The claws of the empire

Image: Nikolay Atanasov


The West is in retreat, trying to manage a situation in which it suddenly no longer controls world events

The Israel-Palestine conflict throws US relations with its Middle Eastern partners into chaos. Rising oil prices reinforce the position of producing countries and offer the prospect of a realignment in relation to the central powers of the United States, Europe and Russia. The West is in retreat, trying to manage a situation in which, suddenly, it no longer controls world events.

The year of this reference is not 2023, but 50 years ago, 1973, at the beginning of the Yom Kippur War. The situation at the time led Arab oil-producing countries to embargo shipments to states supporting Israel. Now, this birthday is probably not a coincidence. It must have been part of Hamas' plans for its attack on October 7, 2023. However, it is worth asking what was the difference between what happens now and then? How have conditions changed? Do poor countries have more or less influence than they did back then?

A new book by Henry Farrell and Abraham Newman, Underground Empire: How America Weaponized the World Economy, helps answer this question. The military use of oil in 1973 was made possible by the existence of bottlenecks in the global production system. Although the United States continued to be a major producer, Western Europe in particular depended on shipments from the Middle East. There was a tap that could turn on and off with potentially devastating effects.

What the aforementioned book shows is that the United States learned directly – and, more likely, indirectly – the lesson of that moment in which a weakness was clearly exposed. Farrell and Newman describe the rise over the last 50 years of what they call “networked imperialism” in the United States. At a time when markets should be increasingly dissociated from States, the authors demonstrate that the opposite is what actually occurred.

The US in particular – with China as a deft late innovator – has, in fact, struggled to deftly invent ways to transform the seemingly confusing global infrastructures of finance, information, intellectual property, and production supply chains into ties, aiming to control and even potentially stifle any challenge to American power.

The OPEC embargo and the Yom Kippur War occurred in 1973, but this was also the year of the creation of the financial transaction system Swift (Society for Worldwide Interbank Financial Telecommunication). As you know, eThis structure was built from Holland by Dutch banker Jan Kraa. This allowed banks to “talk to each other across borders,” replacing the previous system in which traders had to “perform logarithmic calculations using shared codebooks (code share)” to ensure security.

In 1975, there were already 270 registered banks. Today, more than 11 banks send, on average, 42 million messages per day. In the late 90s, Swift was the clearing house for most international financial transactions. It also served as a means of what the authors call “war without weapons” with which the US government began to confront its geopolitical opponents.

The first use was against one of OPEC's founding members, Iran, which had wielded the oil weapon after the 1979 revolution. By excluding those who did business with Iran from the Swift in the 2010s, the country was effectively placed in quarantine in relation to the global financial system.

The second tool used was the so-called “entity list”. This “weapon” prohibits countries from selling, without a license, technology or products manufactured in the USA to companies considered a risk to national security. Although the US has outsourced most of its own manufacturing, it still continues to produce small key components or, more importantly, persists in patenting key parts of technologies.

Since the Trump administration's declaration of a trade war with Beijing, China has been the main target of this form of export control, which restricts the freedom of maneuver of third parties through an intellectual property law created by the US but applicable globally. .

Half a century ago, the United Nations coalition of developing countries, called the G-77, saw cutting oil supplies as a way to pressure, if not blackmail, richer countries, forcing them to undertake a more complex transformation. of international relations, which was called the “new international economic order (NOEI).

While poorer countries suffered the consequences of rising oil prices, the G-77's idea was to use the threat of future blockades of other commodities to force the Global North to increase development aid. He should also accept agreements to stabilize commodity prices and even offer reparations for colonialism. A lesser-known part of NOEI was the demand for a “new international information order.”

Because the ability to report world events was highly concentrated in wealthier countries, new nations were often dependent on news services located in former colonial powers, even for everyday news. The new international information order proposed the decentralization of journalism and communication infrastructures.

These beliefs did not resonate much in the 1970s. However, in the 1990s and until the early 2000s, some believed for some time that the democratization of news production had occurred with the rise of so-called citizen journalists. There was, therefore, a faith in open social media platforms, such as Facebook and Twitter, as well as video platforms, such as YouTube. The book Underground Empire proves this optimism wrong.

Seemingly open internet networks have always operated over fiber optic cables, which have chokepoints as easily identifiable and observable as oil pipelines. While there was a brief idea that fiber optic technology was harder to spy on because it didn't allow for audible leaks like traditional cables, it soon became clear that it was actually even easier to gain full access through the complicity of private service providers. that operate the internet.

In one of their many evocative passages that make visible the hidden infrastructure of everyday life, Farrell and Newman describe how “the cables ended at Folsom Street [in San Francisco], allowing the NSA [the US National Security Agency] to use a prism to split light beams carrying information through fiber optic cables into two separate and identical signals.

One transports email messages, web queries, and user data to their intended destinations, while the other diverts them to room 641A. There, this material is analyzed by a Narus STA 6400 machine, built by an Israeli company with deep connections to the American intelligence community. Private communications thus became the property of US intelligence. Companies were richly compensated for opening these back doors – they write; They further assert that those who refused were threatened with crippling fines.

In the story told by Farrell and Newman, globalization has always quietly reinforced the unipolar power of the United States. Given its portrayal of the world economy in the 2020s, it appears that any realignment effort along the lines of the 1970s is doomed to become trapped in the networks of the United States' underground empire. Certainly, this is what US policymakers are hoping for.

 Surprisingly to the authors themselves, some parts of the US government have returned to an earlier version of their argument that introduced the term “armed interdependence”. Describing the use of chokepoints in the trade war with China, a Trump administration official reportedly commented that this “armed interdependence is a beautiful thing.”

At the end of last year, the vice-president of the European Commission, Margrethe Vestager, also used the term, stating somewhat fatalistically that the European Union “has had a rude awakening in the era of arms interdependence”; this only happened after realizing the “glaring limits of a production model based on cheap Russian energy and cheap Chinese labor.” Will this form of empire be eternal?

Perhaps. But there may be another way to read his evidence. The outcome of the sanctions regime against Russia suggests that exclusion from the global financial system – a warlike move by the United States – may not be the immediate death blow that many expected. Although trade denominated in terms other than the dollar remains a small (although growing) part of the world economy, there are nascent and moderately plausible efforts to build other empires.

However, Farrell and Newman make clear that for this to have any chance, they need a combination of two things: a large internal market, access to the extractive resources needed as inputs for a modern, carbon-based digital economy, and the means of self-defense against a potential US-backed adversary.

The authors are fans of science fiction and the book is peppered with enlightening references to certain novels. One of them is Snow crash, by Neal Stephenson, a 1992 novel that presents a vision of a near future in which sovereignty has been commodified. This fiction bears little resemblance to the technological utopias of the 1990s, but it seems to have offered Mark Zuckerberg the possibly pyrrhic concept of the “metaverse” – but with a much darker background.

Stephenson reminds his readers that the cannons of Louis XIV were inscribed with the motto “ultima ratio regum”, that is, that, finally, the argument of kings is always valid. Now, none of the aspirants to constitute themselves into decentralizing forces that appear in Underground Empire – whether Walter Wriston, head of Citibank, who dreamed of an offshore world free from state control, or Vitalik Buterin, who fantasized about creating autonomous organizations without central command – manages to escape the gravitational pull of state power supported by the monopoly of violence. Only the gigantic “civilized states” of Russia and China have a chance in this endeavor.

Considering the story told in Underground Empire, We can see that, as was the case 50 years ago, the Palestinian people themselves do not have the means to wage war on their own based on armaments, finance, information or capital-intensive manufacturing. Then, as now, its supposed allies in the region have only a limited interest in creating a truly “new international economic order” that turns the world economy upside down.

In fact, why should they? The current one serves them very well. The resolution to the first oil crisis was the quadrupling of the world oil price, thus quadrupling the revenues of the oil-producing states of the Gulf and creating the ocean of liquidity that flooded the London property market at the time.

Now it produces venture capital in abundance, as well as futuristic desert urbanism projects and (potentially) cutting-edge green technologies. The current Gaza conflict may have disturbed the detente between Israel and the Arab countries, but it will not change the grim fact that, in the medium term, the situation of the Palestinian people is nothing more than a footnote in the region's power game.

Rhetorically, the dream of realignment lives on. Last year, the UN General Assembly adopted a new declaration on a new international economic order. A meeting of the BRICS countries (Brazil, Russia, India, China and South Africa) held in South Africa promised to expand the horizons of the so-called South-South collaboration.

But what Farrell and Newman's book helps you see is how slow any potential realignment might be. Fiber optic cables cross oceans and cannot be duplicated overnight. It is not easy to have semiconductor foundries, which require investments of tens of billions and completion times approaching decades.

The vision that emerges from his book is that of a conflict between great powers in which, as usual, those at the bottom of the global wealth hierarchy will continue to suffer more and more, with no refuge in sight. “What we won’t do, because we can’t” – they warn – “is trace plausible escape routes from the underground empire. It’s easy to get to him, but it’s not so easy to get out.” In the 1970s, the G77 said it was calling for economic decolonization as a complement to political independence. The Underground Empire suggests this is further away than ever.

*Quinn Slobodian is professor of history at Wellesley College, Massachusetts. Author, among other books Crack-up capitalism: market radicals and the dream of a world without democracy (Metropolitan Books).

Translation: Eleutério FS Prado.

Originally published on the portal New Statesman.

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