- Created: Tuesday, 19 April 2011 22:00
- Written by Leonard Gentle
Western bombs are raining down on Libya and a “no-fly zone” is being imposed after a United Nations (UN) Security Council resolution. At the UN, BRICS members, China and Brazil, abstained from voting (although South Africa voted for) but publicly criticised the idea of bombing Gaddafi’s forces.
The US is in decline as the power able to exert its authority over world affairs. At the same time we are seeing the rise of China – predicted to be the world’s largest economy within 10 to 20 years – having imperial ambitions, but racked with many internal contradictions. China is the single biggest holder of the US’ debt, in the form of federal bonds. Its rise is offset by its dependence on the US for its exports and on US companies that are its biggest foreign investors. Moreover, holding dollar-denominated US treasury bonds also means that China can't simply watch the dollar decline or risk a US bond default.
So China and the US are like two adversaries manacled together, taking wild pot shots at each other, but unable to strike the decisive blow. For some while now the US has been attacking the Chinese for what it calls a form of protectionism by keeping its currency, the Renminbi, allegedly, artificially low.
The November 2010 meeting of the G20 countries in Seoul was supposed to be an attempt at resolving the currency wars between the US and China. But in the midst of the G20 diplomacy and fine rhetoric about solving trade imbalances, the US decided to indulge in another round of quantitative easing – to the tune of US$600b – essentially a form of printing money by buying back bonds from private banks and then crediting their balance sheets with money.
If any other country were to print money in this way the consequences would be devastating in terms of inflation and the collapse of the currency in world markets. But the US’ currency is the world’s currency, so it doesn’t incur inflation, nor does anyone dump dollars because global trade is conducted in dollars. So the US can get away with it.
This certainly raised the hackles, not only of China, but also of Brazil, Russia, India and South Africa, who are all consequently attracting hot money from low US interest rates and quantitative easing, which overvalues their currencies and makes their exports more expensive.
At the BRICS meeting, President Zuma joined his counterparts in calling for greater independence from the dollar.
The BRICS meeting echoed comments made by the governor of the Chinese Central Bank in 2009, in the midst of the global financial crisis, that the dollar’s role, as the global reserve currency and medium of international trade was placing the world at risk, given the scale of the US’ debt and the fact that the crisis was centred on the US.
This is no mere arcane technical spat between economists. This is about economic clout and the political power that comes with having one’s currency both the global reserve currency and the medium of global exchange. The fight over the dollar is also a fight over who is to be the main political force in the 21st century, and who is the fulcrum around which all foreign policy matters of nation states will turn -- with all the implications for domestic issues.
So the currency wars have direct meaning for what our lives will be like in the next while.
Meanwhile the world’s attention is focussed on the Libyan crisis and the evil perpetrated by Muammar Gaddafi. Having armed Gaddafi, invested in his oil fields and welcomed him back into the fold of the “international community,” the US, Britain and France, are now arming his adversaries and bombing his air force in the name of a “humanitarian mission.”
All of this while there are people’s uprisings against dictators throughout North Africa and the Arab world in Yemen, Algeria, Syria and Bahrain (and, of course, the successful insurrections in Tunisia and Egypt).
So why are the US, Britain and France now supporting what they call “pro-democracy groups” in Libya, while taking the opposite stance in Bahrain and Yemen by arming the dictator’s forces, which are killing the pro-democracy forces in those countries?
And why did the BRICS countries take a different view on Libya to that of the West?
Maybe there is an additional explanation to the theory that this is about Libya’s oil. There appears to be a currency war at stake here as well.
Recently, US financial journalists, speaking to their investor community, have begun highlighting some little-reported developments in Libya. Several writers have noted the odd fact that the Libyan rebels took time out from their rebellion in March to create their own central bank. This before they even had a government.
Robert Wenzel wrote in the Economic Policy Journal, “I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.”
In a statement, the Libyan rebels reported on the results of a meeting held on March 19. Among other things, the supposed “pro-democracy forces” announced the "designation of the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and appointment of a Governor to the Central Bank of Libya, with a temporary headquarters in Benghazi."
US senior financial editor, John Carney, has asked, "Is this the first time a revolutionary group has created a central bank while it is still in the midst of fighting the entrenched political power? It certainly seems to indicate how extraordinarily powerful central bankers have become in our era."
Clearly there is something different about Libya.
Earlier in the twentieth century Libya was a colony of Italy. But Italy was a losing power in World War II and ceded power to Britain. Unlike Italian colonialism, Britain was happy to exercise power indirectly through a Libyan king -- King Idris, who ruled from 1949.
However, a wave of nationalism spread after World War II and Gamal Nasser and army officers seized power in Egypt in 1952 proclaiming themselves nationalists and Arab socialists. The region became notable for the clash between Arab nationalism and imperialist interests in the centre of the world’s oil reserves. So when a Libyan army officer – Muammar Gaddafi – seized power from King Idris in 1969 and proclaimed his movement as Arab socialist and pan-Africanist, he was immediately declared the enemy of the West.
Gaddafi, in return, ruled Libya through the army and through a system of alliances with tribal lords. Internationally, he manoeuvred to play competing imperial interests off against one another.
Inside Libya he combined the suppression of the people with claiming that he was merely a “brother leader” using the growing oil revenue to strengthen the Libyan army and establish a high standard of living for the Libyan middle classes. As a result, Libya has the highest human development index (HDI) in Africa and the fourth highest GDP per capita. Libya also has the 10th-largest oil reserves of any country in the world and the 17th-highest petroleum production.
And critically for current events, Gaddafi also set up a Libyan Central Bank that was 100% state-owned. That in itself was not so unusual, but what is unique amongst the major oil producers is the fact that the Libyan Central Bank is not a member of the Bank for International Settlements (BIS) (the BIS is the international clearing house for global trade and conducts its transactions in dollars).
As a result, the Libyan government, up to now, could create its own money, the Libyan Dinar, through the facilities of its own central bank and insist that trade in oil must take place in its national currency (and not in dollars, as is the case with all the other major oil producers).
This has placed Libya in the same advantageous position as the US, who, as custodian of the global currency of trade, the dollar, can merely print money to expand its trade capacity without, as in the case of Zimbabwe, incurring disastrous inflationary consequences. In order to do business with Libya, banking cartels, oil barons and so on, have had to go through the Libyan Central Bank and its national currency.
So Gaddafi’s Libya was indeed special -- a small player, but suddenly a significant player given the global power plays over the dollar, as the world’s reserve currency and medium of exchange.
In the new Libya being crafted, the “pro-democracy forces” in Eastern Libya around Benghazi are being pulled into the West’s economic orbit in the currency wars, to the trepidation of China and her allies. This is an additional reason why the BRICS countries have been so critical of the West’s latest military adventure.
In this, South Africa’s precariousness in the imperial wars – with its BRICS allies in raging against the dollar, yet voting with the US to bomb Libya, heading an AU delegation to seek peace with Gaddafi and then being brushed aside by NATO – is so apparent.
But how did the initial stirrings of a people’s movement in Libya become something else?
When the Arab uprisings began in Tunisia and spread throughout North Africa and the Middle East many people in Libya also became inspired to confront Gaddafi’s tyranny. They gathered in the main square in Tripoli – the Green Square – defied Gaddafi, and called for democracy. From Tripoli the mood spread out to the South and East of the country.
But other forces were at play…Tribal leaders reading the shifting currents in the region and seeking to position themselves accordingly, old King Idris loyalists seeking to bring back the monarchy, and some of Gaddafi’s own lieutenants trying to guarantee their future careers by jumping ship to the West. Some of these began waving the old Kingdom of Libya flags.
All these forces have completely swamped the original movement, which began in Tripoli and today the “pro-democracy forces” are clearly these, rather than the original Libyan uprising. Tripoli is no longer a centre of rebellion and the whole thing has degenerated into a civil war where one side is being backed by Western special forces, NATO air strikes and arms supplied by whomsoever wants to swing events their way.
And what has been the priority of these forces?
To get the oil terminals at Benghazi to flow and to get a new Central Bank of Libya up and running.
Before the conflict has even ended, the Benghazi-based Transitional National Council (TNC), led by Mustafa Abdul Jalil, an ex-finance minister of Gaddafi, has already met with Sarkozy in France and attended the London meeting on Libya convened by Britain’s David Cameron. At the meeting, the TNC promised to respect all international treaties, including Libya joining the BIS, and guarantying private sector investment.
It is these anti-democracy opportunists who are calling for NATO air strikes and seeking the blessing of the West before the Libyan people can decide for themselves.
Libya is providing an opportunity for imperialism to both crush an old enemy and co-opt the Arab uprising, turning calls for independence, freedom and democracy into calls for independence for central banks, greater free markets and imperial domination.
But the world has changed. The Arab uprisings are themselves a sign that there are weak links in the imperialist chain.
The current capitalist crisis is of such proportions that the space to finance a major war, commit troops to occupation and administer such an occupation is severely limited. The US is already carrying the can for occupations in Iraq and Afghanistan and is simply incapable of sustaining another one at the time of its biggest debt. This is why Obama wants a UN/NATO coalition to share the political and economic cost of the war on Libya. And even within NATO, member country, Turkey, has its own domestic reasons for not wanting to be part of an attack on a Muslim country.
What is being played out are contestations within imperialism – largely between China and the US - on the one hand, and a new tide of popular rebellion against domination – a tide that began in Latin America over the last 10 years, but which has now exploded across North Africa and the Middle East - on the other. The key is the strength of the people on the ground in Yemen, Syria and even Saudi Arabia, but above all, in Tunisia and Egypt, where they are still directly engaged in determining the outcome of events.
Our world will be shaped by which social forces prove triumphant over the next few years.
This article was first published online here: http://sacsis.org.za/site/article/658.1