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[OPIRG-EVENTS] Bombing of Bagdad helps Wall Street
How War and Globalization Support American Business...
> >
> > As Billions Flow to Oil and Defense Companies
> >
> > BOMBING OF BAGHDAD STAVES OFF FINANCIAL UNCERTAINTY
> >
> > by
> >
> > Michel Chossudovsky
> >
> > Professor of Economics, University of Ottawa,
> >
> > author of The Globalization of Poverty, second edition, Common Courage
> > Press, 2001.
> >
> >
> >
> > This article can also be consulted at Emperors-clothes.com at
> > http://emperors-clothes.com/articles/choss/bombs.htm
> >
> >
> > On Friday February 16th, spurred on by the dot-com implosion and the
> > climactic downfall of Nortel Networks Corporation, the World's leader in
> > fiber optics, the value of high tech stocks plummeted on Wall Street in
> > turbulent trading. The NASDAQ stock index declined by more than five
> > percent to a record low.
> >
> > But it could have been much worse. Did the bombing of Baghdad pull Wall
> > Street out of danger? In fact it did more than that. It put billions of
> > dollars into the deep pockets of Defense contractors and oil companies?
> >
> > WARNINGS FROM WALL STREET
> >
> > In the days leading up to the February 16 near-meltdown, stock market
> > analysts had warned of a worst case scenario. High tech stocks were
> > heavily overvalued.
> >
> > But that day at 1.00pm, a few hours before trading closed on the New
York
> > Stock Exchange, American and British warplanes bombed Baghdad in what
the
> > Pentagon described as "a routine mission of self-defense."
> >
> > Routine self defense? The US media applauded. And on Wall Street,
brokers
> > did more than applaud; they gasped with relief. For in a cruel irony,
the
> > bombing raids had saved the day. As one British financial analyst noted
> > with contempt:
> >
> > "..the American market didn't collapse. It didn't plummet. Indeed, the
> > fall was less than one per cent. This was a routine day - unless you
> > happened to live in Baghdad."1
> >
> > Meanwhile, with telecom and computer stocks in the doldrums, financial
and
> > defense analysts had been working hard to rebuild "confidence in the
> > stock market":
> >
> > "Makers of the nation's warfare technologies along with Wall Street
> > analysts and industry consultants spent a week bragging about new
> > opportunities and the likelihood of changes to Pentagon policy that
would
> > foster growth after 15 years of strained budgets. What's more, defense
and
> > aerospace stocks ended on a high note, climbing amid a broad market
slump
> > as 24 U.S. and British warplanes struck Iraqi military targets using
> > various long-range, precision-guided weapons."2
> >
> > In the last hours of trading on the 16th, defense stocks spiraled; oil
and
> > energy stocks boomed following news that Iraq's oil industry might be
> > impaired. The value of Exxon, Chevron and Texaco stocks shot up. Harken
> > Energy Corporation --in which George W. Bush served as company director
> > and corporate consultant before entering politics-- gained 5.4% by the
end
> > of trading. Harken Energy happens to be a key player in Colombian oil
> > (with a multi-billion dollar US military aid package under "Plan
Colombia"
> > on hand to protect its investments). Harken Energy CEO Mikel Faulkner is
a
> > former business associate of George W.
> >
> > FINANCIAL MELTDOWN
> >
> > The February 16th meltdown was already being predicted at the close of
> > trading on the 15th. Business analysts on the evening news said that a
> > major "correction" in the value of high tech stocks was "inevitable".
The
> > financial press had previously hinted that the US defense industry could
> > also take a beating if the new Bush Administration were to curtail
> > military procurement.
> >
> > A few days earlier, Lockheed Martin (LMT) --America's largest defense
> > contractor-- had announced major cuts in its satellite division due to
> > "flat demand" in the commercial satellite market. A company spokesman
had
> > reassured Wall Street that Lockheed "was moving in the right direction"
> > by shifting financial resources out of its troubled commercial (that is,
> > civilian) undertakings into the lucrative production of advanced weapon
> > systems.
> >
> > For weeks, defense contractors had been actively lobbying the new
> > Administration. On Tuesday February 12th, President Bush promised to
hike
> > defense spending based on "a comprehensive review of the military."
> > According to The New York Times (12 February 2001), George W. Bush said:
> >
> > "he planned to break with Pentagon orthodoxy and create 'a new
> > architecture for the defense of America and our allies,' investing in
new
> > technologies and weapons systems rather than making 'marginal
> > improvements' for systems in which America's arms industry has invested
> > billions of dollars."
> >
> > On the 14th, he confirmed "a $2.6 billion increase in the Pentagon's
> > budget as a 'down payment' on new-weapons research and development."3
> >
> > And two days later Baghdad was bombed by the US Air Force.
> >
> > The raids were a signal to Wall Street that Bush's promise "to
revitalize
> > the nation's defense" should be taken seriously. Had the Bush
> > administration decided otherwise, Lockheed Martin's listing on the New
> > York Stock exchange might well have experienced the same fate as that of
> > Nortel. In fact, while (civilian) high tech stocks (quoted on the
NASDAQ)
> > had plummeted, Lockheed Martin stocks ended the day up a comfortable
1.6%.
> >
> >
> > Meanwhile, the F-22 Raptor high tech fighter jet was already scheduled
> > --pending the Administration's final approval-- to be assembled (at an
> > estimated cost of $60 billion) at Lockheed Martin Marietta's plant in
> > Georgia:
> >
> > "Defense Secretary Donald Rumsfeld was an F-22 advocate before joining
> > the Bush administration, and Lockheed officials said Thursday [February
> > 15th , one day before the raids on Baghdad] they are confident Rumsfeld
> > will support the technologically advanced plane." 4
> >
> > The message to financial markets was crystal clear: the bear market was
> > hitting "civilian" high tech stocks including Nortel, Dell Computers and
> > Hewlett Packard; but defense industry listings --including Boeing,
General
> > Dynamics, Lockheed Martin, Northrop-Grumman and Raytheon (the "Big Five"
> > defense contractors) -- remained "safe" and "promising." (i.e. "a good
> > place to put your money"). Wall Street analysts had concluded --without
> > batting an eyelid-- that
> >
> > "with the Bush administration's focus on defense, there is optimism the
> > industry is on target to outperform the market again this year."5
> >
> > The new buzz phrase on Wall Street is that --despite the slow-down of
the
> > US economy-- defense stocks constitute "a safe-haven shelter from the
> > dot-com implosion". More generally, the assumptions underlying Bush's
new
> > defense budget are considered "good for business": no wonder pension
> > funds and institutional investors are busy changing the structure of
their
> > portfolios!
> >
> > NEW WORLD 'ORDER'
> >
> > War and globalization go hand in hand. Militarisation is an integral
part
> > of the neoliberal agenda. The build-up of the defense budget contributes
> > to beefing up the "Big Five" US defense contractors, while denying
> > financial resources to civilian programs including health, education and
> > social welfare not to mention the rebuilding of America's deteriorating
> > urban infrastructure. Whereas defense production has spiraled,
recession
> > has hit the sectors of the US economy which produce "civilian" consumer
> > goods and services. The U.S. domestic economy increasingly hinges on the
> > military industrial complex and the sale of luxury goods (travel,
leisure,
> > luxury cars, etc.) And this satisfies the financial establishment
> > irrespective of the needs of ordinary people.
> >
> > The bombing raids on Baghdad were certainly intended to intimidate
> > countries committed to ending the sanctions on Iraq. But more
generally,
> > "missile diplomacy" is applied to enforce American political and
economic
> > domination under the guise of what is euphemistically called "the free
> > market."
> >
> > "The hidden hand of the market will never work without a hidden fist
> > McDonald's cannot flourish without McDonnell Douglas, the designer of
the
> > F-15.6
> >
> > And America's war machine is used to support the conquest of new
economic
> > frontiers. In the Middle East, the Balkans and Central Asia, the US
> > military is positioning itself directly and through NATO not only to
> > support the interests of the Anglo-American oil conglomerates, which are
> > working hand in glove with defense contractors in lucrative joint
> > ventures, but to further colonize the former Soviet Union and Asian
> > countries. Meanwhile, spiraling defense spending pours wealth into the
> > military industrial complex at the expense of civilian needs.
> >
> >
> > NOTES
> >
> > 1 Sunday Mail, London, 18 February 2001.
> > 2 Reuters, 16 February 2001. About 80 warplanes were involved, of which
24
> > were strike aircraft. See Financial Times, 17 February 2001.
> > 3 "Bush Vows To Modernize Military After Pentagon Review Is Completed",
> > The Bulletin's Frontrunner, 14 February 2001.
> > 4 Dave Hirschman, "F-22's Fate to be Decided Next Month; Not on hold:
> > Bush's Defense Review won't delay Judgment on Raptor", The Atlanta
Journal
> > and Constitution, 16 February 2001.
> > 5 The Nightly Business Report, NPR, 19 February 2001.
> > 6 Thomas L. Friedman, "A Manifesto for the Fast World," 'New York Times
> > Magazine', Mar. 28, 1999.)
> >
> >
> >
> >
> > C Copyright by Michel Chossudovsky, Ottawa, February 2001. All rights
> > reserved. Permission is granted to post this text on non-commercial
> > community internet sites, provided the essay remains intact and the
> > copyright note is displayed. To publish this text in printed and/or
other
> > form (including commercial internet sites), contact the author at
> > chossudovsky@videotron.ca, fax: 1-514-4256224.
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