Naked Capitalism: The MIC, BARE and OGAM Conquer NATO

Yves Smith at Naked Capitalism has pretty good article about what is behind everything going on in Ukraine, Russia, and NATO members. America Defeats Germany for the Third Time in a Century: The MIC, BARE and OGAM Conquer NATO

Yves discusses the military-industrial complex, finance/insurance/real estate, and the oil, gas and minining complex and how they all benefit from the isolation of Russia. The article discusses some potential fallout or downsides of the situation as well. I would go so far as to say that everything presented is correct, but there is a lot of good information to keep in mind when thinking about the situation.

Excerpt:

…My old boss Herman Kahn, with whom I worked at the Hudson Institute in the 1970s, had a set speech that he would give at public meetings. He said that back in high school in Los Angeles, his teachers would say what most liberals were saying in the 1940s and 50s: “Wars never solved anything.” It was as if they never changed anything – and therefore shouldn’t be fought.

Herman disagreed, and made lists of all sorts of things that wars had solved, in world history or at least changed. He was right, and of course that is the aim of both sides in today’s New Cold War confrontation in Ukraine.

The question to ask is what today’s New Cold War is trying to change or “solve.” To answer this question, it helps to ask who initiates the war. There always are two sides – the attacker and the attacked. The attacker intends certain consequences, and the attacked looks for unintended consequences. In this case, both sides have their dueling sets of intended consequences and special interests.

The active military force since 1991 has been the United States. Rejecting mutual disarmament of the Warsaw Pact countries and NATO, there was no “peace dividend.” Instead, the U.S. policy by the Clinton administration to wage a new military expansion via NATO has paid a 30-year dividend in the form of shifting the foreign policy of Western Europe and other American allies out of their domestic political sphere into their own “national security” blob (the word for special rentier interests that must not be named). NATO has become Europe’s foreign-policy-making body, even to the point of dominating domestic economic interests.

The recent prodding of Russia by expanding Ukrainian anti-Russian ethnic violence by Ukraine’s neo-Nazi post-2014 Maiden regime aims at forcing a showdown. It comes in response to the fear by U.S. interests that they are losing their economic and political hold on their NATO allies and other Dollar Area satellites as these countries have seen their major opportunities for gain to lie in increasing trade and investment with China and Russia.

To understand just what U.S. aims are threatened, it is necessary to understand U.S. politics and “the blob,” that is, the government central planning that cannot be explained by looking at ostensibly democratic politics. This is not the politics of U.S. senators and representatives represent their congressional voting districts or states.

America’s Three Oligarchies in Control of U.S. Foreign Policy

It is more realistic to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the industrial interests of their major political campaign contributors. A Venn diagram would show that in today’s post-Citizens United world, U.S. politicians represent their campaign contributors, not voters. And these contributors fall basically into three main blocs.

Three main oligarchic groups that have bought control of the Senate and Congress to put their own policy makers in the State Department and Defense Department. First is the Military-Industrial Complex (MIC) – companies such as Raytheon, Boeing and other arms manufacturers, have broadly diversified their factories and employment in nearly every state, and especially in the Congressional districts where key Congressional committee heads are elected. Their economic base is monopoly rent, obtained above all from its arms sales to NATO, to Near Eastern oil exporters and to other countries with a balance-of-payments surplus. Stocks for these companies soared immediately upon news of the Russian attack, leading a two-day stock-market surge as investors recognized that war in a world of cost-plus “Pentagon capitalism” (as Seymour Melman described it) provided a national security umbrella. Senators and Congressional representatives from California and Washington traditionally have represented the MIC, along with the Solid pro-military South. The past week’s military escalation promises soaring arms sales to NATO and other U.S. allies. Germany quickly agreed to raise is arms spending to 2% of GDP.

The second major oligarchic bloc is the rent-extracting oil and gas sector, joined by mining (OGAM) riding America’s special tax favoritism granted to companies emptying natural resources out of the ground and putting them into the atmosphere. Like banking and real estate, the aim of this OGAM sector is to maximize the price of its energy and raw materials so as to maximize its natural-resource rent. Monopolizing the Dollar Area’s oil market and isolating it from Russian oil and gas has been a major U.S. priority for over a year now, as the Nord Stream 2 pipeline threatened to link the Western European and Russian economies together.

If oil, gas and mining operations are not situated in every voting district, at least their investors are. Senators from Texas and other Western oil-producing and mining states are the leading lobbyists, and the State Department has a heavy oil-sector influence providing a national-security umbrella for its special tax breaks. The ancillary political aim is to ignore and reject environmental drives to replace oil, gas and coal with alternative sources of energy. The Biden administration accordingly has backed the expansion of offshore drilling, supported the Canadian pipeline to the world’s dirtiest petroleum source in the Athabasca tar sands, and celebrated the revival of U.S. fracking.

The foreign-policy extension is to prevent foreign countries not leaving control of their oil, gas and mining to U.S. OGAM companies from competing in world markets with U.S. suppliers. Isolating Russia (and Iran) from western markets will reduce the supply of oil and gas, pushing prices and corporate profits up accordingly.

The third major oligarchic group is the symbiotic Finance, Insurance and Real Estate (FIRE) sector is the counterpart to Europe ‘s old post-feudal landed aristocracy living by land rents. With most housing in today’s world having become owner-occupied (with sharply rising rates of absentee ownership rising since 2008 and the wave of Obama evictions, to be sure), land rent is paid largely to the banking sector. About 80 percent of U.S. and British bank loans are to the real estate sector, inflating land prices to create capital gains – which are effectively tax-exempt for absentee owners.

This Wall Street-centered banking and real estate bloc is even more broadly based on a district-by-district basis than MIC. Its New York senator from Wall Street, Chuck Schumer, heads the Senate, long supported by Delaware’s former Senator from the credit-card industry Joe Biden, and Connecticut’s senators from the insurance sector centered in that state.  Domestically, the aim of this sector is to maximize land rent and the “capital’ gains resulting from rising land rent. Internationally, the FIRE sector’s aim is to privatize foreign economies, above all to secure the privilege of credit creation in U.S. hands, so as to turn government infrastructure and public utilities into rent-seeking monopolies to providing basic services at maximum prices (health care, education, transportation, communications and information technology) instead of at subsidized prices to voters.

Wall Street always has been closely aligned with the oil and gas industry, back to the days of Standard Oil. These are the three rentier sectors that dominate today’s post-industrial finance capitalism. Their mutual fortunes have soared as MIC and OGAM stocks have increased. And moves to exclude Russia from the Western financial system (and partially now from SWIFT), coupled with the adverse effects of isolating European economies from Russian energy, promise to spur an inflow into dollarized financial securities

It is more helpful to view U.S. economic and foreign policy in terms of the military-industrial complex, the oil and gas (and mining) complex, and the banking and real estate complex than in terms of political policy of Republicans and Democrats. The key senators and congressional representatives do not represent their states and districts as much as the industrial interests of their major political campaign contributors. That is why neither manufacturing nor agriculture play the dominant role in U.S. foreign policy. The convergence of policy aims of America’s three rentiergroups overwhelms that of labor and even of industrial capital. That convergence is the defining characteristic of today’s post-industrial finance capitalism. It is basically a reversion to economic rent-seeking, which is independent of the politics of labor and capital.

The dynamic that needs to be traced today is why this oligarchic blob has found its interest in prodding Russia into what Putin evidently viewed as a do-or-die stance to resist the increasingly violent attacks on Ukraine’s eastern Russian-speaking provinces of Luhansk and Donetsk…(article continues)

Ukraine War Updates and Effects

Following are a few articles and videos on the Ukraine invasion and the effects on the rest of the world. First up is a video from S2 Underground. In their video On the Steppe, they give a good and heavily-mapped overview of what is happening on the ground in Ukraine. They also spend some time talking about what NATO is doing or not doing, and a little bit on the effects of sanctions, such as the price of fertilizer. Following the S2 video is an article by investment banker and market analyst Bill Blaine talking about how the world has changed with the invasion, especially focusing on market matters.

After Blaine’s article is a video of Ukraine President Zelenskiy calling on able Ukrainians to come forward so that Kiev an arm them. The general mobilization prohibits any male citizens aged 18 to 60 from leaving the country.

Forward Observer’s daily situational awareness video discusses soaring wheat prices. Following that is a short article from the BBC on prices which may increase as a result of the war, and then a longer article/interview from WWD on Russia’s motivations, goals, and implications for various future problems.

Blaine’s Morning Porridge: Hold the Narrative and Win the Game of Risk excerpt:

The world changed yesterday. Markets did not.

For the next 10-14 days – for that is how long it will likely take Russia to subjugate Ukraine – it will be wall to wall coverage. Already some fatigue with the streets of Kyiv is setting in. Our shock, horror and outrage will continue to be blunted – and by the time it’s over, other topics will be filling the screens.

Probably these other things will be surging inflation, soaring food prices, unimaginable energy bills, tensions in the Taiwan straights, and Europe bickering across every imaginable policy decision. For the next few years expect horror reports about brave Ukraine resistance fighters being massacred – or terrorists being dealt with if you watch Sputnik TV.

The reality is the world fundamentally changed yesterday:

There are the obvious issues; prolonged inflation for longer. We’re all aware that food prices will be impacted long-term. Russia is a major supplier of fertilisers, Ukraine is the number one sunflower seed producer, no 2 in Wheat and massive across agricultural commodities. (Some readers have already asked if it’s a “Ukrainian Chicken Farm moment” – the absolute top of the corporate cycle, named for the said poultry farm that launched a massively oversubscribed bond deal at an insane price, just days before SARs and Bird Flu caused it to shut with uninsured losses – but that is a story for another day…)

Energy is the other talking point – massive spikes in European Gas as we wonder where it’s going to come from. European nations are all eyeing each other – nervous the rest might cut a deal with the Kremlin to secure their own supplies.

It also confirms the critical effect of Geopolitics – and it confirms a massive tectonic shift has occurred as the world splits into new plates with their attendant conflict zones.

  • Putin is aware reproachment with the West will be a long-term play – and he won’t be counting on it happening soon. He’s pivoting (what a great word) to Asia – setting up Gas, Energy and Food deals with China.
  • China is happy to continue building its co-prosperity sphere in Asia. The more Russia and Europe can distract the US, the happier Xi will be.
  • The “West”, including our outposts in Japan and Oz will be wondering where they should stand.
  • The pundits expect Trump or a Trump Clone to lead the US into isolationism in 2025.
  • Europe will remain a tired, broke little grab-bag of ill-assorted nations pretending the like each other, at the end of very long supply chains dependent on what Russian Energy they can beg, borrow or steal.. (Steal in this context being breaking the climate change agenda to re-invest in Energy Security by opening coal, oil and gas facilities – prompting fury from climate activists who will accuse governments of stealing from future generations.)

That leaves Africa and South America up for play – the Chinese have learnt their debt lesson and will be loath to rely on further soft-power through lending. They may get… “outward bound”… As resources dip, populations rise, and climate change fries Africa the refugee crisis will further destabilise Europe.

I’m sorry if it sounds like a Game of Risk – but it’s beginning to look that way..

BBC news: Five Ways Life Could Get More Expensive excerpt:

The Russia-Ukraine conflict is expected to drive these [energy and fuel prices] even higher and has already caused the oil price to jump to its highest level in more than seven years, while future gas prices have increased 60% in just one day.

WWD: Worse Than a Crime, It’s a Blunder excerpt:

Russia’s invasion of Ukraine has profoundly shaken the world order (such as it is) and raised a host of questions about Putin’s endgame, the West’s response, the alternative courses that neither side took, and the consequences for Ukraine, Russia, and nearly everyplace else. In search of some preliminary answers, Prospect editor at large Harold Meyerson and managing editor Ryan Cooper talked to Anatol Lieven, senior research fellow on Russia and Europe at the Quincy Institute for Responsible Statecraft and author of Ukraine and Russia: A Fraternal Rivalry. An edited transcript follows.

Harold Meyerson: What is Putin’s endgame, as far as you can discern it?

Anatol Lieven: Up to this morning, I would have said, on the basis of my conversations with people in Moscow, officials and former officials, that what they were going to do was take the Russian-speaking areas of the country in eastern and southern Ukraine and then, basically, offer to reunite Ukraine on the basis of federalism—in other words, basically propose the Minsk agreement for the Donbas, but into a kind of confederal state in which pro-Russian areas would have de facto control over Ukraine’s international alignment. And accompanying that with a treaty of neutrality. Now—and I think it’s still too early to say for sure—but after Putin’s speech and given what looked like Russian moves towards Kyiv, it may well be that they want more than that, they want to replace the government in Kyiv with a pro-Russian government.

Putin’s talk about denazification, demilitarization, punishment of Ukrainian criminals points in that direction, and the fact that they seem to have crossed the border on the ground from Belarus heading for Kyiv. The Russian bombardments, of course, extend across the whole of Ukraine, but that’s what you would have expected, a classic military offensive to knock out the military infrastructure through air power and missiles. But in the end, the political fate of Ukraine will be determined by what territory the Russian army occupies on the ground.