August 2006. After Hezbollah fighters crossed into Israel and killed or imprisoned a number of Israeli soldiers, Israel bombed southern Lebanon and Beirut and began the massive destruction of civilian infrastructure, including schools, roads, bridges, mosques, churches and medical facilities. Over 1,000 Lebanese were killed, the vast majority civilians, more than 4,000 were injured and a million people were displaced. Israel’s land, sea and air blockade on Lebanon lasted until September 2006.[12]
Despite the destruction in Lebanon, Hezbollah gained political ground both in Lebanon and outside. It had managed to survive, not to surrender, and was able to inflict embarrassing losses on the much more powerful, US-funded Israeli forces. This has made Hezbollah difficult for Israel and western powers to deal with. The US and the UK have declared that Hezbollah is a ‘terrorist’ organisation, and the EU has used that term for its military wing. But its prominent status in Lebanon has been unchanged, and in recent years it has used its military experience to fight against ISIL both in Syria and in Iraq.

Saudi and Iranian money

While Israel’s mode of influence in Lebanon was via Christian politicians, as well as via direct military attacks and intervention, Saudi Arabian and Iranian influence has been through the Muslim community, which makes up more than half the population. The two biggest Muslim groups in Lebanon are the Sunnis and the Shia, roughly equal in size, and the principal links have been Saudi-Sunni and Iran-Shia.
Saudi influence in Lebanon has been led by money, including bribes. Along with some other Gulf states, Saudi Arabia has been an important source of subsidy for the Lebanese economy, helping to finance projects, including reconstruction after the 2006 war with Israel. To that extent, it has been of some benefit to all Lebanese, not just Sunnis, but this subsidy has been under threat in recent years. This is both because of Saudi Arabia’s anger at Iranian and Syrian involvement in Lebanon and because of lower oil prices reducing Saudi revenues.
Iran has far less available money than Saudi Arabia, but has also had a significant role in Lebanese politics. It is able to be far more effective in providing not only military supplies and training, but also food aid and other assistance. The western media focus is on Iran’s support for Hezbollah, but this should not be overstated. Just as the Saudis cannot entirely control the politics of the Sunnis, Iran is also limited in what it can do. Compromise between different Lebanese factions is a necessity that all domestic players accept, whatever the pressures may be from their external sponsors.

Lebanon’s economy

Data on Lebanon’s economy are patchy and unreliable. The war in Syria from 2011, which led at one point to more than a million refugees fleeing to Lebanon, has added to the data problem. But one has to deal with what is available. Here I briefly examine some balance of payments data that throw more light on Lebanon, rather than focus on the latest period of crisis that has seen inflation accelerate to around 90% and the economy in a state of collapse, even before the explosion at Beirut’s port.
At first sight, the broad patterns in these data are consistent with what one would expect from a small economy that was very involved in international trade. For example, exports and imports of goods and services are each a large share of GDP. However, the average for exports from 1990-2010 was a bit over 30% of GDP while the average for imports was nearly 60%.[13] This massive gap of close to 24% of GDP is unusual, and it was at close to the same rate in later years. The total of other factors on the current account did not reduce this gap in ‘current’ payments. Although one, remittances from expatriate Lebanese workers, saw significant inflows, others, including payments on debt servicing, saw big outflows. This implies – if the data are at all indicative of reality – that there had been a persistent and large net inflow of funds into Lebanon on the country’s financial accounts.
These net financial inflows tally with the sharp rise in Lebanon’s foreign debt to around 150% of its GDP. They also reflect the large scale of financial support for Lebanon from Saudi Arabia and others that are not fully documented. Part of this support has come in the form of foreign investment, especially into Lebanese real estate; other money has come in the form of deposits in Lebanese banks, including the central bank. Media reports in recent years have noted a flight of money from Lebanon. Saudi Arabia’s funding of Lebanon’s balance of payments, unwittingly or not, will have made this exit less costly for Lebanon’s capitalists.

Conclusion

Lebanon highlights many features of imperialism today. Despite its colonial past and a system of government that was bound to exacerbate communal tensions, it might still have managed to carve out a niche for itself and become a relatively prosperous trading centre in the Eastern Mediterranean.[14] But that prospect was crushed by the geopolitics of the region, from the creation of the Israeli state, to the interference of the major powers, to the impact of crises in surrounding countries as they too tried to forge some kind of future.
It is especially galling to have media pundits cite ‘corruption’ in Lebanon as the problem when the country’s history has been shaped by outside forces, and when the choices it faced for development meant fitting in with the colonial or imperial set up.
The imperial focus today is on Hezbollah. It has provided Lebanon with the only effective force to counter persistent attacks from Israel, and also runs a much-needed welfare system. That is bad enough for ‘western’ opinion; worse still are its links with Iran and Syria – other countries that do not do what they are told.
So, never letting a crisis go to waste, in the wake of the devastating explosion in the port of Beirut we find that curbing, or eliminating, Hezbollah’s role in Lebanon is a major imperial objective, one shared by both Saudi Arabia and Israel. This is the rationale behind their calls for ‘reform’ in Lebanon, and would appear to be a condition for giving the country anything more than minimal aid.
All citizens of Lebanon are angry at the political regime, and they have wanted to change it for decades. But there is no chance of them being able to decide on a new system without external pressure. Imperialism today presents many countries with problems that cannot be resolved. Lebanon is one of them.

Tony Norfield, 26 August 2020


[1] A valuable source for historical and more recent information is Samir Khalaf, Civil and Uncivil Violence in Lebanon, Columbia University Press, 2004.
[2] Taxes were higher on non-Muslims, yet they were also able to hold relatively prestigious positions within the Ottoman administration.
[3] The Maronites were a Christian sect that welcomed the First Crusade in 1096. Much later, they adopted Catholicism and the authority of the Pope.
[4] There are conflicting accounts of population sizes for the different groups, but an objective of the French was to maintain a significant grouping of Christians in any version of Lebanon. The Maronites need not be the majority of the population, however, and being in a minority would make them more dependent upon French support.
[5] There had been a famine in Beirut and Mount Lebanon with up to 200,000 deaths in World War One, due to a blockade, the Ottomans requisitioning food supplies for the army and a swarm of locusts devouring crops.
[6] The French had arrested Lebanese ministers in November 1943, but the British later forced their release. The British had some support from Muslims and Druze, and were concerned to balance out their other plans as well as undermining French influence in the region. There were more French attacks on attempts at independence in both Lebanon and Syria, but the British finally engineered a French withdrawal from both in 1945-46. France retaliated against the British by backing the Zionist militias in Palestine.
[7] Michael Johnson, Class & Client in Beirut, Ithaca Press, 1986, p118.
[8] The terror programme of Zionist militias began even before the new state was established in May 1948. Israel’s expulsions, and its pervasive land grabbing, also continued well after 1948. Most Palestinians fled to Jordan, fewer to Lebanon, and fewer still to Egypt. By September 1949, the UN estimated there were 711,000 Palestinian refugees from Israeli-controlled territory. Israel has prevented their return.
[9] Lebanon’s population rose to around six million by 2018. That includes nearly 200,000 Palestinian refugees and roughly a million refugees from Syria after 2011; it excludes the many Lebanese who had moved to other countries.
[10] Apart from attacks by missiles and aircraft, Israel has invaded Lebanon on many occasions – notably in 1978, 1982, 1993, 1996 and 2006. It has not only seized land across Lebanon’s southern border but also bombed and invaded Beirut.
[11] See Lebanon’s Legacy of Political Violence, International Center for Transitional Justice, September 2013, for more details of this and numerous other events in Lebanon from 1975 to 2008.
[12] Lebanon’s Legacy of Political Violence, pp83-88.
[13] Note that trade statistics data do not measure value added, just the value of the goods and services exported and imported, whereas the GDP data measure value added. This can mean that entrepôt centre countries might have exports or imports that are a very large share of GDP. The excess of imports over exports is nevertheless still a gap that has to be covered by other inflows on the international balance of payments.
[14] Back in 1981, I visited Beirut briefly as part of a business trip to the Middle East. I had an interview with a businessman who knew about the demand for certain products both in Lebanon and also more widely in the region. The interview was conducted to the sound of gunfire down the street.