BOOK REVIEW:  “Rulers and Ruled in the US Empire” (James Petras)

Reviewing James Petras’ “Rulers and Ruled in the US Empire”

by Stephen Lendman

James Petras is Binghamton University, New York
Professor Emeritus of Sociology whose credentials and
achievements are long and impressive. He’s a noted
academic figure on the left, a well-respected Latin
American expert, and a longtime chronicler of the
region’s popular struggles as well as being an advisor
to the landless workers (MST) in Brazil and unemployed
workers in Argentina. Petras is also a prolific
author. He’s written hundreds of articles and 63 books
(and counting), published in 29 languages, including
his latest one and subject of this review - “Rulers
and Ruled in the US Empire.”

The book is information rich on a core issue of our
time. It discusses the US empire’s “systemic
dimensions,”  evolving changes in its ruling class,
its corporatist system, myths about its coming
collapse, contradictions in the current debate on
immigration and market liberalization policies, the
use of force and genocidal carnage, corruption as a
market penetrating tool, the Israeli Lobby’s power and
influence, Latin American relations and events in the
region, social and armed resistance, and much more in
four power-packed parts under 17 subject chapter

It’s all covered below giving readers a detailed
sampling of Petras’ thoroughly documented, powerful
and insightful account of his subject - who rules
America, who’s ruled, the US imperial role in the
world economy and politics, and challenges to it in
China, Latin America and the Middle East. This is
another must-read book by a distinguished intellect
and major figure on the left who writes dozens of
them. This is his latest.

Part I: The US Empire As A System

Petras distinguishes between who sets policies and
rules America and whose interests are served. He
defines the ruling class as “people in key positions
in financial, corporate and other business
institutions” with rules “established, modified and
adjusted” as the composition and “shifts in power”
within the ruling class change over time. One example
is manufacuring’s decline (from outsourcing to low
cost countries) as a “multidimensional financial
sector” (finance capital) rose in prominence with Wall
Street’s influence especially dominant.

Petras defines “finance capital” to include investment
banks, pension funds, hedge funds, saving and loan
banks, investment funds and many other “operative
managers” of a multi-trillion dollar economy they’ve
all benefitted hugely from. They’ve been the driving
force powering real estate and financial markets
speculation, agribusiness, commodity production and
manufacturing. Petras calls “finance capital” the
“midwife” of wealth and capital as well as a “direct
owner of the means of production and distribution.”

He stratifies it into three sub-groups from top to
bottom in importance: big private equity bankers and
hedge fund managers, Wall street executives, and
senior officials of private and Wall Street public
equity funds as well as major figures in top law and
accounting firms. Political leaders are drawn from
their ranks with Wall Street in the lead and one firm
in particular standing out - Goldman Sachs. Today, its
former CEO Henry Paulson is the de facto US economic
czar in charge of proving doomsayers wrong about the
US economy with Federal Reserve Chairman Ben
Bernanke’s money creation power partnered with him.
Both of them must also navigate around the powerful
Israeli Lobby and its pro-war agenda that could lead
to catastrophic consequences if the US and/or Israel
attack Iran and the Middle East explodes and disrupts
oil flows.

Petras sees an inevitable split between wealth-first
financial ruling class objectives and militarists in
the Bush administration, their counterparts in Israel,
and the Lobby representing Israeli interests with a
stranglehold on most of Congress. The battle lines
shape up over Israeli Middle East dominance at the
cost of imperial overreach, an escalating trade
deficit, a ballooning national debt, decreasing
capital inflows to offset it, and a declining dollar
as other nations move to euros, yen and pounds
sterling. Something has to give, says Petras, as both
sides support opposing agendas that only a
crisis-provoking widespread backlash may resolve.

For now, however, things couldn’t be better for the
ruling class (despite their disrupted plans in Iraq
and Afghanistan) with the top 2% of adults in the
world owning half its wealth, the top 10% with 85% of
it, and the bottom half with just 1%. The result is an
unprecedented wealth disparity with corporate CEO’s on
average earning over 400 times the median income of
wage and salaried workers, and for top-earning
speculators and hedge fund managers the ratio is 1000
to one with some having incomes topping a billion
dollars a year. In addition, corporate wealth was at a
record 43% of 2005 national income accruing to
profits, rents and other non-wage/salary sources
compared to a declining percentage of it to
individuals, except for those at the top gaining

Petras states: “The growth of monstrous and rigid
class inequalities reflects the narrow social base of
an economy dominated by finance capital” with the US
redistributing far less to its people than other
developed nations like those in Western Europe.
Democrats are as culpable as Republicans with both
parties tied to big monied interests through campaign
funding and the power of lobbies. It makes everyone in
the political power structure unwilling to change
things so they don’t. The result is working Americans
suffer hugely while those at the top never had it so
good. It signals warnings of a potential worker
backlash ahead that for now have gone unheeded.
Elitists ignore it at their peril, so far without
negative consequences to their dominance, but watch

Capitalism or US Workers in Crisis?

Petras notes how for years many on the left and some
in the financial community have been predicting the
“coming collapse, decline or demise of capitalism” as
though (for some) wishing would make it so. They’re
still predicting, but it hasn’t happened, and Petras
explains why not. It’s because business and government
partnered (especially since the 1980s) to let workers
take the pain so business could gain and prosper. It’s
done it hugely and continues to despite the resurgent
summer doomsday predictions still ongoing.

In a letter to clients, noted investment manager
Jeremy Grantham explained why business is resilient by
comparing the global financial system (with its US
anchor) to a giant suspension bridge. Thousands of
bolts hold it together, so when some of them fail,
even a lot of them, it’s not enough to bring it down.
Short of “broad-based….financial metal fatigue,”
even more bolts may fail, but he’s betting the bridge
will hold, supported by amazing “animal spirits,” at
least for now.

Grantham is likely right in the near term, while
Petras takes a longer view, and his arguments are
compelling. He sees labor today in crisis with living
standards declining the result of reduced or
eliminated business benefits, government services and
stagnating wages. He also lists popular myths
predicting doom ahead - the growing budget and current
account deficits; ballooning national debt; excess
speculation; weakening dollar; high energy costs;
outsourcing of jobs at all levels, and more. Petras
maintains these problems aren’t as serious as claimed

—budget deficits declined in 2006 as tax revenues
rose from high-end earners’ greater income at the
expense of labor getting less;

—foreign investment in the US remains high;

—the dollar remains the world’s reserve currency;
over time, it weakens and strengthens based on
interest rates, political events, and the overall
level of economic activity; nonetheless, the dollar
weakened considerably after the Fed cut interest rates
and depreciated to an all-time low against a basket of
six of its major peer currencies that include the
euro, pound and yen; in addition, the New York Board
of Trade index hit its weakest level since it came out
in 1973, and the same is true for the Fed’s
trade-weighted dollar index since its creation in
1971; what’s ahead? Likely more of the same until
everyone believes the dollar is dead; then, watch out;

—a decade-long trade deficit hasn’t caused

—strong economic underpinnings (Grantham’s giant
suspension bridge) offset excess speculation, and
workers, not capital, take the pain;

—high energy profits overseas are recycled back into
dollar-based investments and have been for years
although countries like Iran, Venezuela and others are
moving away from the dollar at least for now;

—the potential of new technologies is

—corporate profits have had their longest ever run
of double-digit gains; the number of millionaires and
billionaires is growing; the rich are becoming
super-rich; and the beneficiaries are largely in North
America, Western Europe (plus Russia) and Asia.

Petras concludes that as long as worker exploitation
continues, the fundamental law of “casino capitalism”
applies - the house never loses, or in this case the
neighborhood (of developed nations) with some in it
doing better than others and the US their anchor. The
weakness of US labor and its history of overpaid,
underperforming, corrupted leaders explains why with
only 7.4% today in the private sector organized
compared to 34.7% in the 1950s. Unless new social and
political movements surface under activist leaders,
Marx’s “dirty secret” and Adam Smith’s “vile maxim of
the masters of mankind” will continue proving “the
wealth of all nations” depends on the rich taking it
“all for ourselves and (leaving) nothing for” the
working class.

Market Liberalization and Forced Emigration

Migration and so-called illegal immigrants make
headlines but never the reasons why that are two-fold:
fleeing political strife (as in Iraq) or for economic
reasons that the imperial globalized market system
causes horrifically. The latter forces millions of
Mexicans el norte because of NAFTA. Its disastrous
effects on their lives leaves them no choice -
emigrate or perish.

Petras explains when protective trade barriers come
down, millions of small farmers and entrepreneurs are
no match for the power of subsidized agribusiness, big
manufacturers and corporate service providers. They’re
displaced when their livelihoods are lost, and that
creates a huge surplus army of labor on the move and
an opportunity for business to exploit for profit. It
affects all skill types and levels (farm workers to
computer specialists to doctors), undermines unions,
and allows management to replace higher-paid US
workers with low-wage immigrants at their mercy and
getting little. Pay is kept low, benefits few or none,
working conditions unsafe, unions weakened, and dare
complain and be sent home.

Petras notes that as imperial power grows, “the
massive movement of dislocated workers toward the
imperial center multiplies,” and there’s no end in
sight nor will there be as long as highly exploitative
sectors like agriculture, construction and low-end
manufacturing and services thrive on it. Workers lose
and so do “sender” countries. They bore the costs of
raising, educating, training and providing services
for millions with “receiver” nations getting the
benefits. It amounts to multi-billions in the form of
critically needed skilled areas lost that include
professionals like doctors, nurses, teachers and
others. This won’t ever change unless worker movements
unite against it.

Empire-Building and Corruption

Petras notes how empire-building “is the driving force
of the US economy (especially post-9/11),” corruption
a key corporate predator tool to re-divide the world,
and nations with the greatest firepower get the
choicest slices. Business profit growth depends on
exploiting overseas opportunities for their resources,
markets and cheap reserve armies of labor with four
so-called “BRIC” countries especially targeted:

—China for its cheap labor and opportunities in
finance, insurance and real estate;

—India for its low cost information technology

—Brazil for its high interest rates that hit 19.5%,
were then greatly cut, but are still around 11%; and

—Russia for its high profit oil and gas reserves,
transport and luxury goods markets with booming
opportunities in real estate once political leaders
are bought off in a country rife with corruption as is

Petras notes that today over half the top 500
transnational corporations earn most of their profits
overseas, and for many it’s 75% of it. This trend will
continue, he says, as these companies shift most of
their operations abroad for greater cost savings. In
addition, “political corruption, not economic
efficiency, is the driving force of economic
empire-building (with) the scale and scope of Western
pillage of the East….unprecedented in recent world
history.” It’s from business-friendly legislation on
low wages, pensions, job tenure, land use, worker
safety and health, all designed for maximum profit.
Political leaders are bought off to get state-owned
businesses privatized, markets deregulated, wages kept
low, with a huge reserve army of exploitable labor the
payoff for “the US Imperial System.”

Hierarchy of Empire and Use of Force

Petras explains the US imperial system in terms of its
“hierarchy of empire” rankings. Imperial powers top it
(the US, EU and Japan) followed by emerging powers
(China, Russia, India), semi-autonomous client regimes
(Brazil, South Korea, South Africa), and collaborator
regimes on the bottom (Egypt, Mexico, Colombia). Then
come independent “revolutionary” (social democratic)
states like Venezuela and nationalist ones like Iran
as well as “contested terrain and regimes in
transition (Iraq, Afghanistan, Somalia, Palestine).”
Client regimes provide “a crucial link in sustaining
imperial powers” by allowing them to project and
extend their state and market reach.

One “anomaly” in the hierarchy is Israel. It’s a
colonialist and nuclear power and world’s fourth
largest military power and arms exporter that’s
breathtaking for a country of 7.1 million and 5.4
million Jews. It’s influence over US Middle East
policy, however, inordinately outweighs its size with
Iraq exhibit A and Iran moving up fast. More on this

Petras notes the constant flux within the imperial
system the result of wars, national struggles and
economic crises. They bring down regimes and elevate
others with examples like Russia, the Eastern
European states, South Africa and Venezuela. It shows
“no singular omnipotent imperial state….unilaterally
defines the international or….imperial system (that
in the case of the US) proved incapable
of….defeating popular….resistance in Iraq and

Even in Somalia, a US proxy war is in trouble, but
it’s too early to predict the outcome. The easy 2006
overthrow of the popular Islamic Courts Union (ICU)
put an unsupported warlord regime in charge (that
plundered the country from 1991 - 2005) with
predictable results - strong resistance against the US
puppet regime and its deeply corrupted Transitional
Federal Government (TFG) “president,” Abdullahi Yusuf.

Washington backed a hated regime and an equally
detested Ethiopian government that’s been “prop(ping)
up its Somali puppet” with a lift from US-supported
force. Earlier in 1993-94, the Clinton
administration’s intervention failed. It spawned mass
opposition, took thousands of Somali lives in
retaliation, and ended in defeat and a humiliating US
pullout. That may repeat despite Washington’s
establishing an African Command (AFRICOM) to solidify
its hold on the continent and its strategically
important Horn. So far, it’s very much up for grabs
with US presence in the region unwelcome and greatly
destabilizing. The “empire” never learns, so it’s on
to the next target that looks like Iran. More on that

Imperialism and Genocide

Petras explains how Korea, Vietnam and other wars hid
their true cost in lives, devastation and human
wreckage. It’s the way of all empires sweeping over
populations like crabgrass. It becomes “an
accelerating predisposition to genocides to accomplish
political aims,” and in an age of “shock and awe,” it
can come with “awesome” speed. An example is from the
latest O.R.B. British polling data reporting 1.2
million Iraqi deaths since March, 2003 alone plus
another 1.5 million up to that date. The true toll may
be even higher with huge uncounted numbers of daily
violent and non-violent deaths that one estimate by
Gideon Polya places at 3.9 million from 1990 to the
present. No one knows for sure, and his estimate may
be as good as any other. All of them are horrific.

Petras notes the “quantity” of killings elsewhere -
six million Jews and 20 million Soviet civilians in WW
II as well as 10 million Chinese civilians in Asia. He
explains genocide as policy from a “state (promoted)
racialist-exterminationist ideology (as well as from)
an historical antipathy of one culture to another.”
This allows ruling classes to legitimize their
ideology and achieve “uncontested dominance” and
ability to economically exploit domestic and overseas
markets. An omelet requires breaking eggs. Mass human
slaughter is the frequent fallout from consolidating
empires with living beings having no more worth than
egg shells.

Genocides also result from revolutionary challenges to
unpopular puppet rulers with Korea, Indo-China and
Iraq Exhibits A, B, and C. Up to eight million
perished in Asia, and three (or maybe four) million
could be reached in Iraq in 2008 at the present pace.
There’s no end to it in sight with billions funding
it, and no reporting on the carnage in the mainstream.

Petras reviews examples of imperialism becoming
genocide with the Reagan administration alone
responsible for its share. It committed multiple proxy
genocides in Africa, Afghanistan and Central America,
but you’d never know it from reports at the time about
a president being prepped for Mount Rushmore with a
spot for George Bush beside him until Iraq got him in

Another unreported genocide is Israel’s six
decade-long crusade against the Palestinians with
predicable results. It caused many thousands of
deaths, mass population displacement, and excessive
use of detentions and torture to deny a people freedom
and justice in their own land. The policy continues
because Israel has a powerful ally in Washington and
an even more influential Lobby working on its behalf.
More on that below.

Petras notes genocides are “repeated, common
practices,” impunity for committing them the norm, and
no effective international order is in place to stop
them. Victors justice prevails so victims face
kangaroo tribunals like the ICTY for Yugoslavia and
the equally corrupted one for Iraq. Genocides will
only end when imperial powers are defeated and their
leaders held to account for their crimes, but that
goal is nowhere in sight.

The Global Billionaire Ruling Class

The number of world billionaires reached 946 in March,
2007, they have an estimated combined wealth of $3.5
trillion, and over half of them are in three countries
- 415 in the US, 55 in Germany and 53 in Russia where
never did so many people lose more so a handful of
others could gain so hugely in so short a time. India
ranks high as well with 36 billionaires with China
next in the region at 20. The number of millionaires
exploded as well with close to 10 million in 2007, and
in 2006 their numbers grew by an estimated 8.3%.

Balzac was right saying behind every great fortune is
a crime (and most often a small fortune as seed money)
but likely nowhere more rapaciously than in Russia.
Petras notes “Without exception, the transfers of
(state) property were achieved through gangster
tactics - assassinations, massive theft, and seizure
of state resources, illicit stock manipulation and
buyouts.” They strip mined over a trillion dollars of
Russia’s wealth into private predatory hands who, in
turn, stuffed them in offshore accounts. It happens
everywhere with the US exhibit A. The Rockefellers,
Morgans, Fords and Carnegie’s didn’t amass wealth by
being neighborly or nice. They got it the
old-fashioned way - by strong-arming and stealing.

In developing countries, it came faster under
Washington Consensus rules favoring capital over
people with billionaires coming out on top. Latin
America has 38 of them, mostly in Brazil (with 30) and
Mexico (with industrialist Carlos Slim Helu now the
world’s third richest man). These “two countries….
privatized the most lucrative, efficient and largest
public monopolies,” and benefitted hugely from
regressive taxes, tax exemptions, deregulation, big
subsidies, and the ability to hike prices and make
vital services unaffordable to millions who can’t pay
for them.

“How to become a billionaire,” Petras asked. No need
for an MBA or market savvy when the “interface of
politics (aka friends in high places) and economics”
works much better. The road to super-riches came from
privatized state assets that began with bloody
military coups in Latin America. In countries like
Chile, Colombia and Argentina, results were always the
same - great riches at the top, stagnant economies,
vast poverty, high unemployment, two-thirds of the
region’s population with “inadequate living
standards,” and the long shadow of US involvement
backing military dictators, business elites, and
neoliberal politicians to assure lucrative ties to
corporate interests in America. More on this below.

Part II - The Power of Israel and Its Lobby in the US

Petras covered how the Israeli Lobby defeated the Jim
Baker Iraq Study Group’s (ISG) proposal released
December 6, 2006. Its alternative US Middle East
agenda lost out to the Israeli Lobby’s influence on
Congress, a massive supportive propaganda campaign in
the major media, and Israeli Prime Minister Ehud
Olmert being as able to “have the US president under
our control” as Ariel Sharon once boasted.

For a time it looked like the ISG plan would prevail
with top Bush advisors recommending dialogue with
Iran; high-ranking military, active and retired,
wanting a phased withdrawal for a failed effort; and
the Army, Navy and Marine Corps weekly publications
wanting Defense Secretary Rumsfeld sacked shortly
before he resigned. Even Big Oil interests backed
Baker because stable conditions favor business more
than conflict (at least to pump oil), and that won’t
happen without a change of course now off the table.

Iran wants rapprochement as well but not on the usual
US terms - making demands and offering nothing in
return. Iran’s objectives are simple and reasonable -
normalized relations and an end to Washington’s
confrontational stance and military threats. They’re
off the table because the “Israel-First power
structure (Lobby-Congress-Mass Media-Democratic Party
Donors)” reject them. Syria is just as compliant, but
its overtures are also rebuffed for the same reason.

Petras explained that AIPAC wants war with Iran as its
top priority objective. In addition, the publications,
conferences and press releases of the Conference of
Presidents of the Major American Jewish Organizations
(CPMAJO) asked their members “to go all-out to fund
and back candidates (mostly Democrats) who supported
Israel’s military solution to Iran’s nuclear
enrichment program” even though IAEA agrees it’s in
total compliance with Nuclear Non-Proliferation Treaty
rules while Israel violates them with impunity.

In the end, Prime Minister Olmert co-opted George
Bush, got him to reject the ISG proposal and ally with
Israel’s aim to solidify its Middle East dominance by
removing a non-existent Iranian threat with Syria also
targeted. In many respects, this flies in the face of
logic as many influential US figures know. Petras
believes Iran is a key interlocutor for a Middle East
settlement that might let Washington retain its
strategic Arab allies. Tehran is willing to cooperate
but not when its government is lumped with Al-Queda,
the Taliban and Iraqi resistance and is being
threatened with war. That’s the current condition with
renewed Bush administration efforts to prep the public
to accept more of it if it comes.

Hamas also has been conciliatory. Its leaders made two
peace proposals as a show of good faith, is willing to
recognize Israel if Palestinians get justice, pledged
a cease-fire in the face of Israeli attacks, and was
rebuffed with rejection and an Israeli blockade of
Gaza along with frequent hostile incursions. Conflicts
rage in Iraq and occupied Palestine, more war
threatens in Iran, and the road to peace in the region
runs through Jerusalem providing Washington concurs.
But it’s not possible, in Petras’ judgment, unless
foreign military bases are closed, there’s public
control or nationalization of the region’s resources,
and Israel ends its colonial occupation of Palestine.
So far, those objectives are nowhere in sight.

The Lobby and Media on Lebanon

In Petras’ powerful 2006 book, “The Power of Israel in
the United States,” he documented how this power
derives from a vast pro-Israel Lobby in the country
supporting all aspects of its agenda. It’s position is
firm - “Israel is always right, Arabs and Muslims are
a threat to peace,” and the US should unconditionally
support Israel across the board. In Petras’ view,
that’s the main reason why the Bush administration
attacked Iraq and may now target Iran and Syria.
Israel perceives these countries as threats,
Washington seems willing to remove them, and a chorus
of media-driven propaganda approves.

They always support Israel and jumped right in last
summer backing “Operation Change of Direction” against
Hezbollah and “Operation Summer Rain” against Hamas
that caused many hundreds of deaths and mass
destruction. It was all papered over in the major
media and characterized as Israel’s “defensive,
existential war for survival against Islamic
terrorists.” It was pure baloney. In fact, and
unreported, Israel launched dual long-planned
aggressive wars with Hezbollah’s capture of three IDF
soldiers in Lebanon the pretext and Hamas taking one
Israeli corporal the justification in occupied
Palestine. Never mentioned are the many thousands of
Palestinians illegally abducted, imprisoned and
tortured, and that unprovoked aggressive wars and
their fallout are war crimes and crimes against

Also unmentioned is that if Hezbollah and Hamas hadn’t
provided the pretexts, Israel (as it’s often done)
would have manufactured them to launch its summer
aggression. With full US support and backing from its
Lobby and dominant media, these type actions continue
at the expense of their victims with US taxpayers
duped into funding them generously.

US Empire and the Middle East

Petras notes key factors help explain US Middle East
policy that in his judgment are “challenged from
within and without, are subject to sharp
contradictions,” and are likely to fail.

First, is the influence of the Israeli Lobby he
documented powerfully as have Mearsheimer and Walt in
their work. It’s likely the most potent lobby in
Washington and can practically mobilize the entire
Congress, every administration and the dominant media
to back pro-Israeli policies even when they run
counter to US corporate interests that in Middle East
means those of Big Oil primarily.

The Lobby wanted war with Iraq and got it. Now its top
priority is stiff sanctions and war on Iran, and if
the orchestrated media hate frenzy targeting President
Mahmoud Ahmadinejad’s Columbia University address
September 24 is an indication, it may get it. As
Petras notes, the Lobby’s fanatical support for Israel
is so extreme and uncompromising, it’s even willing to
risk world war and economic collapse to get its way.

Another key factor is the US ability to enlist and
co-op client states and proxy forces to serve our
interests - the Kurds in Northern Iraq; the
Abbas-Dahlan Fatah militants in Palestine; the
Sinoria-Hariri-Jumblat pro-US/Israel,
anti-Syria/Hezbollah/Hamas alliance in Lebanon;
Mubarak in Egypt; King Hussein in Jordan; pro-US
regimes in Turkey; the Saudis and others.

Petras then explains how the Israeli Lobby’s influence
runs counter to the US “Arab agenda.” It shows up in
Washington’s failure to construct a NATO-style
power-sharing alliance in the region, except for
Turkey and Israel, and the former may not prove solid.
The Iraq policy has been disastrous, each tactic tried
failed, resistance is unabated, the Arab street
overwhelmingly rejects occupation, and Arab leaders
offer tepid support.

Petras calls Washington’s permanent war strategy (next
targeting Iran and Syria) “an irrational gamble
comparable to Hitler’s attack on Russia” that doomed
him. Today in the Middle East, attacking these two
countries may only compound the Iraq failure with
“greater defeats, greater domestic rebellion” and
still more wars without end promising gloomy prospects

Part III - The Possibility of Resistance

Petras discusses China and the “general consensus
(it’s) emerging as the next economic superpower” to
challenge US dominance. Petras expresses doubts that
can only be summarized briefly. He notes Chinese
capitalism not only depends on growth and the ability
to generate jobs, but also on “the social relations of
production, circulation and reproduction.” They come
at a high price - ferocious labor exploitation,
rampant corruption and nepotism, mass small farmer
displacement, firing millions of workers from
state-owned and bankrupt enterprises, ending social
services, and higher living costs increasing class
warfare in the streets against billionaire kleptocrats
and foreign investors profiting hugely at the expense
of most Chinese.

Petras then distinguishes between “made in China” and
Chinese-owned and whether the former enhances China’s
growth or foreign investor profits instead. He sees
China taking on “features of both a neo-colony and an
emerging imperial power,” but mostly the former. He
notes the standard of living for most Chinese
“declined precipitously;” air, water and ground
pollution greatly increased; the quality of life for
most Chinese suffers; class inequalities are vast; and
gains from a consumerist society for a minority of the
population are offset by dirty air, loss of leisure,
job security, near rent-free housing, state-provided
health care and education, deteriorated working
conditions and more. Paradise it’s not, at least for
workers, and conditions aren’t improving.

Petras then discusses China’s transition from state to
“liberal” capitalism. As it deepened, trade barriers
were dismantled; protective labor laws abolished;
price controls lifted; the countryside ravaged; a
massive new army of unemployed workers created; and an
export-driven market strategy followed. The result
today is a new class of billionaires and about 2900
former party “princelings” who control around $260
billion of wealth. In addition, property, real estate
and construction boomed, an export strategy
concentrated development on coastal regions, and
domestic consumption is relatively constrained.

In contrast, “millions of construction workers,
miners, domestic servants and assembly-line workers
(labor) under the most abominable conditions” - long
hours, low pay, awful sanitary conditions and little
regard for safety in an unregulated environment
structured for maximum profit. China today is a
“magnet for capitalists and investors worldwide,” a
free market paradise that’s hell on workers paying
hugely for the country’s marketplace “success.”

Petras envisions China’s capitalism deepening and
mainly benefitting foreign investors. He sees their
“initial beachheads as minority shareholders”
extending into production, distribution, transport,
real estate,
telecommunications, consumer goods and services,
entertainment, finance and more and eventually gaining
more control. As a result, he believes China’s next
great leap forward will be from liberalism to
neoliberalism, the country will lose its national
identity, it will become a “territorial outpost” for
foreign-owned transnationals, and the country’s bid
for world power status will be subverted.

Petras sees 21st century China emerging as a “gigantic
proxy for imperial powers,” but China won’t be one of
them. Its “Great Leap Backwards” will be consummated
when the nation’s “share of profits shifts from the
national bourgeoisie” to foreign investors in a
process now accelerating.

But it won’t come easily as a new generation of
China’s leaders may stop or curtail it. In addition,
growing mass resistance has now emerged for obvious
reasons cited above. Already, close to 100,000 mass
demonstrations have occurred involving millions of
Chinese protesting a workers’ hell. Social crisis is
deepening, class struggle has returned, and the
government has taken note. It’s beginning to address
concerns but giving back pathetically little
considering China’s massive population. Petras calls
these remediating actions “too little and too late.”
Ahead he sees decentralized protests becoming
organized urban worker movements that when joined with
displaced farmers may set off a new rebellious period.
This may then blossom into “a new revolutionary
struggle” that will determine China’s future and its
climate for investors.

The US and Latin America

Petras has studied Latin America for decades and knows
the region as well as anyone. Here he dispels notions
of a revitalized regional populism with US dominance
waning. His case is compelling as he argues
Washington’s influence has increased in recent years
(though not to the level of the 1990s) despite the
success of Hugo Chavez and his ability to thwart US
efforts to unseat him.

The Bush administration lost out on FTAA but has had
other successes:

—bilateral trade agreements with numerous Latin
American states from the Caribbean to Chile;

—an expanded number of military bases despite the
possible loss of one in Ecuador ahead;

—US business interests in the region flourishing,
including in Venezuela where they’re booming; and

—neoliberal free market policies intact despite
campaign rhetoric promising change.

Aside from Venezuela and maybe Ecuador (where it’s too
soon to tell), the left’s appraisal of progressive
change is nowhere in sight, so what are they seeing
that’s not there.

Petras assesses the current state of things in the
region after reviewing its recent history readers can
get from the book. He notes signs of Washington’s
declining influence that’s had no adverse affect on
corporate interests except in Venezuela where taxes
are now fair compared to earlier when they were too
low. He also explains so-called center-left regimes in
Brazil, Argentina, Bolivia, Uruguay and elsewhere
tamed mass social movement demands while embracing
1990s neoliberalism. In Brazil, if fact, President
Lula da Silva actually deepened and extended the
privatization and restrictive budget policies of the
preceding Cardoso regime, and despite his Workers
Party background, demobilized mass movements and trade
unions instead of supporting them as people expected.
Many now see him for what he is - a traitor, but
sadly, he’s got company, too much of it.

Of great significance is the way Petras explains four
competing regional power blocs representing varying
degrees of accommodation or opposition to US policies
and interests.

1. The Radical Left

It includes:

— the FARC guerillas in Colombia (active since
1964); some trade union sectors; and peasant and
barrio movements in Venezuela;

—the labor confederation CONLUTAS and sectors of
Brazil’s Rural Landless Movement (MST);

—sectors of the Bolivian Labor Confederation (COB)
and the Andean peasant movements and barrio
organizations in El Alto;

—peasant movement sectors (CONAIE) in Ecuador;

—teachers and peasant-indigenous movements in
Oaxaca, Guerrero and Chiapas, Mexico;

—nationalist-peasant-left sectors in Peru;

—trade unionist and unemployed sectors in Argentina;

—other Central and South American social movements
and some Marxist groups in several countries.

2. The Pragmatic Left

—Hugo Chavez in Venezuela who combines grassroots
participatory democracy and redistributive social
policies with support for business interests;

—Evo Morales in Bolivia;

—Fidel Castro in Cuba;

—various large electoral parties and major peasant
and trade unions in the region; leftist parties
including the PRD in Mexico, FMLN in El Salvador, CUT
in Colombia, Chilean Communist Party, Peru’s
nationalist parliamentary party, sectors of Brazil’s
MST, Bolivia’s MAS governing party, CTA in Argentina,
and PIT-CNT in Uruguay.

3. The Pragmatic Neoliberals (the most numerous
political block)

—Lula in Brazil;

—Kirchner in Argentina;

—the major trade union confederations in Brazil and

—business and financial elite sectors providing
subsistence unemployment doles and food aid; and

—similar groups in Ecuador, Nicaragua (the
Sandinistas and their split-offs), Paraguay and other

4. The Doctrinaire Neoliberal Regimes

—Calderon in Mexico;

—Uribe in Colombia;

—Bachelet in Chile (in spite of her being imprisoned
and tortured under Pinochet);

—the Central American countries: El Salvador,
Honduras, Costa Rica and Guatemala;

—Garcia in Peru;

—Paraguay with the region’s largest military base;

—Uruguay’s ex-leftist regime now rightist;

—US-occupied Haiti through proxy thuggish
paramilitary UN peacekeepers; and

—the Dominican Republic.

The notion that populism swept Latin America in the
new century is pure fantasy. In fact, there’s a
“quadrangle of competing and conflicting” regional
forces with Washington having less market leverage
than in the 1990s “Golden Age of Pillage” but still
enough to be dominant and able to keep business

Petras continues his analysis with detailed examples
of key center-left regimes in Brazil under Lula,
Argentina under Kirchner, Uruguay under Vazquez,
Bolivia under Morales plus some comments on Peru and
Ecuador under leaders preceding their current ones.
Each case substantiates the fantasy that these regimes
represented “new winds from the Left” sweeping the
region. Hot air maybe, but little, if anything, in the
way of progressive change despite the beliefs of many
intellectuals on the left.

However, that’s not to say leftist forces aren’t
strong enough to bubble up and bring change.
Insurrectionary forces brought Evo Morales to power in
Bolivia and can take him down if he fails them as he’s
now doing. The same is true in other countries with
Hugo Chavez their model. He challenged US imperialism,
brought real social change, has mass public support
and thus far withstood US efforts to oust him. In
Cuba, Fidel Castro thwarted every Washington effort
against him since 1959 and is still in charge, larger
than life, although frail and weak following his
protracted illness from which he’s still recovering.
Petras sees a new generation of young committed
leaders emerging in the region. “They are the ‘Left
Winds’ of Latin America,” and it’s in them that hope

Foreign Investment (FI) in Latin America

Petras demystifies FI’s impact, explains the risks in
attracting it, and exposes six myths about its

Myth 1.

It’s untrue FI creates new enterprises, market
opportunities and more. Most, in fact, aims to buy
privatized and other enterprises while crowding out
local capital and public initiative.

Myth 2.

FI doesn’t increase export competitiveness. It buys
mineral resources for export with little done to
create jobs or stimulate the local economy.

Myth 3.

It’s false to think FI provides tax revenue and hard
currency. An FI export model creates more indebtedness
and a net loss.

Myth 4.

It’s false believing debt repayments to international
lenders is key to a good financial standing. Much
foreign debt is odious and repaying it harms borrower

Myth 5.

It’s false believing FI provides developing countries
needed capital. It’s used instead to buy local
companies and control a country’s markets.

Myth 6.

It’s false believing FI attracts further investment.
Capital freely moves to wherever it gets the best
returns and is anchored nowhere.

Developing countries benefit most by relying less on
FI and more on national ownership and investment. The
former is predatory. The latter accrues profits to the
national treasury and grows the country’s economy. FI
demands conditions favoring capital over labor that
results in a widening economic gap and greater
inequalities in political and social power. The 20
year (1980 - 2000) record of Latin American FI is
socially disastrous. Living standards plunged while
unemployment and poverty soared. Hardly reasons to
attract it and clear ones to stay away or restrict it.

Part IV - An Agenda for Militants

Petras considers FI economic alternatives and ways to
buck its strategic countermeasures. FI generally
threatens disinvestment when a country wants to
enhance its own economy and benefit popular living
standards. Hardball tactics cut both ways, and the
state can use its own effectively to counter capital
flight threats as well as adopt policies in advance
serving its needs first ahead of those FI wants to
have things its own way.

Petras notes that FI “is incompatible with any notion
of an independent, socially progressive country” even
though at times it can be useful in a regulated
environment controlling it. He explains a country’s
own financial and economic resources can be used
instead of FI to enhance its internal development and
technological advance by reinvesting profits from
export industries; controlling foreign trade to
increase retention of foreign exchange; investing
pension funds productively; imposing a moratorium on
debt payments; recovering stolen public treasury funds
and unpaid taxes; maximizing under-employed labor, and

Most countries can avoid FI by relying on multiple
sources of its own capital. They can also employ
alternative effective strategies when outside help is
needed by minimizing its ownership, employing
short-term contracts on favorable terms, imposing
stiff penalties on capital flight, and barring it from
returning if it leaves. Petras concludes: “The
historical and empirical evidence demonstrates that
the political, economic and social drawbacks of (FI)
far exceed any short-term benefits perceived by its

The Middle Class and Social Movements in Latin America

Petras observes that middle class attitudes in the
region depend on the “political-economic context”
confronting it. It’s attracted to the right under
expanding right-wing regimes and to the left in times
of economic crisis. On the other hand, under a
“popular, anti-dictatorial, anti-imperialist populist
government, the middle class supports democratic
reforms” but not radical policies harming it for the
benefit of the working class. Three examples make his
case - in Brazil under Lula when it took over his
Workers Party; in Argentina when it benefitted under
Menem and Cardoso and later under Kirchner; and in
Bolivia under Morales who combines “political
demagogy” to his base and neoliberal IMF austerity in
his policies attractive to middle class and business

Petras notes social movements failed by not developing
political leadership or a program for state power and
depended instead on “electoral politicians of the
upwardly mobile professional middle class.” The Left’s
key challenge, he believes, is to “convert the public
sector middle class from anti-neoliberalism to
anti-capitalism and anti-imperialism, and to combine
urban welfare (with) agrarian reform.”

Iraq and Afghanistan’s Importance in Defeating the

Petras concludes by noting Washington’s imperial wars
were stopped in their tracks in Iraq and Afghanistan
by resistance too powerful to contain. A “shock and
awe” blitzkrieg failed when Iraqis wanted a say in
running, rebuilding and transforming their country and
rejected its US-installed puppet regime. The country
is a wasteland, the nation creation project bankrupt,
and the prospect for success bad and worsening with
multi-billions expended and nothing gained except huge
profits for administration favored contractors that
always benefit whoever wins or loses.

The same situation holds in Afghanistan. An easy five
week walkover turned into an endless debacle with no
end in sight. Washington planned successive wars for
unchallengeable world dominance, but local resistance
in two countries stopped it cold (so far), may defeat
its proxies in Somalia, and resilient opposition in
Palestine and South Lebanon may prove equally
formidable as well.

The US is now over-extended and its “imperial grand
strategy” weakened. It’s made preemptive wars against
Iran and Syria and trying again to topple Hugo Chavez
less likely, but none of these possibilities are off
the table. Cornered and facing defeat, rhetoric is
heated making anything possible, and the September 20
Lieberman-Kyl “Sense of the Senate” (no legal force)
resolution/amendment to the FY 2008 Defense
Authorization bill ratchets up the possibility of
attacking Iran and its regional “proxies” with
potentially catastrophic fallout the risk.

For now, emboldened resistance and strong anti-war
opposition are matched against an administration
desperate to turn things around and willing to try
anything to do it. How this may end is a crapshoot,
the stakes on its outcome too great to risk but may be
waged anyway, and the world trembles as it waits and
watches. Stay tuned and hope Petras is right believing
Iraq and Afghanistan thwarted the empire and prevented
further aggression against Iran and beyond, now off
the table. Or maybe not. When wounded and cornered,
desperate animals and politicians may try anything
with nothing to lose. Keep a close watch.

Stephen Lendman lives in Chicago and can be reached at
.(JavaScript must be enabled to view this email address).

Also visit his blog site at and
listen to The Steve Lendman News and Information Hour
on Mondays (moved from Saturdays)
at noon US central time.