In the wake of last week’s withdrawal of the great bulk of US troops from Afghanistan after 20 years of occupation and war, the US military and intelligence apparatus is scrambling to set up means for continuing attacks inside the country.
An Afghan army soldier walks past Mine Resistant Ambush Protected vehicles, MRAP, that were left after the American military left Bagram air base, in Parwan province north of Kabul, Afghanistan, Monday, July 5, 2021. The U.S. left Afghanistan's Bagram Airfield after nearly 20 years. (AP Photo/Rahmat Gul)
Last Friday, the Pentagon abandoned the sprawling Bagram Air Base, long the center of US military operations in the country. Reports have since emerged from Afghanistan that the American forces departed like thieves in the night, failing to notify the new Afghan commander that they were leaving, and plunging the facility into darkness by cutting power on the way out. Their departure was followed by the invasion of the base by an army of looters who grabbed everything they could of supplies abandoned by the US military.
This ignominious end to the longest war in US history is emblematic of the unmitigated debacle of the US intervention in Afghanistan, which claimed the lives of hundreds of thousands of Afghans, along with those of more than 4,000 US troops and military contractors, while costing trillions of dollars.
The depth of this debacle has been further demonstrated by the ever-worsening rout of the US-trained Afghan security forces ostensibly loyal to the puppet government of President Ashraf Ghani in Kabul. The Taliban insurgents have overrun fully a quarter of the country’s district centers in recent weeks, on top of territory the Islamist movement already controlled.
On Monday, the Tolo news agency reported that 13 districts had fallen to the Taliban in the space of 24 hours—11 in the northeast, one in the east and one in the south—the highest number of areas taken thus far by the insurgents in a single day.
In many cases, the Afghan troops have fled or surrendered their positions as well as their US-supplied weapons without putting up any resistance, and a number of soldiers have gone over to the Taliban. Morale within the Afghan army is low, with troops well aware that their commanders have subordinated their welfare to a host of corruption schemes that have enriched the senior officer corps. In some cases, soldiers may have concluded that they are more likely to be paid by the Taliban than by an army in which commanders routinely steal the salaries of their troops.
On Monday, the government of Tajikistan’s national security committee reported that 1,037 Afghan government troops had fled across Afghanistan’s northeastern border into the former Soviet republic to escape the Taliban offensive.
“Taking into account the principle of good neighborliness and adhering to the position of non-interference in the internal affairs of Afghanistan, the military personnel of the Afghan government forces were allowed to enter Tajik territory,” said the statement, published by Tajikistan’s state information agency.
In the north, the Taliban has taken over key border crossings as well as entire districts that it was unable to even enter when it constituted the national government between 1996 and 2001. While emerging from the predominantly Pashtun areas of eastern and southern Afghanistan, the Taliban has in recent years recruited fighters from among ethnic Tajiks, Hazaras and other minority populations.
Developments on the ground are seeming to confirm the reported worst-case scenario presented by US intelligence analysts that the government could fall to a resurgent Taliban within the space of six months.
In an attempt to prop up the Afghan puppet forces, the Pentagon has announced changes to the withdrawal schedule, which has already seen virtually all of the allied NATO forces leave the country and all but a small residual contingent of US troops. Some 650 American soldiers are reportedly being left behind to secure the massive US embassy in Kabul as well as the Afghan capital’s airport. Another force of 300 troops is being placed on standby for a possible crisis evacuation of US personnel, along the lines of the evacuation of Saigon in 1975.
Gen. Scott Miller, the senior commander of US forces in Afghanistan, is remaining in the country for a few additional weeks to coordinate the post-withdrawal liaison between the Pentagon and Afghan puppet forces. He is set to travel to different areas of the country as well as to the NATO headquarters in Brussels and to what will now be the most forward US base for Afghan operations in Qatar in what one senior official described to the New York Times as “a hand-holding tour.”
General Miller gave a grim assessment of Afghanistan from the standpoint of US imperialism in an interview Sunday with ABC News.
“The loss of terrain and the rapidity of that loss of terrain has… has to be concerning,” he said, warning that the Taliban’s advance could lead Afghans to conclude that their victory is “a foregone conclusion.” He added, “I would like us not to just turn our backs on this.”
Perhaps of greater substantive significance for the Afghan security forces, the Pentagon is also extending the contracts for a few hundred of the 18,000 US military contractors deployed in Afghanistan in order to continue supporting Afghan warplanes and Black Hawk air assault helicopters, which have been the principal prop of the government’s security forces.
The Pentagon, the CIA and the White House are still working out command-and-control protocols for continuing US operations in Afghanistan following the troop withdrawal. The US military will retain the power to support Afghan puppet forces with airstrikes against the Taliban, according to CNN.
The CIA, however, may remain in charge of operations directed at assassinating alleged “terrorists” inside Afghanistan.
US President Joe Biden has spoken of Washington retaining an “over the horizon” capability for intervening in Afghanistan, which could include everything from US airstrikes carried out by warplanes flying from the Persian Gulf to drone missile strikes and assassination raids by CIA or special forces kill teams.
Japan’s State Minister of Defense, Yasuhide Nakayama, has called into question the “One China” policy, which states that Taiwan is a part of China and has been the basis for Tokyo’s relations with Beijing for nearly 50 years. Nakayama, who serves as deputy to Defense Minister Nobuo Kishi, was taking part in an online event hosted by the rightwing Hudson Institute think tank in Washington on June 28.
Yasuhide Nakayama, State Minister of Foreign Affairs for Japan (AP Photo/Pablo Martinez Monsivais)
Speaking in imperfect English, Nakayama, who serves as deputy to Defense Minister Nobuo Kishi, commented, “In the 1970s, the United States policy and also all over the world, [thought] China would become one, so it [tried] the ‘One China’ policy… The decision at that time and now since the 1970s…what happen[ed] and the results of the decision-making…Was it right? I don’t know.”
Nakayama’s challenge to the “One China” policy is in line with Japan’s efforts to remilitarize, and build up for war in alliance with the United States. The Japanese ruling class is attempting to abrogate Article 9 of the constitution, known as the pacifist clause, which bans Tokyo from waging war overseas. In doing so, the ruling class wants to be free to use military means to advance its imperialist interests and offset three decades of stagnant economic growth.
Nakayama justified Japan’s involvement in a future war with China over Taiwan, saying Okinawa Prefecture in the East China Sea would be impacted by events on the island. Tokyo claims that Beijing was acting aggressively in the region and represents a danger to Japan. In reality, Washington has steadily ramped up its confrontation with Beijing since the Obama administration, turning minor territorial disputes into flashpoints, is using Taiwan to further demonize China.
Tokyo is also using the supposed China threat to increase military spending, beyond the self-imposed ceiling of one percent of GDP. Echoing his remarks in May, Defense Minister Kishi stated on June 24, “Our defense spending should be based on what equipment and personnel the country needs for its defense, as well as the national security situation.” Tokyo’s military budget for 2021 is already a record high 5.34 trillion yen ($US51.7 billion).
China’s Foreign Ministry spokesman Wang Wenbin sharply criticized Nakayama on June 29, saying, “The politician in question flagrantly refers to Taiwan as a ‘country’ on multiple occasions, severely violating principles set out in the four political documents including the Japan-China Joint Communiqué (of 1972) and its solemn and repeated commitment of not seeing Taiwan as a country. We ask Japan to make crystal clarification, and ensure that such things won’t happen again.”
In his comments, Nakayama called Taiwan the “red line of the 21st century,” effectively threatening war over the island. Echoing Washington, Nakayama repeatedly claimed it was necessary to “protect Taiwan as a democratic country.”
Neither Tokyo nor Washington is concerned about democratic rights in Taiwan, which Japan ruthlessly ruled as a colony from 1895 to 1945. The characterization of Taiwan as “democratic” ignores the island’s history of military dictatorship, and is aimed at poisoning public opinion towards China, in preparation for war.
Taiwan first reverted to China’s control after World War II. Chiang Kai-shek and the Kuomintang (KMT) then fled to Taiwan, following their defeat in the 1949 Chinese Revolution. As throughout China, the KMT was deeply unpopular on the island. As many as 28,000 people had already been killed by government troops two years earlier, in what became known as the February 28 Incident. Declining economic conditions and anger towards government corruption had erupted in mass protests, leading to the massacres.
These killings marked the beginning of a decades-long period known as the White Terror. In 1949, the KMT imposed martial law on the island, which would not be lifted until 1987. Some areas of Taiwan continued to be under martial law until the early 1990s. This was ignored by Washington, which saw the island as a bastion of anti-communism, and a base of operations against the People’s Republic of China.
Despite the US rapprochement with China in 1972, directed against the Soviet Union and its tacit acceptance of the “One China” policy in establishing formal diplomatic relations with Beijing in 1979, Washington maintained ties to Taipei and supplied it with arms against China.
Under martial law, the government suppressed free speech and the right to assembly. It strictly controlled newspapers, even down to the number of pages, with anti-government sentiment barred from publication. New political parties were also banned. The Taiwan Garrison Command, the island’s secret police until 1992, arrested at least 140,000 people, with many of them sentenced to long prison terms and tortured. Approximately 8,000 people were executed. The real totals are believed to be much higher.
In 2007, while marking the 20th anniversary of the lifting of martial law, Michael Hsiao, a sociology professor at Academia Sinica, and now senior advisor to current President Tsai Ing-wen, told the BBC that the KMT government “put a lot of effort to control people’s thinking, people’s reading. Economic and everyday social life wasn’t so tightly controlled, but in political life, things were strict. They put people in jail—there was no freedom of expression.”
Facing growing popular opposition, the government of Chiang Ching-kuo, the son of Chiang Kai-shek, who had died in 1975, lifted martial law in 1987, but the KMT ensured that many of the same restrictions and anti-democratic provisions were included in a new National Security Law, which remains in effect to this day.
The KMT turned to the Democratic Progressive Party (DPP), illegally established in 1986, as a means of controlling popular discontent. However, the DPP, Taiwan’s current ruling party, does not speak for the democratic aspirations of the Taiwanese working class and youth, but instead for a layer of big business that seeks greater access to wealth, through the removal of restrictions imposed by the “One China” policy.
While the DPP and its supporters suffered under martial law, it follows in the anti-democratic KMT’s footsteps. In December 2019, Taiwan’s lawmaking body, the Legislative Yuan, controlled by the DPP, passed a so-called “anti-interference” law to heighten penalties for those accused of acting on Beijing’s behalf. The law focuses on political donations, lobbying, disrupting elections, aiding elections, or disrupting social order.
The anti-democratic framework established under the KMT dictatorship remains in place today, supported by the DPP. As workers in Taiwan and throughout the Asia-Pacific region increasingly move into confrontation with capitalism, these same anti-democratic laws will be used to clamp down on political dissent.
Israel, the world’s third-most vaccinated country by share of the population, is experiencing a new outbreak of COVID-19 due to the more contagious Delta variant. The Health Ministry reported 343 new cases on July 4, the most cases in three months. Since first being detected on April 16, the Delta variant now comprises 90 percent of coronavirus cases in Israel.
Israelis receive a COVID-19 vaccine from medical professionals at a coronavirus vaccination center set up on a shopping mall parking lot in Givataim, Israel. (AP Photo/Oded Balilty)
The outbreak is particularly concerning given Israel’s vaccination program. According to Our World in Data, Israel has currently given at least one dose to 65 percent of its population, bested only by the United Kingdom’s 67 percent and Canada’s 69 percent. Until early June, Israel was the most vaccinated country by this metric. About 56 percent of Israelis are fully vaccinated, most with the vaccine produced by Pfizer.
The Health Ministry expects new cases to increase to 500-600 per day this week, while a team at Hebrew University warn that daily cases could reach 1,000 in two weeks. Daily new cases peaked at an all time high on January 17 with a seven-day-average just over of 8,600 per day and fell to a low of less than 10 on June 9.
With the resurgence of the virus, the government has reinstituted some measures, including an indoor mask mandate, and has resumed meetings of the so-called coronavirus cabinet.
Not only is the Delta variant more contagious, but it also appears to partially evade immunity provided by the vaccines which had previously been regarded as the most effective, including the Pfizer-BioNTech mRNA vaccine. According to the Ynet news site, Health Ministry data show that the Pfizer vaccine is now 64 percent effective in preventing infection, whereas before the rise of the Delta variant in Israel it was 94.3 percent effective.
This is corroborated by a study from Hadassah University Medical Center and Hebrew University, which estimate the Pfizer vaccine’s effectiveness against the Delta COVID-19 variant at 60-80 percent.
However, the vaccines do seem to largely protect against severe disease, hospitalization and death. Ynet reports that recent Health Ministry data show 93 percent effectiveness against severe disease, whereas previously it was 98.2 percent. Given the delay between infection and hospitalization, and between hospitalization and death, the real effectiveness against the Delta variant may be slightly lower.
This is comparable to initial data from the UK and Singapore on severe illness.
It is clear that, by not isolating vaccinated travelers returning from overseas and lifting social distancing and masking measures, the Israeli government missed an opportunity to curtail the Delta variant before it became entrenched in the country. Haaretz reports: “More than half of the new coronavirus patients are vaccinated (51 percent), according to the health ministry. Only 15 were returning travelers. One third of the new patients were children under 11, and another 13 percent were aged 12 to 18. In 50,000 tests carried out, 0.7 percent returned positive results.”
Outbreaks in Israel have been traced back to vaccinated individuals, including 75 high school students who got infected at a party after it spread from a vaccinated tourist to a vaccinated relative.
Despite the danger, particularly to teenagers and children, Prime Minister Naftali Bennett declared, “We do not want to impose any limits—not on parties, or on trips, or on anything,” and urged those 12 and older to get vaccinated.
More stringent measures are reportedly under discussion, but have not been implemented. The Times of Israel reports, “Former Health Ministry deputy director-general Itamar Grotto said the country should consider returning to the ‘Green Pass’ system that differentiates between vaccinated and non-vaccinated citizens regarding access to certain venues and activities.”
The “Green Pass” system ended on June 1, and had allowed vaccinated or those who recovered from a COVID-19 infection to eat indoors and attend certain events earlier than the population as a whole.
The Times of Israel also reported that the Israeli “Health Ministry is also considering mandating vaccinated parents of children who test positive for COVID[-19] to remain in quarantine until they receive a negative test … though the health minister expressed reservations about the economic toll of such a step.”
Meanwhile, the Delta variant continues to spread internationally and has become or is rapidly becoming dominant in a number of countries, including the United States. With practically every country less vaccinated than Israel (the US has 54 percent of its population at least partially vaccinated, for example, and only 24 percent of people worldwide are at least partially vaccinated), the dangers are immense for the majority of the population.
Moreover, these developments underscore a number of conclusions about the available vaccines and the way forward against the pandemic: First, the vaccines are remarkably effective, even against the worst variants thus far. It is a remarkable achievement of the human ability to scientifically understand the world that highly effective vaccines have been developed and distributed rapidly against a novel virus.
Second, the vaccines are not a “silver bullet” against the pandemic. The COVID-19 virus, through selective pressure, has and will continue to evolve to evade immunity as long as it is allowed to spread anywhere. While current evidence indicates it is unlikely that the Delta variant will produce a wave of infections in Israel as deadly as earlier ones, future variants may well evade immunity more comprehensively.
With Peru still gripped by a political crisis stemming from the month-long delay in announcing the winner of the June 6 second round of the presidential election, the masses of working people are confronting increasingly desperate conditions driven by the handling of the COVID-19 pandemic by the Peruvian and international ruling classes.
Supporters of presidential candidate Pedro Castillo gather near a ballot counting site, in Lima, Peru, Tuesday, June 8, 2021. (AP Photo/Martin Mejia)
While Peruvian workers have seen their living standards devastated, the bourgeoisie has been untouched by the same crisis or has, as in all other capitalist countries of the world, even increased its wealth.
The country is facing what has been described as a slow-motion coup, as the fujimorista Fuerza Popular (FP) party continues its bid to annul the recent presidential elections in which the candidate of FP, Keiko Fujimori, lost to Pedro Castillo of Peru Libre by a slim margin of 44,058 out of a total of 25,287,954 votes cast.
Whichever of the two candidates is sworn in as president on July 28, the crisis facing the working class will only deepen. In the final analysis, the two candidates offer the Peruvian ruling establishment alternative means of suppressing an eruption of social unrest in response to intolerable economic conditions. Fujimori represents the politics of authoritarianism and iron-fist repression; while Castillo offers a means of diverting the struggles of the working class by means of populist and reformist promises that he and his circle know he will not fulfill as they scramble to reassure Peruvian and foreign capital that they will defend their profit interests.
Economic inequality had been growing since 2014, when a 12-year run of sustained growth in the national GDP driven by a mining boom came to an end. The pandemic has dramatically worsened an already precarious economic situation for the working class.
Amid growing unemployment and poverty, the Peruvian bourgeoisie and the transnational mining corporations are determined to restart the process of extracting surplus value from the working class, regardless of the continuing sickness and death caused by the COVID-19 pandemic. Peru has by far the highest per capita COVID-19 death toll in the world.
Even while demanding an economic reopening, companies and individuals are hedging their bets, transferring the enormous sum of US$ 17 billion abroad, fearing that a government headed by Pedro Castillo will prove incapable of disciplining the working class.
Living standards are being eroded by inflation, with consumer prices jumping by 3.2 percent compared to a year ago. The increase in prices mainly affects the “basic food basket” upon which working class families depend. According to the state statistics agency INEI: the price of butter has soared by 100 percent; flour, 30 percent; yeast, 20 percent; sugar, 115 percent, and salt, 25 percent. Also from INEI, the retail price of chicken increased by 9.7 percent from June 2020 to June 2021, but the wholesale price of chicken rose 122 percent in the same period.
As Peru produces only 9.5 percent of the wheat it consumes—the rest is imported from Canada, the US, Argentina and Russia—the rise in international prices has caused demand to fall by 50 percent. Thirty percent of bakeries that only sell bread are at risk of closing, and another 500 are expected to close by the end of the year.
The most telling figure in terms of escalating social inequality is that of the exponential growth of poverty. According to the INEI, the number of families declared poor in Peru has risen from 20 percent to 30 percent of the population. This figure means that poverty reduction over the past decade has been wiped out in a single year.
The real scope of poverty is far greater, given the shameful metrics employed by the government. According to the INEI, a family of five people is considered poor if its income is no more than 810 soles per month (US$210 per month), or US$2,520 annually. The depth of poverty in Peru is tied to the domination of the informal sector in terms of employment, which today accounts for 77 percent, up from 74 percent before the economic paralysis associated with the pandemic.
Meanwhile, according to the economic daily Gestión, 31 percent of companies say they will reach pre-COVID production levels by the end of 2022, but 30 percent say they will never return to the employment levels of 2019.
The WSWS spoke with two single mothers who explain how the pandemic has affected them economically.
A young woman who lives in the working-class and lower-middle-class neighborhood of Los Olivos, and who gave birth last May, said:
“A few months ago I lost my job because I was pregnant. It is a worker’s right to have maternity leave, but my boss is not interested in my rights. This is how informality works in Peru.
“In the end, I decided not to sue him. Justice in Peru is very precarious, especially when it comes to health and social issues. It has gotten worse given the political environment we live in.
“Food is very expensive due to the rise in the dollar. So I have no choice but to eat rice and eggs. I have no support from anyone, and the money I had saved to pay for college has gone to buy diapers.
“With my newborn baby and jobless, I have no choice but to leave my apartment in Los Olivos. I’m going to live with my sister in the hills of Ancón, which is very far away. There is no water or drainage, the hill is covered with sand, but I will have peace.
“Peru is very rich. There shouldn’t be so many poor people.”
Another woman ,who lives in San Juan de Miraflores in a southern cono —underdeveloped areas on the periphery of the capital—and who was recently widowed after her husband died of COVID-19, said:
“I am a mother of two children and I have not had a steady source of income since my husband died of COVID-19 more than a year ago, in the first wave.
“The rise in the dollar is affecting us all. Luckily my rent is in soles. But my landlord is shrewd. He says he understands my situation, but he doesn’t lower my rent. I have to borrow from my sisters so they don’t throw me out on the street.”
While these conditions are shared by millions of workers and poor, reports tell a very different story in terms of how the bourgeoisie and the well-to-do sections of the middle class have coped with the pandemic.
For example:
• Online and credit card transactions, reserved mostly for the wealthier layers of the population, have grown considerably.
• Supermarkets, which low-income people do not go to because they buy their goods in popular markets, have seen their sales grow by 13 percent.
• Demand for apartment improvements, decorative items and home repairs rose 39 percent annually, in part due to people with the highest-paying jobs working from home and stetting up rooms as offices.
The desperation of working people left without incomes has been expressed in the land invasions that have occurred in the poorest neighborhoods in southern Lima. Involved are both families that lost their homes, and people who have moved to the periphery of Lima in a desperate search for jobs. More than 10,000 families have been evicted from the informal settlements created in these land invasions in police in operations that, in many cases, have resorted to violence, using tear gas against defenseless families, including women and children.
According to Wood McKenzie, foreign investment in Peru’s mining sector, the main economic activity in the country, is expected to total US$34 billion over the next decade. Despite the international price of copper rising by 94 percent from May 2020 to May 2021, however, mining every day employs fewer personnel due to increasing automation in the mining sector. Currently, mining is not one of the main engines of employment growth.
The high international price of copper is generating super-profits. It is not surprising, then, that mining billionaires, such as the president of the Buena Ventura mining company, Roque Benavides, who is also the president of the association of the most powerful businessmen, CONFIEP, has stated his acceptance of president-elect Castillo’s proposal for a minor increase in taxes on mining. The thinking within at least a layer of Peru’s big business circles is that a small share of excess profits can be used in an attempt to assuage the growing unrest in the working class as well as the peasantry, which has seen agricultural and livestock lands devastated by large-scale mining.
Whatever measures are taken by a Castillo government committed to the defense of capitalist interests will prove too little, too late. The abrupt fall in living standards, combined with political instability and the corruption of the bourgeois state, have created the conditions for an explosive eruption of the class struggle in Peru.
When the US jobs figures for June were issued on Friday, Wall Street’s S&P 500 and NASDAQ indexes both climbed to new record highs, because the jobs data were regarded as a “Goldilocks” moment—neither too hot, nor too cold.
A sign for a Wall Street building, Wednesday, May 19, 2021, in New York. (AP Photo/Mark Lennihan)
Coming in at 850,000, the jobs growth number—beating economists’ estimates of 720,000 and well above the figure of 583,000 for May—was regarded as a sign of recovery for the US economy, but not enough to push the Federal Reserve towards tightening its monetary policy, as the data showed there were still 9 million people unemployed, compared with 5.7 million in February 2020, before the pandemic hit.
As one analyst told the Financial Times, the jobs figures “couldn’t have delivered better news for Wall Street. Enough new jobs to confirm the economy is on a roll, [but] enough jobless to give the Fed’s current strategy a warm hug.”
Another part of the good news for Wall Street was that, despite evidence of labour shortages in parts of the US economy, and the payment of higher wages, the rise in average hourly earnings for the month was only 0.3 percent, down from the increases in April and May.
The significance of the wages, jobs growth and overall employment data for Wall Street is not so much what they signify in and of themselves—though that is factor—but their implications for the policies of the Fed.
Since the Fed’s massive intervention in March 2020, when it stepped in to halt a meltdown of the financial system with the injection of around $4 trillion, Wall Street has become ever more dependent on the flow of ultra-cheap money from the central bank.
This inflow is continuing at the rate of $120 billion a month—more than $1.4 trillion a year—through the purchase of Treasury bonds and mortgage-backed securities, and the financial markets are fearful that even a slight lessening of this support could have major effects.
Consequently, some analysts are issuing warnings that the present situation, in which markets continue to rise, based on continued economic growth, combined with monetary support from the Fed, is inherently unstable.
In a comment published in the Financial Times last week, Mohamed El-Erian noted that, as recorded by a recent Bank of America survey, markets were currently dominated by three core hypotheses: durable high economic growth; transitory inflation and “ever-friendly central banks.”
El-Erian wrote that while he did not have a serious quarrel with the higher growth scenario, he did “worry a great deal about the widespread conviction that the current rise in inflation will be transitory.”
He did not expect a return to the inflation levels of the 1970s, but “we have to respect the possibility of a shock to a financial system that has been conditioned and wired for the persistence of lower and more stable inflation.”
If inflation remains low, and present rises prove to be transitory, then the Fed will maintain low interest rates. But if that proves not to be the case, then “a late slamming of the brakes, rather than easing off the accelerator, would significantly increase the rise of an unnecessary economic recession.”
A much sharper warning about the state of the US and global financial system has been delivered by economist Nouriel Roubini, who came into public prominence because of his warnings prior to the financial crash of 2008.
In a comment in the Guardian last Friday, he warned that conditions were ripe for a repeat of the 1970s stagflation and the 2008 debt crisis.
He noted that debt ratios today were much higher than in the 1970s, while a mix of loose economic policies threatened to fuel inflation, rather than the deflation that occurred after the 2008 crisis.
“For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck,” he wrote, and pointed to the warning signs.
These included: high price to earnings ratios for shares, inflated housing and tech assets, irrational exuberance surrounding special purpose acquisition companies (firms that are floated on the stock market on a cash only basis, with the aim of taking over another firm seeking a public listing) the crypto-currency sector, the level of high yield corporate debt (junk bonds), collateralised loan obligations, the increased use of private equity, meme stocks and runaway retail daily trading.
At a certain point this would trigger a loss of confidence and a crash, but in the meantime, loose monetary policies will continue to drive inflation, creating the conditions for stagflation, when the next economic shock arrives.
He noted that central banks were in a “debt trap.” If they start to raise interest rates to combat inflation, they “risk triggering a massive debt crisis and severe recession” but if they continue on the present course, they risk double-digit inflation.
Roubini pointed out that the Fed was already in a debt trap, and its recent adjustment from an “ultra-dovish stance to a mostly dovish stance”—when its “dot plot” of interest rates at its June meeting showed a rise in 2023, rather than 2024—changed nothing.
The debt trap was in evidence at the end of 2018—more than a year before the onset of the pandemic—when the Fed dropped proposed interest rate rises and ceased its wind-down of asset holdings, because of the adverse reaction in financial markets.
In response to the Fed’s plan to continue interest rates in 2019, after four rises in 2018, Wall Street had its worst December since 1931, and Fed chair Jerome Powell reversed course and then began cutting rates in July 2019.
“With inflation rising and stagflationary shocks looming, it is now even more ensnared,” Roubini wrote.
There is also clear evidence that financial authorities are no better prepared to deal with a crisis than they were in 2008, or in the March 2020 meltdown, which triggered the latest round of massive financial support.
This was highlighted in a recent blog post by the Bank of England on the events of the spring of 2020. It was potentially more serious than that of 2008, because it centred on the $21 trillion US Treasury market—the bedrock of the global financial system, and supposedly a “safe haven” in times of stress, as investors buy government bonds. In the March crisis however, Treasuries were sold off.
The blog began by noting that while financial markets reflect changes in the economy, they can amplify them as well, and this was evident as the COVID-19 pandemic materialised.
It then drew attention to the role of margin calls in precipitating the crisis. Investors in financial assets use borrowed money at cheap rates to finance their activities, but have to place some collateral with the lender.
This enables them to make huge profits, so long as the underlying asset continues to rise in the market. But if there is a downturn, the lender demands more collateral, a margin call, to cover the fall and this can precipitate a “dash for cash,” leading to a negative feedback loop because the value of financial assets falls further as they are sold off.
The blog post noted that net outflows reached more than 5 percent of assets under management for corporate bonds in the March crisis—the highest since the global financial crisis of 2008.
The risks of a self-reinforcing spiral, inherent in the operations of highly leveraged hedge funds, “crystallised in the US Treasury market in March 2020. ... Notably, hedge funds unwound US Treasury positions following severe portfolio losses and margin calls, contributing to a sharp rise in yields [interest rates] and market illiquidity.”
As the blog noted “large-scale intervention by the Federal Reserve managed to restore market liquidity and break the self-reinforcing loss spiral.”
But as other reports on the March crisis have noted, none of the underlying issues that produced it have been resolved, and no solutions were advanced by the Bank of England blog to prevent a recurrence.
In fact, it concluded with a profession of ignorance, saying merely that it had identified “key questions, emphasised by the Covid-related financial stress in early 2020, that warrant further investigation” and that the authors would “welcome further engagement with the research community on these issues.”
Such a conclusion only emphasises the fundamental point that, in the final analysis, the destructive anarchy of the capitalist economy and its financial system, arising from the system of private ownership, is outside of conscious control and regulation.
Bob Hawke, who later became a Labor Party prime minister, was a highly-valued “informer” to the US government while the head of the Australian trade union movement and president of the Labor Party during the 1970s, a new study of declassified US diplomatic cables has demonstrated.
Bob Hawke, 1982 [WSWS Media]
The documents provide a graphic picture of the true character and role of the Labor Party and the unions, which have always fought to tie workers to the requirements of the corporate profit system and to the Australian ruling elite’s alignment with the dominant imperialist power of the time—initially Britain and then, after World War II, the United States.
Hawke was among a whole multitude of informants in the Labor and union leadership, conspiring with the US embassy and key figures in the Australian ruling elite, behind the backs of the working class, to defend the interests of US and Australian capitalism.
The cables point to how Hawke became a central figure in plans to suppress the eruption of working-class struggles in Australia, as part of a global upsurge, during the late 1960s and 1970s, via a “tripartist” partnership with big business and government. This later gave rise to the Hawke-Keating government’s corporatist Accords with the union apparatuses in the 1980s and 1990s, which transformed the unions completely into industrial police forces against workers.
Covering the period 1973 to 1979, the cables show that Hawke worked intimately with US officials, notably Ambassador Marshall Green, on every key aspect of trade union and Labor policy. Their other preoccupation was how to muzzle rising opposition to the US alliance as a result of the barbaric Vietnam War and to protect highly strategic American military-intelligence bases in Australia.
New light is also shed on Governor-General John Kerr’s anti-democratic dismissal of the Whitlam Labor government in 1975. What is partially documented is how closely Hawke worked with the US embassy in preparing for Whitlam’s removal. And the cables confirm that Washington’s ruling circles did not move against Whitlam because they doubted his own firm commitment to the US alliance, but because they became increasingly concerned that Whitlam could not control explosive working-class militancy.
Mass protest against dismissal of Whitlam government, Sydney November 24, 1975 [Source: Wikipedia]
Extracts from the cables, held by the US National Archives and Records Administration, have been published by Cameron Coventry, a tutor and PhD student at Federation University, in a peer-reviewed article in the Australian Journal of Politics and History, entitled “The ‘Eloquence’ of Robert J. Hawke: United States Informer.”
One of the earliest cables from 1973 typifies Hawke’s conduct. It records that the US Labor Attaché contacted Hawke about a possible industrial dispute at the North West Cape military base in Western Australia, a highly-classified communications station for the US nuclear submarine fleet. Hawke “volunteered to intervene informally” and expressed “concern and surprise” at the militancy of the workers.
The documents prove that Hawke was just one of many secret US confidantes throughout the Labor and union leadership, including Gough Whitlam himself. Another prolific informer was John Ducker, the president of New South Wales (NSW) Labor and a member of the Australian Council of Trade Unions (ACTU) executive alongside Hawke.
Among the others conspiring with US officials behind the backs of the population were future Labor leader, foreign minister and governor-general Bill Hayden, future NSW premiers Barrie Unsworth and Bob Carr—later a foreign minister too—Whitlam’s foreign minister Don Willesee and South Australian Premier Don Dunstan.
These systemic relations with US representatives were clearly known, accepted and supported throughout the Labor and union machine, but kept from the view of workers and youth for fear of the hostility that would greet such revelations.
Hawke was just the most prized asset, providing constant inside information and political intelligence to US representatives, who described him as a “bulwark” against anti-US sentiment in the 1970s and an “ideal Australian Labour leader.”
The political context: Hawke and the working-class upsurge
To understand the significance of what the cables show of Hawke’s role in the evolution of the Labor Party and the unions, it is necessary to review the political context of his cultivation and rise to the leadership of both.
A law graduate, Hawke had no working-class background. He came from a relatively privileged and Labor Party family upbringing, which led to him becoming a Rhodes Scholar at Oxford University in 1953. Hawke was initially recruited from doctoral studies at the Australian National University to the ACTU in 1958 as a research officer and advocate by Albert Monk, the ACTU’s longtime right-wing president.
For some years, successive US embassy labor attachés—postings occupied by CIA officers—had promoted Hawke. As early as 1966, one reported that Hawke was regarded by “some people even as a future prime minister of Australia.” The cables show admiration for Hawke’s “chameleon” persona—his capacity, despite his academic background and right-wing outlook, to project a working-class and “left” image when necessary.
Significantly, the trigger for Hawke’s elevation into the ACTU presidency came in 1969 when rising working-class hostility to two decades of rule by the Liberal-Country Party Coalition government and anti-strike “penal powers” exploded in a three-day near general strike against the jailing of Victorian tramways union official Clarrie O’Shea for the non-payment of a fine that had been imposed on the union.
Monk, who unsuccessfully opposed the strike, saw that his time was up and decided to step down. Hawke was narrowly elected, by 399 votes to 350, to replace him as ACTU president, entirely due to the backing of the “left” union bureaucrats, particularly those from the long-Stalinised Communist Party of Australia, such as metalworkers union official Laurie Carmichael.
The election of the Whitlam government in 1972, finally ending 23 years of Coalition rule, sparked a rising tide of industrial struggle. Workers took the return of a Labor government as a signal to seek to regain lost living standards and demand better social conditions.
In 1972, 2 million working days were lost as a result of strikes; in 1973, 2.6 million and in 1974, almost 6.3 million. This was the most since the industrial and political turmoil of 1919 following the horrors of World War I and the inspiration of the 1917 Bolshevik-led revolution in Russia. Wage claims leapfrogged as workers won first $15 per week, then $24 and even $40 increases.
The Whitlam government’s initial program of limited social reforms, such as universal health insurance, soon gave way to efforts to stifle this movement, impose austerity measures and restructure the economy. Already, the emerging worldwide globalisation of production was shattering the previous program of Labor and the unions of seeking to extract partial concessions from the corporate elite within the framework of wage labour and an insulated national economy.
In December 1973, one year after taking office, Whitlam’s government unsuccessfully tried to pass a referendum to legalise government controls over wages and prices. That referendum, which the Socialist Labour League (SLL), the forerunner of the Socialist Equality Party, strongly opposed, was roundly defeated, setting off the resumption of a wages’ offensive by the working class.
This was part of an international movement by the working class, from the May–June 1968 general strike in France to the defeat of the Heath Tory government in Britain and the collapse of the Nixon administration in the United States, both in 1974, and the downfall of the dictatorships in Portugal, Greece and Spain in 1974–75. In Southeast Asia, US imperialism was being defeated in Vietnam and the dictatorships it had helped install in Indonesia and the Philippines were facing difficulties.
It was this turmoil that led to a CIA-backed campaign to destabilise and oust the Whitlam government, fearing it could not maintain control of the working-class upsurge. But Whitlam’s sacking on November 11, 1975 sparked walkouts by tens of thousands of workers across Australia for days.
Together with Whitlam, Hawke played the pivotal role in shutting down the developing uprising. At a media conference, Hawke summed up the alarm of the Labor and union leaders: “What has happened today could unleash forces in this country the like of which we have never seen. We are on the edge of something quite terrible and therefore it is important that the Australian people should respond to leadership.”
The suppression of that movement, with the help again of the Stalinist and other “left” union bureaucrats, paved the way for the election of the Fraser Coalition government of 1975 to 1983. During that period Hawke became known as the “industrial fireman” for hosing down and selling out industrial struggles, especially when they threatened to politically challenge the government.
Nevertheless, in the wake of the class tensions produced by the 1975 “Canberra Coup,” Fraser’s government was unable to contain the working class. That came to a head in October 1982, when thousands of miners and steelworkers demonstrated outside parliament house, eventually bursting through the doors, in a protest against BHP’s decision to sack 384 miners and more than 3,000 steelworkers.
Under those conditions, Hawke was installed as Labor leader via a backroom parliamentary party caucus move on the eve of the 1983 federal election, with the backing of the Murdoch media. His assignment was to cement a partnership with the unions to strangle the discontent and impose the intensified pro-market restructuring requirements of the corporate elite.
Hawke’s agenda was based on further “opening up” the economy to international finance capital and smothering working-class opposition to the associated destruction of jobs and working conditions. Within weeks of taking office, the Labor government floated the Australian dollar, and soon privatised key state-owned corporations, such as the airline Qantas and the Commonwealth Bank.
Hawke, the US and the Accords
One of the most telling cables points to the US State Department origins of Hawke’s “tripartist” and “consensus” agenda that later underpinned the Hawke-Keating Labor government’s 1983–96 Accords with the unions. These Accords provided the mechanism for shutting down strikes and using the unions to enforce the drive to make Australian capitalism “globally competitive,” at the expense of their members.
Workers protest Labor government’s Accord in December 1984 [WSWS Media]
Hawke’s first public mention of his preference for a “consensus” approach to industrial relations and politics was made on August 21, 1974 in a speech as ACTU president to the Conference of Economists at the Australian National University. Just 19 days earlier, the US Labor Attaché in Canberra had suggested to Hawke on August 2, 1974 that he pursue a “tripartite committee of unions, employers, and government” to build consensus on industrial matters, especially on wages. The suggestion was made after “many months” of advocating inside the State Department.
These proposals were connected to parallel processes internationally, including in the American trade unions. Global industrial relations were of “vital concern” to the United States, according to the cables. Its diplomats wanted to align the ACTU with the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).
In preparation for a 1974 trip by Hawke to the US and the UK, Ambassador Green told Washington that Hawke “has every prospect of being a major figure on political scene for next 20 years or so, and it will be worth our while to make a real effort to develop a worthwhile program for him.” Green proposed meetings with Chase Manhattan, the International Chamber of Commerce and the Brookings Institution, as well as the AFL-CIO.
Hawke, Marshall Green and the 1975 Canberra Coup
Hawke told US diplomats in 1974 that, contrary to his public statements as ACTU president, in which he feigned support for workers’ wage demands, these were driving inflation and undermining economic growth. In another exchange with the Labor Attaché in December 1974, he predicted that the Whitlam government would fall within a year, saying the economy was “on the verge of economic collapse.”
The cables confirm that Washington had mended earlier tense relations with Whitlam after he had reassured the Nixon administration of support for the US alliance and American bases in Australia, including the key Pine Gap satellite communications facility in central Australia. US officials feared that these installations were under threat from shifting Australian public opinion.
The embassy’s concern, expressed in August 1974, was that “Whitlam’s weakened position within ALP government has worrisome implications for US. We have relied upon his basic moderation and his support of US defence facilities and other US interests […] ALP is undergoing a crisis of leadership.”
Hawke floated with US diplomats the possibility he would propose a “national unity” government to deal with the crisis. In conversation with US embassy representatives in Canberra in late 1974, he recounted receiving “several feelers about political realignment,” including one from his lifelong friend, business magnate Sir Peter Abeles.
Another cable indicates the involvement of Rupert Murdoch, the then rising media tycoon, in discussions about installing Hawke. Murdoch told the US ambassador: “Hawke is now talking ‘national government,’ which would give him the best chance personally [at becoming prime minister].”
Hawke’s crucial role in the 1975 Canberra Coup itself is not referred to in Coventry’s journal article. The cables do show, however, that Hawke denounced accusations by some Labor “left” figures of US orchestration of the destabilisation of the Whitlam government. In 1974, Hawke publicly rebuked Senator Bill Brown for accusing Ambassador Green of interfering in Australian politics. Green thanked Hawke in person during a meeting at Hawke’s house.
Hawke’s personal relationship with Green is particularly revealing. Before his appointment to Australia in 1974, Green had a record as a coup master. During Green’s term as charge d’affaires in Seoul, General Park Chung Hee had carried out a military coup in 1961, initiating nearly three decades of US-backed military dictatorship. As US ambassador to Indonesia, Green was a key participant in the 1965–66 military coup that brought General Suharto’s brutal junta to power for two decades.
After the dismissal of the Labor government in 1975, plans “intensified” to parachute Hawke into parliament and subsequently the Labor leadership. Hawke briefed US diplomats that he would “move over” from the ACTU to replace Whitlam as leader. Ducker later told them the “cabal conspiracy” to install Hawke failed because the plotters made “a bad mistake to tip their hand prematurely.”
Nevertheless, US officials continued to work very closely with Hawke, regarding his “subtle dampening” of workers’ wage demands as preferable to Fraser’s counterproductive “union-bashing” because Australia was a “highly volatile country.” Hawke understood that unions should not engage in “economy-disrupting industrial clashes.”
This is extremely revealing. It underscores the overwhelming reliance by the ruling class on Labor and the unions, not Coalition governments, to stifle the working class, especially in periods of social unrest and political crisis. That dependence has only intensified ever since, even as Labor and union betrayals have caused their memberships to plummet, reducing them to bureaucratic shells.
Hawke and US militarism
Against the developing public hostility to US militarism as a result of the Vietnam War, Hawke helped cement the absolute commitment of the Labor Party and the union apparatus to the US alliance. Today, this apparatus has lined up unequivocally behind the Biden administration’s intensification of US preparations for war against China to reassert the global hegemony that the American ruling elite secured through World War II.
Bob Hawke with US Secretary of Defense Caspar Weinberger in the Pentagon, in June, 1983 [Credit: Department of Defense Photo, by Robert Ward]
At times, Hawke publicly expressed his desire for an “independent non-aligned Australia,” thus promoting nationalism, while privately telling the US officials he wanted to expand the ANZUS military pact beyond a “purely defensive military alliance.” The US embassy in Canberra saw this “duality” as a means of garnering “left-wing” support.
For several years, to try to poison public opinion in preparation for involvement in a US-led war, the corporate media and the political establishment has bombarded the population with allegations of Chinese “interference” in Australia. Yet the documents again show the real source of intervention, over many decades—that of US imperialism.
In 2010, that “interference” was again behind the ousting of Prime Minister Kevin Rudd, orchestrated by numerous US “protected sources” in the Labor Party, for suggesting that the Obama administration should make some accommodation to China’s rise as an economic power. That operation was laid bare by US diplomatic cables published in 2010 by WikiLeaks, led by Julian Assange. They documented how key coup plotters in the Labor Party and unions—including senators Mark Arbib and David Feeney, and Australian Workers Union chief Paul Howes—secretly provided the US embassy with regular updates on internal government discussions and moves to install Julia Gillard to replace Rudd.
Julia Gillard and Kevin Rudd [Source: Wikipedia]
The latest revelations underscore the necessity for workers and youth to seriously examine this history and draw the necessary political conclusions. What is required is a conscious break from the entire pro-capitalist Labor and union bureaucracy, and a turn to the alternative socialist and internationalist program and leadership fought for by the Socialist Equality Party.
