'CRONY CAPITALISM' & WAR
American foreign policy & the Rockefeller connection

My recent column on the "warbloggers" raised a lot of hackles, as well as provoking some interesting arguments. Dealing with the latter first, we have Jim Henley of "Unqualified Offerings" – a consistently interesting and well-written blog – telling me to "aim at the target, please." Henley wants to know:

"Why does Justin Raimondo spend an entire column running on about how 'the Rockefellers' – the Rockefellers! – are behind what he calls 'a furious post-9/11 anti-Saudi propaganda campaign that has gone into overdrive in recent weeks?' When right wingers start with the Rockefeller talk, everyone else heads for the exits. At best it's irrelevant. I neither know nor care whether 'the Rockefellers' want to bring down the House of Saud and replace it with someone more congenial."

While not rejecting the possibility out of hand, Henley avers that

"It's either wrongheaded and wrong for the US to go to war to topple the present Royal Family or it isn't, regardless of who pays off whom."

BECAUSE IT MATTERS

I'll tell you why I spend an entire column "running on" about this topic, Jim: because, contrary to what you seem to believe, it matters a whole lot when very rich and politically powerful people try to get the US government to do their bidding. For example, as Murray Rothbard, Gabriel Kolko, and others have shown, the "progressive era" reforms of the nineteenth century were initiated and supported by large corporations for the purpose of keeping out competition. In short, the various corporate clans – Rockefeller, Morgan, etc., including both the "Yankees" and the "Cowboys" of the American business community – have not exactly been shy in using State power to achieve their ends, both at home and abroad.

TAKING PANAMA

Take the case of the Panamanian "revolution" of 1903, in which the "founding fathers" were the members of an American financial syndicate. As Rothbard points out in Wall Street, Banks, and American Foreign Policy:

"The Panama Canal Company's lobbyist, Morgan-connected New York attorney William Nelson Cromwell, literally sat in the White House directing the 'revolution' and organizing the final settlement. We now know that, in 1900, the shares of the old French Panama Canal Company were purchased by an American financial syndicate, headed by J. P. Morgan & Co., and put together by Morgan's top attorney, Francis Lynde Stetson. The syndicate also included members of the Rockefeller, Seligman, and Kuhn, Loeb financial groups…"

Selling these shares, after the US-engineered "revolution," at double the price as the Panama Canal project was revived, made a number of very well-connected people – including Teddy Roosevelt's brother-in-law – quite rich. Were the corporate connections of the Panamanian "revolutionaries" irrelevant to the course of events in 1903? No more so than the machinations of US oil companies in the Middle East today – in other words, the corporate connection is highly relevant.

THE CORPORATE CONNECTION

Indeed, in the context of the history of our involvement in the Middle East, practically nothing else is at all relevant. For why else are US troops in Saudi Arabia? There is, after all, no oil shortage: far from it, the world is swimming in the stuff, which is one reason why the Saudis are in a bit of financial trouble. So it isn't access to oil, per se, that our American centurions are guarding, but the access of certain American corporate entities to Saudi oil profits, to which they have become rather accustomed over the years.

HEADING FOR THE DOORS?

"When right wingers start with the Rockefeller talk," smirks Henley, "everyone else heads for the exits." Not quite everyone: a lot of leftists and plain old populists are prone to prick up their ears at this kind of talk. Yet this merely points to the utter uselessness of conventional "left-right" distinctions: one doesn't have to be a Marxist to understand how and why corporate power is often rooted in government power. Surely libertarians, who see government as the sole source of monopolistic privilege, should be the first to see the corporate connection to policymaking.

Unlike the Left, however, libertarians see that the problem is not the nature of capitalism but of government. Instead of nationalizing industries in the name of "the people" (i.e. certain people), libertarians call for the complete separation of economy and state. The whole ostensibly "leftist" analysis of the "war on terrorism" – that this is a "war for oil" – actually confirms the libertarian insight into the role of the State in world affairs. But the Left cannot explain the subtleties of that policy, blinded as it is by its cultural and political prejudices: they are clueless when it comes to the reasons for the US-Saudi rift. And so, I might add, are most conservatives, even those with libertarian sympathies.

THOSE IDLE PRINCES OF ARABY

Henley goes on to cite a correspondent who points out that Aramco, the company originally granted a monopoly franchise on oil production by the Saudi monarchy, is state-owned, and is now known as Saudi Aramco:

"Which is to say, [owned by] lots of little princes. Abdullah announces in 1998 that he wants to open it up to competition, which is to say, make things rough for hundreds of trust fund babies in the kingdom. Someone might have to earn a living! Might some of those princes decide to play footsie with, oh, al Qaeda?"

To begin with, as I pointed out in my original column on this subject, the phony "nationalization" of the 1970s left the Rockefeller-controlled Aramco consortium as the "managers" of the operation, and these companies still received the lion's share of Saudi oil. Their monopoly on production, refining, and marketing was unbroken – until very recently, when Crown Prince Abdullah announced that it was high time the Saudi kingdom liberalized its economic policies.

WINNERS AND LOSERS

Secondly, Henley simply gets it wrong when he sees the Saudis, and not Western oil interests, as the losers in this liberalization process. The evolution of the state franchise system, embodied in Aramco, shows the direction of the US-Saudi relationship, with the latter pulling away from the former since the 1970s. As Richard Cowen of the University of California, at Davis, puts it:

"In all of the upheavals, the overriding concern of the majors was clearly to retain control over crude oil shipping, refining, and marketing. This was shown in 1974, when Saudi Arabia demanded the nationalization of Aramco. If there were problems, the Saudis threatened, they would simply offer 3 million barrels a day directly to third parties (outside the majors). In the end, Aramco quietly gave in, in return for contracts by which it would handle all the shipping of Saudi crude."

STEPPING OUT

But the Saudis began to step out on their own in 1988, going into the production, refining, and marketing business for themselves, in alliance with Texaco – the biggest of the Texan "wildcatters" and the only major independent factor in the original Aramco consortium, granted a mere 30 percent of ownership shares compared to 70 percent for the Rockefellers and their corporate cohorts. This operation has grown into the sixth largest oil and gas retailer in the US, directly threatening the majors. A Saudi collision with Big Oil was inevitable, from that point on, and the breaking point came with Prince Abdullah's shocking announcement that the downstream aspects of the oil industry – long dominated by the majors – would now be opened up to the international competition.

In 1976, Walter S. Measday, chief economist of the Senate Subcommittee on Antitrust & Monopoly asked us to:

"Recall if you will the spring of 1973, when many of the OPEC governments secured 25 percent participation and announced that they would develop their own marketing capabilities as rapidly as possible, while President Nixon suspended quantitative controls on imports. Remember the large number of glorious plans for new independent refineries which were announced – and try to remember what happened to all but one or two of these plans.

"What happened as the months passed, of course, is that after the first flush of enthusiasm over participation, the host governments came to the conclusion that the major integrated companies offered the best opportunity for marketing their oil in a manner which would avoid a break in OPEC prices. The door to independents appeared to close in Saudi Arabia, for example, last September when the Saudis announced they would not enter any new contracts with private refiners. … [I]t was agreed that after nationalization of production the state company, Petromin, would retain only 5 percent of the nation's crude output to maintain the contracts it entered into in 1973 and 1974; 95 percent of the output would continue to be marketed by Exxon, Texaco, Socal, and Mobil."

Ah, but no more. In creating Aramco, as the corporate offspring of US and Saudi government-to-government relations, the Seven Sisters are now being hunted by the monster they created. The analysts over at ICFAI give us an overview:

"In 1972, just before the Arab oil embargo sent prices through the ceiling, state-owned oil companies accounted for just 6 percent of worldwide crude production, whereas companies like Exxon and Mobil were the dominant players (Exxon and Mobil together accounted for almost one-sixth of the global market share). In the changing oil landscape, these domineering companies of yesteryear today find themselves marginalized by the state-owned companies. Today, state-owned companies such as Saudi Aramco, Mexico's Pemex and Venezuela's Petroleos de Venezuela account for almost 52 percent of global production, compared to this Exxon and Mobile, pre-merger, accounted for merely 2 percent and 1 percent respectively."

Screwed out of their formerly privileged position, the major American oil companies (otherwise known as "the Rockefellers") have been maneuvering to reestablish their commercial hegemony. One such maneuver was to cut the Saudis off at the pass: a merger between one of the majors, Chevron, and Texaco, Saudi Aramco's ally. After a long series of negotiations and behind-the-scenes political machinations, the merger was finally given the green light by the Federal Trade Commission – on September 7, 2001.

According to the terms set down by the FTC, the two companies could merge – provided Texaco divested itself of the distribution and "downstream" marketing subsidiaries that had made it attractive to the Saudis in the first place. As the FTC news release states:

"Under the terms of the proposed order, the combined Chevron/Texaco would be required to divest all of Texaco's interests in two joint ventures, Equilon Enterprises, LLC (Equilon), which is currently owned by Texaco and Shell Oil Company (Shell), and Motiva Enterprises, LLC (Motiva), which is currently owned by Shell, Texaco, and Saudi Refining, Inc. (SRI). Outside 'the Alliance' defined by these two joint ventures, Texaco would be required to divest assets including its one-third interest in the Discovery natural gas pipeline system in the Gulf of Mexico..."

And so the door was still open to the independents, and to foreign competitors like Saudi Aramco: the means to reach oil and gas consumers directly was still within the grasp of the Saudis. Four days later, "everything changed…."

CUI BONO?

The major US oil companies had won a Pyrrhic victory in the FTC decision. Given their history of political manipulation and influence-buying, why would they hesitate to use the armed forces of the United States to win back what had been lost? Contra Henley, who pays off whom is totally relevant to the question of whether we ought to go to war, or make some other policy move that is supposed to embody the "national interest." For any libertarian worth his salt is moved to ask "Whose interests are being served?" Cui bono? Who benefits? In understanding political events, the answer to this question, if it doesn't tell the whole story, at least leads us in the right direction.

Henley continues:

"Going down the Rockefeller path causes Raimondo to make some very dubious claims: 'Speaking through Jeff Jacoby – in an act of ventriloquism that no doubt had the dummy-columnist's full cooperation – the Aramco-Rockefeller consortium delivered this "ultimatum" to their former business partners…'

"There is a factual claim here, a serious one, and it comes without evidence. The claim is that Jacoby is not just a neo-imperialist crank but an agent of a particular corporate interest. Unless Raimondo has evidence of Jacoby being rented, Krugmanlike, for the duration of an article, it's not just bogus, but scurrilous."

In calling for the US military conquest of the Saudi oil fields, Jacoby is perhaps getting a little ahead of his corporate mentors, but his bald statement amounts, in reality, to a call for handing those oil fields back to the US oil majors. This is not a "factual claim" but a simple fact. If this is "scurrilous," then so be it. It also happens to be true. You don't need canceled check stubs to show that someone is serving, in effect, as an agent of certain interests. The requirement that a pundit be "rented, Krugmanlike," before we can detect his allegiances would rule out of order Orwell's famous excoriation of pacifists during World War II, which has proved such an inspiration to Andrew Sullivan and other pro-war "bloggers." He said that they were "objectively" aiding Hitler in his quest to conquer Britain, and regardless of the merits of that particular case, surely there is merit to the general idea that it is possible to serve certain political or even financial interests without being put on the payroll.

A QUESTION OF TIMING

Henley cites my reporting on a vital meeting that took place on September 23, 1998, when Prince Abdullah, on a visit to the US, told a bunch of shocked oil company executives that he was opening up Saudi markets to free competition. Oh, but this is "lax timing," he says, why the time gap between the meeting and the start of the anti-Wahabi campaign?

"Every supposedly baleful, Rockefeller-inspired maneuver Raimondo cites, from Martha McSally to Andrew Sullivan's 'sudden' outrage over Saudi persecution of gays to the general outbreak of anti-Wahabism among pundits, happened three years after Raimondo's Big Meeting. If that's 'tandem' it's tandem like a Dr. Seuss bicycle that extends across several pages from front seat to back seat."

TIME AND OPPORTUNITY

In the context of the US-Saudi strategic relationship – one of the longest and most closely-guarded alliances of the postwar period – 1998 wasn't that long ago. Unlike the latest development in the Paul Krugman scandal or the Doris Kearns Goodwin/Stephen Ambrose plagiarism brouhaha, the evolution of US-Saudi relations hardly ever changes radically from day to day – except, perhaps, from 9/10 to 9/11, as Henley himself points out. While Prince Abdullah served notice on Big Oil in 1998, it took time – and opportunity – for the oil majors to mount an effective counterattack. Before 9/11, if Daniel Pipes, Stephen Schwartz and the editors of National Review had ranted and raved about the alleged "totalitarian" threat from Wahabism, people would simply have looked at them funny. Post 9/11, however, this nutty idea has some demagogic resonance, and why shouldn't we expect those who stand to benefit to make the most of it?

IT'S ALL IN THE DETAILS

Henley goes on to note that the hijackers were all Saudis and that they pulled off the 9/11 attacks "at the behest of a rich Saudi guy" – leaving out, as the anti-Saudi crowd always does, that this "guy" is the head of an organization which has – like Jeff Jacoby – vowed to overthrow the Saudi monarchy.

WHERE DO I APPLY?

In disputing my analysis of how state capitalism in the US works, Henley asks:

"Surely the outsiders could buy their own pundits and government officials, couldn't they? Why do only The Rockefellers do that?"

The Rockefellers and their allies made their bundle – a very big bundle – before the income tax and the wave of egalitarianism in public life made the accumulation of such a fortune practically impossible. They and a few others had a head start, so to speak, and this has been a great advantage to them. The "outsiders," by definition, have less resources, and less influence. As to whether they are buying their own pundits outright, or at least keeping accounts of who's been naughty and who's been nice, is not for me to say. I can say, however, that this pundit is for sale to the right (not the highest) bidder, and if Mr. Henley knows where I can send my application for the job, I would be more than happy to do so.

GLENN REYNOLDS, INSUFFERABLE SNOB

Speaking of buying people off, the bloggers, led by their Lider Maximo, Andrew "The Enforcer" Sullivan, have been all atwitter lately about the Paul Krugman scandal: it appears Krugman took $50,000 from the now bankrupt Enron to serve on some "advisory board" or other. Bill Kristol, apparently, took $100,000 (but, somehow, this is deemed less important). InstaPundit is filled with this blither, the general idea being to divert attention away from any possible connection between Enron and the Bush administration. It's all very tiresome, and partisan, the kind of "gotcha" journalism that easily descends into bitchiness. Indeed, the bitchy tone of Sullivan's blogging seems to have infected his fellow "war-bloggers," especially evident in the non-response to my column on the blogger phenomenon and Tim Cavanaugh's devastating mockery of blogger pretensions. Here, for instance, is the snot-nosed little Glenn Reynolds, sneeringly asking:

"WHY DO THEY HATE US? I suspect that Tim Cavanaugh's lame assault on bloggers, mentioned below, is just the first of a wave. The interesting thing is, the top-rank journalists like Michael Barone, Walter Shapiro, Howard Kurtz, Charles Oliver, James Taranto, etc., etc., seem to like the blogger phenomenon. (Not to mention the ones who are bloggers themselves, of course). It's the folks several rungs down, like Cavanaugh or Justin Raimondo, who seem to have the most trouble.

"But then, that's really no surprise. Imagine yourself in the position of a lower-tier writer: sucking up to editors, letting them rip up your writing, trying to fit in with their politics, grimly hanging on in the hopes that, some day, a bigshot will quote your stuff in a major national publication and you'll get the chance to move up.

"Now the bloggers appear. They write what they think. No sucking up to editors. No ass-kissing. No grim hanging-on – hell, these people are actually, and obviously, having the time of their lives. And to add injury to insult, they're being noticed by the bigshots while you continue to toil in obscurity. "

Oh yes, Glenn, you're soooo right: why, I'm positively sleepless at night thinking that I would really much rather be a well-paid warmonger like Candy Andy Sullivan, posing for Gap ads and swooning over President Karzai's new wardrobe. And, oh gee, I think I'll have an orgasm if Sullivan – or some other puffed-up self-important "big boy" – deigns to mention me. Maybe I'll even "get the chance to move up" – up to the pages of The New Republic and National Review, where I can add my voice to the "amen!" chorus as we barrel down the road to World War III. Sheesh! Is this guy kidding? Unfortunately, it appears not….

A PREFERENCE FOR HELL

Reynolds' argument boils down to "The elite looooves us, and only you 'lower rung' types are making a stink" – and we are supposed to be the ones who are into "sucking up"! Perhaps Instapundit ought to change its background color from white to brown. But really, Glenn old boy, your description of the bloggers fits me to a tee: no sucking up to editors. No ass-kissing. Very far from grimly "hanging on," I'm having the time of my life. And if being a "top rank journalist" means having to be the talent-less James Taranto, whose excursions into wit consist entirely of putting "Our Friends, the…" in front of the targets of his latest smear, then no thanks, bud – I'll stick with the "lower rungs," thank you. Indeed, I'd prefer the lowest rung of Hell.

After that embarrassing display of petulant snobbery, and whining all the while that he didn't get "bupkus" for hits from being linked in my piece – which had dozens of links – Reynolds has the gall to ask Cavanaugh to "lighten up." Try it yourself, Glenn: who knows, perhaps then your unhealthy obsession with status will subside and you'll lose your own delusions of grandeur.

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