Thug Capitalism and Free Enterprise

Jerusalem Post, June 26, 2013

“Thug Capitalism” turns the mechanisms of the West against it ultimately threatening to undermine and overwhelm it – even own it, this time without firing a shot.

Prime Minister Stephen Harper of Canada has finally done it. He has let the cat out of the bag. Always scrupulously honorable to a fault, Canadian PM Harper has applied the word “Thugs”, not only to those in control in Damascus, but also to those who support them in this blood bath, keep them in power there, and without whom all this violence could not continue and would not be possible (namely Russia and a few others) and this at the just-concluded G-8 Meeting in Northern Ireland (see the recent spate of articles on this subject, starting with AP, but across the World Press). All power to him!

Wittingly or unwittingly (I‘m sure ‘wittingly’) he has put his finger on the problem and to use a famous (now out of style) idiom, called ‘a spade a spade.” Like it or not, one cannot do business with “Thug” regimes or their supporters – shall we call them “Thug Capitalists”?  We all know who these are – regimes using the methods of capitalism or posing as capitalistic but forgetting about or neglecting (really even “negating”) the one key ingredient of the Capitalistic system since its inception sometime after “the Enlightenment”, originally making the whole system run – “Free Enterprise” – and I emphasize the world “Free”.

“Free Enterprise” – these are dirty words nowadays because, not only do they imply “Freedom”, they imply individual initiative which we usually refer to under the terminology “Enterprise” and not “State Capitalism” or outright cronyism often boiling down to ‘you scratch my back and I’ll scratch yours’ or ‘help your friends and harm your enemies.’ Since these regimes were all formerly almost all ‘Communist’ ones – an anomaly in itself (though some may be or are becoming “Islamic”) – where State control goes, it is all the same.

“The State,” as it were, controls all – whether a “Thug Capitalist” one or an “Islamic” one; and, since it does, “Freedom” per se doesn’t even enter into the picture. In fact, it is an encumbrance – a joke, whether one is speaking about Russia, China, Cuba, North Korea or even Zimbabwe or Venezuela – or whether one is speaking about an “Islamic Regime,” one or one styling itself as or verging upon becoming one; and it matters not Shi’ite or Sunni, viz., Iran, Saudi Arabia, some or all of the Gulf States, the Sudan; and now, seemingly on their way, Egypt, Turkey, and Shi’ite Iraq; and, of course, Syria.

One way or another, both of these – “Totalitarian Capitalist” or “Islamic” – become “managed” or “command” economies, or, what I prefer to term them following the lead of a true Democrat and courageous Leader, Canada’s Stephen Harper, “Thug Capitalists”. Unfortunately for the rest of the world, though fortunately for them or they could neither be so effective or do so, so easily; these regimes turn out to control a good proportion of the world’s high-demand natural resources and commodities and have done so – especially in the case of Saudi Arabia, Iran, and Russian Baku – since the mid-Thirties or Forties of the last Century. What has happened since has only added to this.

Just as he implied and just as during “the Cold War”, one must carry on diplomatic relations, of course, with these regimes (nothing has changed) – and, to repeat, we all know who they are – but one should not “do business” with them in an unfettered manner because anyone with any brains at all will know what the end will be. One should not admit them into World Trade Organizations and the like – even the one, we just witnessed, the G-8, as one sees there what the final result turns out to be regarding, for instance, Iran’s drive to acquire nuclear weaponry or the Syrian blood bath – “Nyet” – because, being run by “Thugs”, they will always act like “Thugs” and undercut and certainly blackmail you economically or defeat you in some other manner.

What does a regime like Putin’s or the North Koreans, the Ayatollahs or, sadly, even China, care about how many people are killed in the streets of a country like Syria, where regimes bombard, bomb, and even use chemical weapons against their own citizens, or what went on – even though to somewhat lesser degree – two years ago in Iran? Why, of course, nothing. In fact, a Totalitarian “Thug Regime” like Putin’s prefers to send a message to anyone who would try to do the same in its sphere of influence – and this does not include only Russia – but also Chechnya, North Georgia, and even the Ukraine (where the former Prime Minister Yulia Tymoshenko is serving what adds up to be an indeterminate prison sentence for unknown infractions no matter how innocent she may be). The same probably for Belorussia.

This is the way “Thug Capitalism” works – human life means nothing, especially if the loss of it takes place in other countries under its political sway or from which it derives a significant benefit, such as a Mediterranean naval base or oil, in comparison to its own interests, economic or political. Take the Chinese, for instance, who practice unconcealed financial domination and economic control of natural resources to fuel their burgeoning economy across large swathes of Africa or South America (and it was just reported that U.S. Secretary-of-State Kerry wishes to talk “Global Warming” with them – give me a break!), to say nothing now of being almost totally dominant, where economic matters go, in Iraq (what did America bother for?).

On the contrary, examples such as the one made and still being made in Syria, which amount to Tiananmen Square multiplied by a 1000, are useful in keeping their own populations in check. They send a message – this is what you can expect to happen to you if you cross us. This is certainly the message those in Moscow, Beijing, and Tehran (especially now Tehran) wish to send their own people. This is how far they are willing to go – as the Russians showed in the Second Chechnya Campaign under Putin and tried to do in North Georgia – so what better way than to allow the blood bath in Syria to continue and challenge the West to do anything about (which is what Putin basically just did at the G-8 Conference and will continue to do – and New York Senator Chuck Schumer finally talks about: “Putin seeming to enjoy sticking his finger in our eye!”).

So how does “Thug Capitalism” work? Why it works just like Fascism. In fact, that’s what it comes to look like even if “elected” by seemingly “popular” means – actually Fascism in Germany and Italy was originally “elected” by popular means – my point being that essentially Democracy is not ‘exportable’ as America thought it was going to be doing in Iraq and Afghanistan (who knows, maybe it has). It must develop on its own and over time – and this, often a very long period of time – by “natural” means.

Of course, Germany and Japan (even Korea) are the living modern antitheses of this but, in both cases, the development of Democracy was abetted by a strong military presence and still is (as in Korea) and even, to some extent, a certain amount of pre-history. You cannot just ‘run away’ from a place, whether you were right or wrong in going in there in the first place, as the Obama Government has just done in Iraq and is in the process of doing in Afghanistan, and hope that everything will turn out all right. Maybe it will but probably it won’t.

Freedom, ‘Democratic’ elections, human rights, and the like have to be accompanied by strong political Institutions and people have to respect them – particularly a functioning court system, a well-trained and capable judiciary displaying a certain amount of incorruptibility, and even a Constitution as should be obvious from what happened in Germany after WWI (the weakness there being an ‘Armistice’ and not a proper ‘Occupation,’ as almost everyone later came to sadly realize, but altogether too late – not just for the Germans but also for the Jews) and to some extent what is happening in China, Russia, and like-minded nationalist but undemocratic political regimes today – Iran, the Ukraine, Egypt, Turkey, etc.

In the end, such elections ‘exported’ without proper “Institutions”, which take a good deal of time to implant themselves or develop in any real way, either become less and less “popular” (as seems to be happening in Egypt today) or they were never very “popular” to begin with. In fact, as in Iran and Russia today – to say nothing of China, North Korea, Turkey, Zimbabwe, et. al. – they become ‘rigged’ and, in the worst case scenario, all opposing voices or ‘dissenters’ are thrown into prison, silenced, or in many cases liquidated or just meet – as in the old days in Russia – with an unfortunate ’accident’.

There, nothing seems to protect and this seems to happen to an inordinate degree; and many, like the Pussy Riot, Mikhail Khodorkovsky, and now even perhaps a former KGB agent like Alexander Lebedev, are given ridiculous prison sentences; and latterly, one even wonders what may have happened to Boris Berezovsky at his estate outside of London or journalist Yuri Shchekochikhin a decade previously in Moscow. But one does not have to wonder about Alexander Litvinenko in London or another Journalist Anna Politkoveskaya in 2006, Andrei Kozlov, First Deputy of Russia’s Central Bank the same year in Moscow, Duma Deputies Sergei Yushenkov and much earlier Galina Starovoitov; or an opposition political leader like Natalia Estemirova about to become the next President of Chechnya in 2005.

In the final analysis in such situations what one ends up, unfortunately, with is a ruling elite perpetuating itself using ‘Totalitarian’ or ‘Command Capitalism’, an approach first pioneered, apparently, after WWI in the short-lived Weimar Republic and followed with a vengeance by its antithetical successor, “War Capitalism” under Hitler. Differing very little from what Stalinism ultimately made out of “Communism” in Russia; not only does the whole economy become “managed”, friends rewarded and enemies usually undermined or liquidated; but in today’s world – and what will finally turn out to be our real point – “free-market” competitors are unfairly undermined by fixing prices and undervaluing and manipulating currencies and, as a result, fatally weakening them by underbidding or ‘buying them up’ and, in the end, possibly finally destroying them, which seems to be happening today.

In fact, since the ‘Crash’ or ‘Sub-Prime’ Debacle of 2008 and its aftermath, this has become painfully obvious – cases in point: in both the European Union ( the former “Common Market”), which seems to be presently barely ‘limping along’ and, at worst, an ‘economic basket-case’ tied as it is to either Russian, Iranian, or Saudi/Gulf gas and oil supplies; and the Americans, who are – like many other ‘emerging’ countries – under such a Chinese balance-of-payments stranglehold and consonant bond-holding deficit that they seem hardly able to dig themselves out for possibly half-a-century – certainly not several decades – while countries like China buy up their most precious assets (and where even Italy now ‘owns’ Chrysler!).

The problem with the present economic situation is that – as I and a good many others have pointed out – though journalists like Thomas Friedman of The New York Times may cloak it with fancy verbiage like “the World is Flat” – as already remarked above, the playing field is still not level! The point is that we in America and certainly those in the so-called “European Union” are trying to operate in a “Free Enterprise” system; but in order to operate in a “Free Enterprise” universe you must have “free” governments and “free” societies; and, along with it, its associated “Free Market”. This is the problem in a nutshell. “Thug Capitalist” countries are using “the Free World”‘s mechanisms against itself and this is what is creating the irreparable imbalances. You can’t just have some countries operating on the basis of “Freedom” and “Free Enterprise” with minimal government control (even here some might object as only ostensibly “Free”, but never mind, “free” eough and, at least, trying to intervene as little as possible); while other countries are, for all intents and purposes, slave societies.

But it is not just that one must have a “Free” society or a “Free” government in order to compete in a “Free Enterprise” World, but one must also have “Free Competition”. Just to cite a case-in-point, in the 60s and 70s before the fall of the Berlin Wall, ‘managed’ societies like Russia, Eastern Europe and even China started to outdistance those in the West in athletics where they had previously been dominant. This was clear in gymnastics, figure skating, hockey, and even basketball; but it was just as clear that these countries were not really ‘playing by the rules’ (if there were any ‘rules’). When the Wall fell, so did much of the dominance – though, of course, perhaps not in individual sports like tennis.

The same is clear in the matter of “free” vs. “non-free” countries, i. e., those we are calling “Thug Capitalists” like China and Russia, but also religiously-Totalitarian Regimes such as in today’s Iran and Saudi Arabia – in fact, in particular, Saudi Arabia which depends upon its oil exports and for a not insubstantial amount of time has been able (though not always) to manipulate or control oil prices. You cannot have one society ‘free’ and another under ‘tight management’. The same can be said for relatively more recent newcomers like Russia and other OPEC countries. So these regimes, whether ideologically, religiously, or politically totalitarian, wish to and actually are operating in the “Free Market” aand/or “Free Enterprise” system.

But where is the “Freedom”? The cards are stacked. There is no “Freedom” so how are they operating in “the Free Market” system? They aren’t. They are operating in a tightly-controlled and completely-managed society. So now they have discovered the benefits of “Capitalism” – “State Capitalism”. Okay, after World War II the imbalance in economies and relative net worths was enough to sustain the Western “Free Enterprise” system and, basically, for the last 60 or 70 years this has worked. But for last 10 or even 15 years, anyone with any insight can see that it is no longer working or even sustainable in this manner.

Probably the best example of what we are saying, as we have been emphasizing, is China. Since being admitted to the free enterprise community and learning the ways of the Capitalist world (under George Herbert Walker Bush by the way, whose own patron, Richard Nixon, had been an employee – along with a good many others – of his grandfather’s Walker Bank); it has mushroomed into a massive creditor nation and all the nations in what used to be known as “the Western World” are almost universally indebted to her. Its balance of payments surplus is visibly staggering – its currency reserves likewise.

Russia has begun – if it has not already been doing so for the last several decades – adapting itself to the same system and, primarily because of its vast natural resources, not only blackmailing Western European countries, but Eastern European ones as well – like the Ukraine or those even further East in the Asian heartland. Saudi Arabia, of course, has been operating in this manner for the last some 60 or 70 years, as we said, because of the nature of the  Western World’s energy needs and its dependence on oil supplies from nations such as this, who have been forced to – nay, obliged to protect it, even in fact indulge it.

So these countries can manipulate their economies, manipulate their currencies, manipulate the price of their goods, and, for the most, part pay little or nothing for labor; and now, the Western economies are forced to compete. In such a world the outcome is pre-ordained. Ultimately – and this is already happening as we have been observing – in the course of time, the Societies of “the Command Economies” will dominate. Okay, you say, that is the essence of the “Free Enterprise,” competitive, market-capitalist system.

But that concept was based on the fact that people felt that the countries operating in such a “Market-Capitalist” or so-called “Free Enterprise” system were organized in relatively the same manner; but, as we have been at pains to point out, this has all gone by the boards now. There is nothing similar about these Totalitarian Capitalists or what we have been calling “Thug Capitalist” societies. In fact, they are completely dissimilar and, as already noted too, they are using the “Capitalist” or “Free Enterprise” system against itself and succeeding – succeeding in a way their predecessors never dreamed of doing because they are actually beginning to defeat it!

It is the same for technology. This sounds ungenerous or even arrogant but up-close analysis to some extent actually bears it out. Forget about all we hear about hacking political and military secrets or ignoring laws of and stealing patents. Countries and societies that did little or nothing to invent or develop the kinds of technologies that dominate or characterize the modern world either use or wish to use them against that world. In the realm of industrial technology, this has been going on for years – a case in point, the planes in the Russian Air Force still look like carbon copies of the American Air Force ones.

It is amazing, too, how one sees the citizens of many Middle Eastern countries holding cell phones as if attached to their heads (like the terrorists recently in Boston), captivated by computers and ipads and, now, even launching rocketry while at the same time, as we have several times now had occasion to remark, some even threatening to destroy the West with them when they have done little or nothing to develop them and intellectually they have barely emerged from the Middle Ages. Of course, this is mainly the case with Totalitarian Religious Regimes such as in Iran or what have to be seen as “Terrorist Groups” sponsored, for instance, by Saudi Arabia across North Africa (a country that also largely paid for Pakistan’s nuclear program and is probably still doing).

But, to some extent, it also fits the case of a number of new “Thug Capitalist” regimes like China or Russia that are not necessarily religious. The Russians for a start (and we have already heard from Sen. Schumer about “Putin enjoying sticking his finger in America’s eye”) make no bones about laughing or even bragging about how they sent their agents out to steal Western technology even during WWII and to copy military apparatuses down to the last detail – a captured American B-29, forced to land in Siberia, was treated in this fashion; but, to some extent, so too was the Atomic Bomb. The Chinese now are clearly doing the same through industrial espionage. Even today, countries like Iran or Pakistan make no bones about how they have lured or shot down advanced American drones and intend to either copy them or give them over to countries like China to do so.

Fine, previously politically this was acceptable, but it isn’t any longer because Western societies are slowly approaching the level of satiety with this. Currencies are beginning to collapse and national debt unsustainable. We all know and can see this, but few are willing to either admit or face the root cause of most of it (besides one’s own internal fecklessness). Of course there is mismanagement in Western “Free Enterprise” societies and maybe the social safety net has become to a certain degree unmanageable but, if the income and the economies were functioning to maximum effect, these would not be the problems they are today. The problem is they are not and cannot.

So what’s to be done? How can you limit those who are allowed to compete in a “free market” or “free enterprise” system? You can say this is a political question and you cannot. But, in fact, you must before all Western economies slowly sink into insolvency and bankrupt themselves as in the case of Greece, Spain, and Italy (even France) in Southern Europe (Ireland and Iceland in the North) and America even notwithstanding; and slowly diminish themselves to the extent that their citizenry really are looking at a not very promising and rather unpleasant future world.

So again – and one admits these are ideal solutions about which few are likely to agree – what must be done? First of all – and this is a sine qua non – you must insist on operating on a not unequal or un-level playing field or, as it were, with one hand tied behind one’s back. One must make sure that all countries entering the system observe certain minimal standards (as the European Union says, it tries to do). These standards should be clear. If you’re going to enter the Community of “Free Enterprise” Societies and “Free Market” Nations, then you yourself have to have what at the bare minimum resembles a “Free Society”. A “Free Market” and “Free Trade” can only be carried on with countries that are themselves “Free”. That’s it. Otherwise, as we said, the deck is stacked.

If this is not going to be the case, then obviously they cannot be permitted to enter the “Free Market” or “Free Enterprise” economic system, no matter what the enticements or inducements. It is this fact that Western Countries are going to have unfortunately to face up to; but since there are no widely-respected theoretical treatise circulating to explain this, only showboat billionaires like Donald Trump (and even Mitt Romney) who proclaim their readiness and wish that they had or could negotiate trade agreements with countries like China. So let them – whatever works. In an ideal world, one wishes perhaps they had had their chance.

As already alluded to, the main problem flying in the face of any such solutions is natural resources, almost all of which – especially in the face of Western Conservationist rules – turn out to be located in areas of the world that are what we would ostensibly call “Thug Capitalistic” and not really “Free” at all. So how is one to act in this regard? This is obviously beyond the scope of this column; but, where natural resources and/or commodities are concerned, clearly the “Free-Enterprise”/“Free-Market” nations, operating as a unit, will have to develop certain standards or requirements just as “Thug Nations” have developed certain standards for their monopolistic control in their industrial sphere. How many countries would be willing to observe this? On that depends the future of the “Free-Market”/“Free-Enterprise” system as well as what we have been euphemistically calling “the Free World”.

At the moment, we and it are being “bought up” at a visibly alarming pace. Meanwhile, some like China, are buying up large swathes and control of what used to be called “the Developing World” at an enormous rate. The present barrier-less and tariff-less, unregulated “Free Trade” through whatever “Organization”, one wishes to name, cannot be sustained. Western Democracy will go down by virtue of its very own “Achilles Heel” – the “Free Market” (“Free” in the sense that anyone who participates in it, participates in any manner they choose; but not “Free” in the sense that those within their own societal systems are “Free” enough to operate in an independent manner or in the manner we all pay lip service to) and “Free Enterprise” or “Free Competition” but few “Free” enough, either East or West, or really “Free” – that is, unshackled by Government control.

Two good recent books to read, incidentally paralleling this subject, are “The Unwinding: An Inner History of the New America” by George Packer (Farrar, Straus and Giroux, 2013) and Niall Ferguson, The Great Degeneration: How Institutions Decay and Economies Die (Penguin, 2013)