The Asia-Pacific Journal | Japan Focus Volume 7 | Issue 2 | Number 4 | Article ID 3010 | Jan 08, 2009

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Martial Law, the Financial Bailout, and the Afghan and IraqWars

Peter Dale Scott

Martial Law, the Financial Bailout, and theAfghan and Iraq Wars

Peter Dale Scott

Paulson’s Financial Bailout

It is becoming clear that the bailout measures oflate 2008 may have consequences at least asgrave for an open society as the response to9/11 in 2001. Many members of Congress feltcoerced into voting against their inclinations,and the normal procedures for orderlyconsideration of a bill were dispensed with.

The excuse for bypassing normal legislativeprocedures was the existence of an emergency.But one of the most reprehensible features ofthe legislation, that it allowed TreasurySecretary Henry Paulson to permit bailed-outinstitutions to use public money for exorbitantsalaries and bonuses, was inserted by Paulsonafter the immediate crisis had passed.

Paulson’s bailout

According to Congressman Peter Welch (D-Vermont) the bailout bill originally called for acap on executive salaries, but Paulson changedthe requirement at the last minute. Welch andother members of Congress were enraged by“news that banks getting taxpayer-fundedbailouts are still paying exorbitant salaries,bonuses, and other benefits.” [1] In addition, asAP reported in October, “Sen. Charles Schumer,D-N.Y. questioned allowing banks that acceptbailout bucks to continue paying dividends ontheir common stock. `There are far better usesof taxpayer dollars than continuing dividendpayments to shareholders,’ he said.” [2]

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Even more reprehensible is the fact that sincethe bailouts, Paulson and the TreasuryDepartment have refused to provide details ofthe Troubled Assets Relief Program spending ofhundreds of billions of dollars, while the NewYork Federal Reserve has refused to provideinformation about its own bail-out (usinggovernment-backed loans) that amounts totrillions. This lack of transparency has beenchallenged by Fox TV in a FOIA suit against theTreasury Department, and a suit by BloombergNews against the Fed. [3]

The financial bailout legislation of September2008 was only passed after members of bothCongressional houses were warned that failureto act would threaten civil unrest and theimposition of martial law.

U.S. Sen. James Inhofe, R-Okla., and U.S.Rep. Brad Sherman, D-Calif., both saidU.S. Treasury Secretary Henry Paulsonbrought up a worst-case scenario as hepushed for the Wall Street bailout inSeptember. Paulson, former GoldmanSachs CEO, said that might even requirea declaration of martial law, the twonoted. [4]

Here are the original remarks by Senator Inhofe:

Speaking on Tulsa Oklahoma’s 1170KFAQ, when asked who was behindthreats of martial law and civil unrest ifthe bailout bill failed, Senator JamesInhofe named Treasury Secretary HenryPaulson as the source. “Somebody inD.C. was feeding you guys quite a storyprior to the bailout, a story that if wedidn’t do this we were going to seesometh ing on the sca le o f thedepression, there were people talkingabout martial law being instituted, civilunrest….who was feeding you guys thisstuff?,” asked host Pat Campbell. “That’sHenry Paulson,” responded Inhofe, “Wehad a conference call early on, it was on

a Friday I think – a week and half beforethe vote on Oct. 1. So it would havebeen the middle … what was it – the19th of September, we had a conferencecall. In this conference call – and I guessthere’s no reason for me not to repeatwhat he said, but he said – he paintedthis picture you just described. He said,‘This is serious. This is the most seriousthing that we faced.’” [5]

Rep. Brad Sherman (D-CA 27th District)reported the same threat on the Congressionalfloor (Rep. Sherman later downplayed hisremarks slightly on the Alex Jones show):

“The only way they can pass this bill isby creating a panic atmosphere…. Manyof us were told that the sky would fall….A few of us were even told that therewould be martial law in America if wevoted no. That’s what I call fear-mongering, unjustified, proven wrong.”[6]

So it is clear that threats of martial law wereused to get this reprehensible bailout legislationpassed. It also seems clear that Congress wastold of a threat of martial law, not itselfthreatened. It is still entirely appropriate to linksuch talk to the Army’s rapid moves to redefineits role as one of controlling the Americanpeople, not just protecting them. In aconstitutional polity based on balance ofpowers, we see the emergence of a radical newmilitary power that is as yet completelyunbalanced.

The Army’s New Role in 2001: NotProtecting American Society, butControlling It

This new role for the Army is not whollyunprecedented. The U.S. military had beentraining troops and police in "civil disturbanceplanning" for the last three decades. The masterplan, Department of Defense Civil DisturbancePlan 55-2, or "Operation Garden Plot," was

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developed in 1968 in response to the majorprotests and disturbances of the 1960s.

But on January 19, 2001, on the last day of theClinton administration, the U.S. Armypromulgated a new and permanent Continuityof Operations (COOP) Program.

Continuity of Operations Program

It encapsulated its difference from thepreceding, externally-oriented Army Survival,Recovery, and Reconstitution System (ASRRS)as follows:

a. In 1985, the Chief of Staff of the Armyestabl ished the Army Survival ,Recovery, and Reconstitution System(ASRRS) to ensure the continuity ofessential Army missions and functions.

ASRRS doctrine was focused primarilyon a response to the worst case 1980'sthreat of a massive nuclear laydown onCONUS as a result of a confrontationwith the Soviet Union.

b. The end of the Cold War and the

breakup of the former Soviet Unionsignificantly reduced the probability of amajor nuclear attack on CONUS but theprobabi l i ty of other threats hasincreased. Army organizations must beprepared for any contingency with apotential for interruption of normaloperations.

To emphasize that Army continuity ofoperations planning is now focused onthe full all-hazards threat spectrum, thename "ASRRS" has been replaced by themore generic title “Continuity ofOperations (COOP) Program.” [7]

COOP program lampooned: Balancingsecurity and access

This document embodied the secret Continuityof Operations (COG) planning conductedsecretly by Rumsfeld, Cheney, and othersthrough the 1980s and 1990s. [8] This planningwas initially for continuity measures in theevent of a nuclear attack, but soon called forsuspension of the Constitution, not just “after a

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nuclear war” but for any “national securityemergency.” This was defined in Reagan’sExecutive Order 12656 of November 18, 1988as “any occurrence, including natural disaster,military attack, technological emergency, orother emergency, that seriously degrades orseriously threatens the national security of theUnited States.” The effect was to impose ondomestic civil society the extreme measuresonce planned for a response to a nuclear attackfrom abroad. [9] In like fashion ARR 500-3Regulation clarified that it was a plan for “theexecution of mission-essential functions withoutunacceptable interruption during a nationalsecurity or domestic emergency.”

Donald Rumsfeld, who as a private citizen hadhelped author the COG planning, promptlysigned and implemented the revised ARR 500-3.Eight months later, on 9/11, Cheney andRumsfeld implemented COG, a significant eventof which we still know next to nothing. What wedo know is that plans began almost immediately– as foreseen by COG planning the 1980s -- toimplement warrantless surveillance anddetention of large numbers of civilians, and thatin January 2002 the Pentagon submitted aproposal for deploying troops on Americanstreets. [10]

Then in April 2002, Defense officialsimplemented a plan for domestic U.S. militaryoperations by creating a new U.S. NorthernCommand (CINC-NORTHCOM) for thecontinental United States. [11] In short, whatwere being implemented were the mostprominent features of the COG planning whichOliver North had worked on in the 1980s.

Deep Events and Changes of Party in theWhite House

Like so many other significant steps since WorldWar Two towards a military-industrial state, theArmy’s Regulation 500-3 surfaced in the lastdays of a departing administration (in this casethe very last day). It is worth noticing that, eversince the 1950s, dubious events--of the

unpublic variety I have called deep events--havemarked the last months before a change ofparty in the White House. These deep eventshave tended to a) constrain incomingpresidents, if the incomer is a Democrat, oralternatively b) to pave the way for the incomer,if he is a Republican.

Consider, in the first category, the following(when a Republican was succeeded by aDemocrat):

* In December 1960 the CIA secured approvalfor the Bay of Pigs invasion of Cuba, andescalated events in Laos into a crisis for whichthe Joint Chiefs proposed sending 60,000troops. These events profoundly affectedPresident Kennedy’s posture towards Cuba andIndochina.

* In 1976 CIA Director George H.W. Bushinstalled an outside Team B intelligence unit toenlarge drastically estimates of the Sovietthreat to the United States, eventuallyfrustrating and reversing presidential candidateJimmy Carter’s campaign pledge to cut the U.S.defense budget. [12]

Equally important were events in the secondcategory (when a Democrat was succeeded bya Republican):

* In late 1968 Kissinger, while advising theJohnson administration, gave secret informationto the Nixon campaign that helped Nixon toobstruct the peace agreement in Vietnam thatwas about to be negotiated at the peace talksthen taking place in Paris. (According toSeymour Hersh,“The Nixon campaign, alertedby Kissinger to the impending success of thepeace talks, was able to get a series ofmessages to the Thieu government” in Saigon.making it clear that a Nixon presidency wouldoffer a better deal. This was a major factor insecuring the defeat of Democratic candidateHubert Humphrey. [13] Kissinger was not thekind of person to have betrayed his president onhis own personal initiative. At the time Nixon’s

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campaign manager, John Mitchell (one of thevery few in on the secret), told Hersh that “Ithought Henry [Kissinger] was doing it becauseNelson [Rockefeller] wanted him to. Nelsonasked Henry to help and he did.” [14]

* In 1980 the so-called October Surprise, withthe help of people inside CIA, helped ensurethat the Americans held hostage in Iran wouldnot be returned before the inauguration ofReagan. This was a major factor in securing thedefeat of incumbent Jimmy Carter. [15] Onceagain, the influence of the Rockefellers can bediscerned. A CIA officer later reported hearingJoseph V. Reed, an aide to David Rockefeller,comment in 1981 to William Casey, the newlyinstalled CIA Director, about their joint successin disrupting Carter’s plans to bring home thehostages. [16]

Both the financial bailout, extorted fromCongress and the escalated preparations formartial law can be seen as transitional events ofthe first category. Whatever the explanationsfor their timing, they will constrain Obama’sfreedom to make his own policies. I fearmoreover they may have the consequence ofeasing this country into unforeseen escalationsof the Afghan war.

The Intensive Quiet Preparations forMartial Law

Let us deal first with the preparations for martiallaw. On September 30, 2008, the Army Timesannounced the redeployment of an activeBrigade Army Team from Iraq to America, in anew mission that “may become a permanentpart of the active Army”:

The 3rd Infantry Division’s 1st BrigadeCombat Team has spent 35 of the last60 months in Iraq patrolling in full battlerattle, helping restore essential servicesand escorting supply convoys.

Now they’re training for the samemission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1stBCT will be under the day-to-day controlof U.S. Army North, the Army servicecomponent of Northern Command, as anon-call federal response force for naturalor manmade emergencies and disasters,including terrorist attacks. . . . After 1stBCT finishes its dwell-time mission,expectations are that another, as yetunnamed, active-duty brigade will takeover and that the mission will be apermanent one. . . .They may be calledupon to help with civil unrest and crowdcontrol. [17]

This announcement followed by two weeks thetalk of civil unrest and martial law that was usedto panic the Congress into passing Paulson’sbailout legislation. Not only that, the twounprecedented events mirror each other: thebailout debate anticipated civil unrest andmartial law, while the announced positioning ofan active Brigade Combat Team on U.S. soilanticipated civil unrest (such as might resultfrom the bailout legislation).

Then on December 17, 2008, US NorthernCommand chief General Renuart announcedthat “the US military plans to mobil izethousands of troops to protect Washingtonagainst potential terrorist attack during theinauguration of president-elect Barack Obama.”[18]

The US Army War College has also raised thepossibility of the U.S. Army being used tocontrol civil unrest, according to the PhoenixBusiness Journal:

A new report by the U.S. Army WarCollege talks about the possibility ofPentagon resources and troops beingused should the economic crisis lead tocivil unrest, such as protests againstbusinesses and government or runs onbeleaguered banks.

“Widespread civil violence inside the

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United States would force the defenseestablishment to reorient priorities inextremis to defend basic domestic orderand human security,” said the WarCollege report.

The study says economic collapse,terrorism and loss of legal order areamong possible domestic shocks thatmight require military action within theU.S. [19]

It is clear that there has been a sustained movein the direction of martial law preparations, atrend that has been as continuous as it hasbeen unheralded. Senator Leahy was thus rightto draw our attention to it back on September29, 2006, in his objections to the final form ofthe Fiscal Year 2007 National DefenseAuthorization Act, which gave the presidentincreased power to call up the National Guardfor law enforcement:

It . . . should concern us all that theConference agreement includeslanguage tha t subver ts so l id ,longstanding posse comitatus statutesthat limit the military’s involvement inlaw enforcement, thereby making iteasier for the President to declaremartial law. There is good reason for theconstructive friction in existing law whenit comes to martial law declarations.[20]

This quiet agglomeration of military power hasnot “just growed,” l ike Topsy, throughinadvertence. It shows sustained intention, evenif no one has made a public case for it.

How the Bush Administration ProtectedPredatory Lending and Let the FinancialCrisis Grow

Let us now consider the financial crisis and thepanic bailout. No one should think that the crisiswas unforeseen. Back in February Eliot Spitzer,in one of his last acts as governor of New York,

warned about the impending crisis created bypredatory lending, and reveled that the BushAdministration was blocking state efforts to dealwith it. His extraordinary warning, in theWashington Post, is worth quoting at somelength:

Several years ago, state attorneysgeneral and others involved in consumerprotection began to notice a markedincrease in a range of predatory lendingpractices by mortgage lenders. …

Even though predatory lending wasbecoming a national problem, the Bushadministration looked the other way anddid nothing to protect Americanhomeowners. In fact, the governmentchose instead to align itself with thebanks that were victimizing consumers. .. . Several state legislatures, includingNew York's, enacted laws aimed atcurbing such practices. . . .Not only didthe Bush administration do nothing toprotect consumers, it embarked on anaggressive and unprecedentedcampaign to prevent states fromprotecting their residents from the veryprob lems to wh ich the federa lgovernment was turning a blind eye.

Let me explain: The administrationaccomplished this feat through anobscure federal [Treasury] agency calledthe Office of the Comptroller of theCurrency (OCC). The OCC has been inexistence since the Civil War. Its missionis to ensure the fiscal soundness ofnational banks. For 140 years, the OCCexamined the books of national banks tomake sure they were balanced, animportant but uncontroversial function.But a few years ago, for the first time inits history, the OCC was used as a toolagainst consumers.

In 2003, during the height of thepredatory lending crisis, the OCC

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invoked a clause from the 1863 NationalBank Act to issue formal opinionspreempting all state predatory lendinglaws , thereby render ing theminoperative. The OCC also promulgatednew rules that prevented states fromenforcing any of their own consumerprotection laws against national banks.The federal government's actions wereso egregious and so unprecedented thatall 50 state attorneys general, and all 50state banking superintendents, activelyfought the new rules.

But the unanimous opposition of the 50states did not deter, or even slow, theBush administration in its goal ofprotecting the banks. In fact, when myoffice opened an investigation ofpossible discrimination in mortgagelending by a number of banks, the OCCfiled a federal lawsuit to stop theinvestigation. [21]

Eliot Spitzer submitted his Op Ed to theWashington Post on February 13. If it had animpact, it was not the one Spitzer had hopedfor. On March 10 the New York Times broke thestory of Spitzer’s encounter with a prostitute.According to a later Times story, “on Feb. 13[the day Spitzer’s Op Ed went up on theWashington Post website] federal agents stakedout his hotel in Washington.” [22]

Predatory lending exposed by Spitzer

It is remarkable that the Mainstream Mediafound Spitzer’s private life to be big news, butnot his charges that Paulson’s Treasury wasprolonging the financial crisis, or the relation ofthese charges to Spitzer’s exposure. As aweblog commented,

The US news media failed to draw theobvious connection between the bizarrefederal law enforcement investigationand leak campaign about the private lifeof New York Governor Spitzer andSpitzer's all out attack on the Bushadministration for its collusion withpredatory lenders.

While the international credit systemg r i n d s t o a h a l t b e c a u s e o f asuperabundance of bad mortgage loansmade in the US, the news media failedto cover the details of Spitzer's publiccharges against the White House.

Yet when salacious details were leaked

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about alleged details of Spitzer's privatelife, they took that information andmade it the front page news for days.[23]

After Spitzer’s Op Ed was published, accordingto Greg Palast, the Federal Reserve, “for thefirst time in its history, loaned a selected coterieof banks one-fifth of a trillion dollars toguarantee these banks’ mortgage-backed junkbonds. The deluge of public loot was an eye-popping windfall to the very banking predatorswho have brought two million families to thebrink of foreclosure.” [24]

What are we to make of Spitzer’s charge thatthe Bush administration interfered to preemptstate laws against predatory lending, and of thefact that the mainstream media did not reportthat? A petty motive for the OCC’s behavior in2003 might have been to allow the housingbubble to continue through 2003 and 2004, thusfacil itating Bush’s re-election. But thepersistence of Treasury obstruction thereafter,despite the unanimous opposition of all fiftystates, and the continuing silence of the mediaabout this disagreement, suggest that somebroader policy intention may have been atstake.

One is struck by the similarities with theSavings and Loan scandal which was allowed tocontinue through the Reagan 1980s, long afterit became apparent that deliberate bankruptcywas being used by unscrupulous profiteers toamass illegal fortunes at what was ultimatelypublic expense. [25]

In the same way, the long drawn-out housingbubble of the current Bush decade, andparticularly the derivative bubble that wasfloated upon it, allowed the Bush administrationto help offset the trillion-dollar-plus cost of itsIraq misadventure, [26] by creating spurioussecurities that sold for hundreds of billions, notjust in the United States, but through the rest ofthe world.

The $3 trillion war in Iraq

In the long run, this was not a sustainablesource of wealth for America’s financial class,which is now suffering like everyone else fromthe consequent recession. But in the short run,the financial crisis and bailout made it possiblefor Bush to wage a cost ly war withoutexperiencing the kind of debilitating inflationthat was brought on by America’s Vietnam War.

The trillion dollar meltdown, [27] in other words,can be rationalized as having helped finance theIraq War. When we turn to the martial lawpreparations, however, they are being made inanticipation of civil unrest in the future. Whysuch intense preparation for this?

The obvious answer of course is memory of therioting that occurred in San Francisco andelsewhere during the great depression of the1930s. Indeed that thought may be uppermostamong those who recently arranged for theredeployment of a Brigade Combat Team fromIraq to America. But the planning for martial lawin America dates back almost three decades,from the days when Reagan appointedRumsfeld, Cheney and others to plan secretlyfor what was misleadingly called Continuity [i.e.,Change] of Government. Concern about the2008 recession cannot have been on theirminds then, or on those who introduced theArmy’s “Continuity of Operations (COOP)Program” on January 19, 2001. Instead the “fullall-hazards threat spectrum” envisaged in thatdocument was clearly ancillary to the doctrineof “full-spectrum dominance” that had beenarticulated in the Joint Chiefs of Staff blueprint,Joint Vision 2020, endorsed eight months earlieron May 30, 2000. [28]

The interest of Cheney and Rumsfeld in COGplanning, including planning for martial law, alsoenvisaged full spectrum dominance. This ismade clear by their simultaneous engagement

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in the 1990s in the public Project for the NewAmerican Century (PNAC). PNAC’s goals werestated very explicitly in their documentRebuilding America’s Defenses: to increasedefense spending so as to establish America’smilitary presence throughout the world as anunchallengeable power. This would entailpermanent U.S. forces in central as well as eastAsia, even after the disappearance of SaddamHussein. [29]

In short PNAC’s program was a blueprint forpermanent overseas American empire, a projectthey recognized would not be easily acceptedby an American democracy. Their call franklyacknowledged that it would be difficult to gainsupport for their projected increase in defensespending to “a minimum level of 3.5 to 3.8percent of gross domestic product, adding $15billion to $20 billion to total defense spendingannually.” “The process of transformation,” thedocument admitted, “is likely to be a long one,absent some catastrophic and catalyzingevent—like a new Pearl Harbor.” [30]

There is of course every reason to hope that thedisastrous era of Rumsfeld and Cheney is aboutto end, with the election of Barack Obama.Obama has made it clear that he will pursue aforeign policy dedicated to diplomacy andmultilateralism. In this spirit he has declared hiswillingness to talk to Iran without preconditions.

But Obama’s stated reason for disengagementfrom Iraq – “The scale of our deployments inIraq continues to set back our ability to finishthe fight in Afghanistan” [31] – is very ominous.Few serious students of the Afghan scenebelieve that America can “finish the fight inAfghanistan,” any more successfully than couldthe Russians or British before them. The U.S.position there is visibly deteriorating, while theU.S. strategy of cross-border attacks is havingthe effect of destabilizing Pakistan as well. TheU.S.-backed Karzai regime has so little controlover the countryside that Kabul itself is nowcoming under rocket attack. Experts on the

scene agree that any effort to “finish” will be along-term proposition requiring at a minimum avastly escalated commitment of U.S. troops.[32]

One cannot predict the future, but one canexamine the past. For thirty years I have beenwriting about the persistence in America of awar mentality that, time after time, trumpsreasonable policies of negotiation, and leads usfurther into armed conflict. This dominantmindset is not restricted to any single agency orcabal, but is rather the likely outcome of on-going tensions between hawks and doves in theinternal politics of Washington.

If a container of rocks and gravel is shakenvigorously, the probability is that the gravel willgravitate towards the bottom, leaving thelargest rocks at the top. There is an analogousprobability that, in an on-going debate overengaging or withdrawing from a difficult militarycontest, the forces for engagement will comeout on top, regardless of circumstances.Available military power tends to be used, andone of the most remarkable features of historysince 1945 is that this tendency has not so farrepeated itself with atomic weapons.

Let me explain this metaphor in more concretedetail. Progressive societies (in this era usuallydemocracies) tend to expand their presencebeyond their geographic boundaries. Thisexpanded presence calls for new institutions,usually (like the CIA) free from democraticaccountability. This accretion of unaccountablepower, in what I have elsewhere called the deepstate, disrupts the public state’s system ofchecks and balances which is the underpinningof sane, deliberative policy.

We might expect of progressive democraciesthat they would evolve towards more and morerational foreign policies. But because of thedialectic just described, what we see is theexact opposite – evolution towards foolish andsometimes disastrous engagements. WhenBritain became more democratic in the late 19th

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Century, it also initiated the Boer War, a warvery suited to the private imperial needs ofCecil Rhodes, but irrelevant if not deleterious tothe interests of the British people. [33] Hitler’sdreams of a Third Reich, entailing a doomedrepeat of Napoleon’s venture into the heart ofRussia, suited the needs of the Germanindustrialists who had financed the Nazis; butfrom the outset sane heads of the Germanmilitary staff could foresee the coming disaster.

For over a half century now, beginning withVietnam, unaccountable forces have beenmaneuvering America into unsustainableadventures on the Asian mainland. We nowknow that Kennedy did not intend ever tocommit U.S. combat troops to Vietnam. [34] Butthe fatal planning to expand the Vietnam Warnorth of the 17th parallel was authorized in thelast week of his aborted presidency, probablywithout his being aware. [35] When elected,Jimmy Carter was determined to reduce the sizeand frequency of CIA covert operations. [36] Yethis national security advisor, ZbigniewBrzezinski, initiated maneuvers in Afghanistanthat led to the largest CIA covert operation (andin my view, one of the most deleterious) of alltime. [37]

Our archival historians have not yet fullyunderstood either paradox, or the forces behindthem. And as the philosopher George Santayanafamously observed, "Those who cannotremember the past are condemned to repeatit." [38]

The Future: Military Escalation Abroad andat Home?

Like both Kennedy and Carter, Barack Obama isa complex mix of hopeful and depressingqualities. Among the latter are his unqualifieddesire to “finish” (i.e., “win”) the war inAfghanistan, and his support, along with hisparty’s, for the final version of the Paulsonbailout. In my view they go together.

Like the government negotiated resolution of

the savings-and-loan-scandal of the 1980s, thefinancial bailout undisguisedly taxed the publicwealth of the republic to protect and evenenrich those who for some time had beenundeservedly enriching themselves. Old-lineleftists might see nothing unusual about this: itconforms to their analysis of how the capitaliststate has always worked.

But it is only characteristic of the Americanstate since the Reagan revolution of the 1980s.Before that time governmental policies weremore likely to be directed towards helping thepoor; afterwards the ideology of free-marketliberalism, even under Clinton, was invoked innumerous ways for the enriching of the rich.

The result of these government policies hasbeen summarized by Prof. Edward Wolff:

We have had a fairly sharp increase inwealth inequality dating back to 1975 or1976. Pr ior to that, there was aprotracted per iod when wealthinequality fell in this country, going backalmost to 1929. So you have this fairlycontinuous downward trend from 1929,which of course was the peak of thestock market before it crashed, until justabout the mid-1970s. Since then, thingshave really turned around, and the levelof wealth inequality today is almostdouble what it was in the mid-1970s…..

Up until the early 1970s, the U.S.actually had lower wealth inequalitythan Great Britain, and even than acountry like Sweden. But things havereally turned around over the last 25 or30 years. In fact, a lot of countries haveexperienced lessening wealth inequalityover time. The U.S. is atypical in thatinequality has risen so sharply over thelast 25 or 30 years. [39]

Past excesses of American wealth, as in theGilded Age and the 1920s, have been followedby political reforms, such as the income tax, to

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reduce wealth and income disparity. But asKevin Phillips has warned, this type of reformmust happen again soon, or it may not happenat all:

As the twenty-first century getsunderway, the imbalance of wealth anddemocracy in the United States isunsustainable. . . . Either democracymust be renewed, with politics broughtback to life, or wealth is likely to cementa n e w a n d l e s s d e m o c r a t i cregime—plutocracy by some othername. [40]

Judged by this criterion, the Paulson bailout aspassed was not just an opportunity missed; itwas a radical leap in the wrong direction. It isnot reassuring that the bailout was passed withthe support of Obama and the DemocraticParty. This is rather a sign that plutocracy willnot be seriously challenged by either party intheir present state.

Warren Buffett may have been correct in sayingthat the bailout was necessary. But it is not hardto th ink o f re forms that should haveaccompanied it:

1) there should have been transparency, notsecrecy

2) public funds should not have been madeavailable for bonuses or dividends (The richest10 percent of Americans own 85 percent of allstock). [41]

And as a bailout for the automobile industry isdebated, two more reforms seem self-evident:

3) any reduction in income should not affectworkers alone, but all levels of employeesequally

4) as has often been suggested, a limit shouldbe established by law to the maximum ratio ofthe highest remuneration to the lowest in anyindustry – perhaps a ratio of twenty to one.

I am not making these obvious suggestions withany expectation that they will be passed orseriously debated. The plutocratic corruption ofboth our parties makes such a prospect almostunthinkable.

What I do want to contemplate is the seriousprospect of war. America escaped from thedepression of the 1890s with the Spanish-American War. [42] It only escaped the GreatDepression of the 1930s with the Second WorldWar. There was even a recession in the late1940s from which America only escaped withthe Korean War. As we face the risk of majordepression again, I believe we inevitably facethe danger of major war again.

In the meantime, some aspects of the financialmeltdown, although they arose for manyreasons and were not the result of someconspiratorial cabal, may be prolonged becauseof their utility to the war-minded. Consider that,from the perspective of maintaining America’simperial thrust into Afghanistan (and evenPakistan), the financial crisis has had somedesired consequences:

1) The dollar’s value against other internationalcurrencies, notably the euro, has improved,thus improving America’s balance of paymentsand also offsetting the threat to the dollar’simportant ro le as the pr imary unit ofinternational trade.

2) Thanks to the determined internationalmarketing of overvalued derivatives based onpredatory lending, the resulting financial crisishas been internationalized, with economieselsewhere suffering even greater shocks thanthe United States. This has relatively improvedAmerica’s capacity to finance a major war effortoverseas (which has always had a major impacton the U.S. balance of payments).

3) The price of oil has plummeted from $147 abarrel last July to under $40, thus weakeningthe economies of Russia, China, and especiallySaudi Arabia, the country whose international

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foundations have been supporting Al Qaeda.

The Afghan situation is grim, but it is nothopeless. Two skilled observers, Barnett R.Rubin and Ahmed Rashid, have proposed apolitical solution for the entire region that wouldpromise greater security for the entire areathan Obama’s ill-considered proposal to send20,000 more U.S. troops. [43] In Rashid’s words,

President-elect Obama and Westernleaders have to adopt a comprehensiveapproach that sees the region [withAfghanistan's neighbors, includingPakistan, India, Russia, China, Iran, andthe former Soviet states] as a unit withinterlocking development issues to beresolved such as poverty, illiteracy andweak governance. There has to be amore comprehensive but more subtleapproach to democratising the regionand forcing powerful but negativestakeholders in local power structures -such as the drug mafias - either tochange their thinking or be eliminated.[44]

That observers with such recognized status areoffering a sensible political solution does notprovide me with much optimism. For threedecades now Barnett Rubin has been offeringsound advice on Iran and Afghanistan toWashington, only to be ignored by thoselobbying for covert operations and militarysolutions. This dialectic is reminiscent of theVietnam War, where for over a decadereasonable proposals to demilitarize the conflictwere similarly ignored.

I repeat that the future is unpredictable. But Ifear that Obama’s proposal to send 20,000additional troops will carry the day, with itspredictable consequences of a wider war in bothAfghanistan and Pakistan. [45] With this I alsofear an increased use of the U.S. Army tocontrol protests by the American people.

I earnestly hope that my fears are misplaced.

Time will tell.

Peter Dale Scott, a former Canadian diplomatand English Professor at the University ofCalifornia, Berkeley, is the author of Drugs Oiland War ,The Road to 9 /11 , The WarConspiracy: JFK, 9/11, and the Deep Politics ofWar. His American War Machine: Deep Politics,the CIA Global Drug Connection and the Roadto Afghanistan is in press from Rowman &Littlefield.

His website, which contains a wealth of hiswritings, is here.

He wrote this article for The Asia-PacificJournal: Japan Focus. Posted on January 10,2009.

Recommended Citation: Peter Dale Scott,“Martial Law, the Financial Bailout, and theAfghan and Iraq Wars” The Asia-PacificJournal, Vol. 2-4-09, January 10, 2009.

Notes:

[1] WCAX, Bur l ington, Vermont -December 22, 2008, Cf. CNBC, October30, 2008: “`You can get paid $30 millionunder this program,’ says Michael Kesner,who heads Deloitte Consulting's executivecompensation practice. `There's no limiton what you can get paid.’”

[2] John Dunbar, AP, October 25, 2007.

[3] David Hirst, “Fox joins battle cry fordetails of US bail-out,” BusinessDay,December 24, 2008,

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[ 5 ]http://www.blacklistednews.com/news-2367-0-13-13--.html.

[6] Rep. Brad Sherman, in the House, 8:07 ESTPM, October 2, 2008. Rep. Sherman laterissued the following clarification: “I haveno reason to think that any of the leadersin Congress who were involved innegotiating with the Bush Administrationregarding the bailout bill ever mentionedthe possibility of martial law -- again, thatwas just an example of extreme anddeliberately hyperbolic comments beingpassed around by members not directlyinvolved in the negotiations.” Cf. Rep.Sherman on Alex Jones show.

[7] Army Regulation 500-3, EmergencyEmployment o f Army And OtherResources, Army Continuity Of Operations(COOP) Program, emphasis added. Cf.Tom Burghardt, “Mi l i tar iz ing the`Homeland’ in Response to the Economicand Political Crisis: NORTHCOM's JointT a s k F o r c e - C i v i l S u p p o r t , ”GlobalResearch, October 11, 2008.

[8] Peter Dale Scott, The Road to 9/11:Wealth, Empire, and the Future ofAmerica (Berkeley and Los Angeles:University of California Press, 2007),183-87; cf. James Mann, The Rise of theVulcans: The History of Bush’s WarCabinet (New York: Viking, 2004), 138-45.

[9] Scott, The Road to 9/11, 183-87.

[10] Ritt Goldstein , “Foundations are inplace for martial law in the US,” SydneyMorning Herald, July 27 2002.

[11] Peter Dale Scott, The Road to 9/11,

240-41.

[12] Scott, The Road to 9/11, 60-61.

[13] Robert Parry, “Henry Kissinger, EminenceNoire,” ConsortiumNews, December 28, 2008:“Kissinger, … – while serving as a peace-talkadviser to the Johnson administration – madeobstruction of the peace talks possible bysecretly contacting people working for Nixon,according to Seymour Hersh’s 1983 book, ThePrice of Power [p. 21].

[14] Hersh, Price of Power, 18. Cf. JimHougan, Spooks: The Haunting of America(New York: William Morrow, 1978), 435:“K iss inger , marr ied to a formerRockefeller aide, owner of a Georgetownmansion whose purchase was enabledonly by Rockefeller gifts and loans, wasalways the protégé of his patron, NelsonR[ockefeller], even when he wasn’tdirectly employed by him.”

[15] Scott, The Road to 9/11, 93-118.

[16] Scott, The Road to 9/11, 82-87, 91,104-05.

[17] “Brigade homeland tours start Oct.1,” Army Times, September 30, 2008. Cf.Michel Chossudovsky, “Pre-electionMilitarization of the North AmericanHomeland, US Combat Troops in Iraqrepa t r i a ted t o `he lp w i th c i v i lunrest,’"GlobalResearch, September 26,2008.

[18] Agence France-Presse, December 17,2008.

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[20] Remarks Of Sen. Patrick Leahy,National Defense Authorization Act ForFiscal Year 2007 Conference Report,Congressional Record, September 29,2006.

[21] Eliot Spitzer, “Predatory Lenders'Par tner in Cr ime: How the BushAdministration Stopped the States FromStepping In to Help Consumers,”Washington Post, February 14, 2008; A25.Three months earlier, on November 8,2007, Governor Spitzer and New YorkAttorney General Andrew Cuomo hadpublished a joint letter to Congress,“calling for continued federal action tocombat subprime lending practices."

[22] David Johnston and Philip Shenon,“U.S. Defends Tough Tactics on Spitzer,”New York Times, March 21, 2008.

[23] “Why Eliot Spitzer was assassinated:The predatory lending industry had apartner in the White House,” BrasscheckTV, March 2008.

[24] Greg Palast, “Eliot’s Mess: The $200billion bail-out for predator banks andSpitzer charges are intimately linked,” AirAmerica Radio’s Clout, March 14, 2008.

[25] Without suggesting that the scandalwas in any way centrally orchestrated ordirected, it can be argued that thescandal was permitted to drag on so longbecause it was allowing profits from theillegal drug traffic to recapitalize theAmerican economy and strengthen thebeleaguered U.S. dollar.

[26] Joseph E. Stiglitz and Linda J. Bilmes,The Three Trillion Dollar War: The True

Cost of the Iraq Conflict (New York: W.W.Norton, 2008). Cf. Joseph Stiglitz andLinda Bilmes, “The three trillion dollarwar,” The Times (London), February 23,2008: “On the eve of war, there werediscussions of the likely costs. LarryLindsey, President Bush's economicadviser and head of the NationalEconomic Council, suggested that theymight reach $200 bil l ion. But thisestimate was dismissed as “baloney” bythe Defence Secretary, Donald Rumsfeld.His deputy, Paul Wolfowitz, suggestedthat postwar reconstruction could pay foritself through increased oil revenues.Mitch Daniels, the Office of Managementand Budget director, and SecretaryRumsfeld estimated the costs in the rangeof $50 to $60 billion, a portion of whichthey believed would be financed by othercountries. (Adjusting for inflation, in 2007dollars, they were projecting costs ofbetween $57 and $69 billion.) The tone ofthe entire administration was cavalier, asif the sums involved were minimal.”

[27] Charles R. Morris, The Trillion DollarMeltdown: Easy Money, High Rollers, andthe Great Credit Crash (New York:PublicAffairs, 2008).

[28] Joint Vision 2020; Scott, The Road to9/11, 20, 24. “Full spectrum dominance”repeated what had been outlined earlierin a predecessor document, Joint Vision2010 of 2005, but with new emphasis onthe statement that “the United Statesmust maintain its overseas presenceforces” (Joint Vision 2020, 6). Cf. JointVision 2010, 4: “We will remain largely aforce that is based in the continentalUnited States.”

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[29] Project for the New AmericanCentury, Rebuilding America’s Defenses;Scott, The Road to 9/11, 23-24, 191-93.

[30] Rebuilding America’s Defenses, 51,75.

[31] “War in Iraq,” BarackObama.com.

[32] See e .g . Andrew Bacev ich ,Newsweek, December 8, 2008: “InAfghanistan today, the United States andits allies are using the wrong means topursue the wrong mission. Sending moretroops to the region, as incomingpresident Barack Obama and others havesuggested we should, will only turnOperation Enduring Freedom intoOperat ion Endur ing Obl igat ion.Afghanistan will be a sinkhole, consumingresources neither the U.S. military nor theU.S. government can afford to waste.” Cf.PBS, Frontline, “The War Briefing,”October 28, 2008.

[33] For the role of the Rhodes-promotedJameson Raid in instigating the Boer War,see Elizabeth Longford, Jameson’s Raid:The Prelude to the Boer War (London:Weidenfeld and Nicolson, 1982).

[34] Gordon M. Goldstein, Lessons inDisaster: McGeorge Bundy and the Pathto War in Vietnam (New York: TimesBooks/Henry Holt, 2008).

[35] John Newman, JFK and Vietnam:Deception, Intrigue, and the Struggle for Power(New York: Warner Books, 1992), 375-77,434-35, 447; Peter Dale Scott, The WarConspiracy: JFK, 9/11, and the Deep Politics ofWar (Ipswich, MA: Mary Ferrell FoundationPress, 2008), 25-26, 28.

[36] Ofira Seliktar, Failing the Crystal BallTest: The Carter Administration and theFundamentalist Revolution in Iran(Westport, CN: Praeger, 2000), 52.

[37] Brzezinski later boasted that his“secret operation was an excellent idea. Itdrew the Russians into the Afghan trap”(“Les Révélations d’un ancien conseillerde Carter,” interview with ZbigniewBrzezinski, Le Nouvel Observateur,January 15–21, 1998; French version;quoted at length in Peter Dale Scott,Drugs, Oil, and War: The United States inAfghanistan, Colombia, and Indochina(Lanham, MD: Rowman & Littlefield,2003), 35). For my negative assessmentof what some have described as the CIA’smost successful covert operation, see TheRoad to 9/11, 114-37.

[38] George Santayana, Life of Reason,Reason in Common Sense (New York:Scribner's, 1905), 284.

[39] Edward Wolff, “The Wealth Divide:The Growing Gap in the United StatesBetween the Rich and the Rest ,”Multinational Monitor, May 2003. Cf.Edward Wolff, Top Heavy: The IncreasingInequality of Wealth in America and WhatCan Be Done About It (New York: NewPress, 2002).

[40] Kevin Phillips, Wealth and Democracy: APolitical History of the American Rich (New York:Broadway Books, 2002), 422; quoted in Scott,The Road to 9/11, 3.

[41] Wolff, “The Wealth Divide.”

[42] For McKinley’s mercantilist “largepolicy” as a response to depression, see

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Philip Sheldon Foner, The Spanish-Cuban-American War and the Birth of AmericanImperialism, 1895-1902 (New York:Monthly Review Press, 1972).

[43] Barnett R. Rubin and Ahmed Rashid,“From Great Game to Grand Bargain:Ending Chaos in Afghanistan andPakistan,” Foreign Affairs,November/December 2008.

[44] Ahmed Rashid, “Obama's huge SouthAsia headache,” BBC, January 2, 2009.

[45] Cf. Zia Sarhadi, “America's "good war"turns into quicksand,” MediaMonitors, January 5,

2009: “Obama’s announcement to send 20,000addit ional troops to the `good war’ inAfghanistan has been greeted by the Talibanwith glee. They regard it as an opportunity toattack a `bigger army, bigger target and moreshiny new weapons to take from the toysoldiers.’ American generals have talked interms of 40,000 to 100,000 additional troops,levels that are simply not available. America’skilling of hundreds of Afghan civilians inindiscriminate aerial attacks has been the mosteffective recruiting tool for the Taliban. Eventhose Afghans not keen on seeing the Talibanback in power are appalled by the level ofbrutality inflicted on civilians.”

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