THE US GLOBAL EMPIRE OF CHAOS PAGE 4

OCTOBER 2006

North

and

South

BY IGNACIO RAMONET

AN ECONOMY OF BUCCANEERS AND FANTASISTS

Weapons of mass fi nancial destruction

DISSENSION in the Korean peninsula increased sharply, despite repeated

warnings from Washington and Tokyo, after North Korea test-fired

seven missiles on 5 July. All seven came down in the Sea of Japan although one, the

Taepodong 2, is theoretically capable of reaching United States territory. The tests

were not in breach of international law but were reprehensible because they threaten

security in northeast Asia, potentially one of the most dangerous regions in the world. The

anxiety level was ratcheted up further this month with Pyongyang’s announcement that

it planned to test a nuclear weapon. Pyongyang undertook to abandon its

nuclear weapons programme in September 2005, and the decision, adopted during six

party talks involving China, Japan, North Korea, Russia, South Korea and the US, raised

great hopes, especially in South Korea. After the restoration of democracy in the

1990s Seoul began to improve relations with its northern neighbour. The South Korean

president in offi ce at the time, Kim Dae-jung, visited Pyongyang and signed a joint state

ment with his North Korean counterpart, Kim Jong-il, on 15 June 2000, a turning point in

inter-Korean relations. The authorities in the South rely on dia

logue and exchanges, particularly in the economic sphere, and on the development of

common interests to reduce the diff erences between the countries, prevent confl ict and

prepare for eventual reunifi cation. Business exchanges now account for $1bn and South

Korea is Pyongyang’s second most important trading partner after China.

A special economic zone has been created at Kaesong, north of the 38th parallel, and some

8,000 North Koreans work in South Korean companies established there. Despite persist

ent obstacles, both parties are also working on proposals to restore the rail link between

Seoul and Pyongyang as well as other communications with South Korea.

After the 19 September 2005 agreement the situation suddenly deteriorated when the US

Treasury adopted fi nancial measures against Pyongyang on the pretext that the Banco Delta

Asia in Macao had laundered money for North Korea, an allegation that has never been sub

stantiated by any subsequent international investigation. The bank, afraid of what Wash

ington might do, froze North Korean assets, valued at $24m, this February. Pyongyang

responded by slamming the door on the six-party talks, reasserting its right to have

nuclear bombs, and proceeding with the testfi ring that was condemned by the UN Security

Council, including China. According to North Korea, the US govern

ment is not seeking a diplomatic solution and

GALERIE LO UIS CARRÉ & CIE

MARK BRUSSE: Water Spirit (1998)

is pursuing only one objective, that of regime change. Some authorities in South Korea

share this view. Kim Dae-jung, architect of the reconcili

ation with North Korea and winner of the Nobel peace prize in 2000, told us from his

home in Seoul on 14 September that he disapproved of the test-fi rings but did not think Washington was doing anything to calm the situation. The neo-conservatives in America

do not want peace in this region. They are driven by dogma. They are not defending US

interests, as President Clinton did; he supported attempts to establish peaceful dia

logue, but the neo-conservatives are obsessed with sanctions, even though sanctions never

worked against Cuba, Iraq, Afghanistan or Iran. Now they are urging Tokyo to impose

sanctions too (1). This fuels regional disagreements and provides rightwing elements in

Japan with an excuse to call for Japanese rearmament, which increases China’s distrust.

Kim Dae-jung says it is a dangerous spiral. The present South Korean president, Roh Moo-hyun, takes much the same view. He usually has to humour his powerful US ally (2),

but he stood fi rm in discussions with President George Bush at the Washington summit

on 15 September on the three points at issue between the countries.

He reiterated his determination to assume military command of 30,000 US troops sta

tioned in Korea in the event of war; he insisted on having more time to negotiate the highly

unpopular plans for a free trade agreement with the US; and he refused to impose further

sanctions on North Korea. On that point, Seoul is determined not to

bow to pressure from Washington, but to retain the right to take its own decisions. As

Kim Dae-jung says, the South Koreans do not want reunifi cation by force, as in Vietnam, or

destructive reunifi cation, as in Germany. They want to be left alone to move at their own

pace, slowly and peacefully, towards a happy solution.

TRANSLATED BY BARBARA WILSON

(1) Tokyo adopted new fi nancial sanctions against

Pyongyang on 19 September 2006. They block all currency transfers to North Korea by the 300,000 – strong North Korean community in Japan.

(2) Among other things, Seoul wants Washington to support

the South Korean foreign minister, Ban Ki-moon, in his bid

for election to the post of UN secretary general, which falls vacant at the end of the year.

Last month a major US hedge fund, Amaranth Advisors, lost more than half its assets in a week, speculating on natural gas prices. The company proved correct the chief worry of such major fi nancial institutions as the World Bank and the International Monetary Fund: that fi nancial reality is now out of control.

BY GABRIEL KOLKO

GLOBAL financial structure is far less transparent now than it has

ever been. A few decades ago daily payments for foreign exchange

transactions were roughly equivalent to the capital stock of a major United States bank;

today they exceed the combined capital of the top 100 US banks. Financial adventurers

constantly create new products that defy nation states and international banks. This May the International Monetary Fund’s (IMF) managing director, Rodrigo de Rato,

deplored these new risks, which the weakness of the US dollar and the US’s mounting trade

deficits have greatly magnified. His fears refl ect the fact that the IMF has

been in both structural and intellectual crisis. Structurally, its outstanding credit and loans

have declined sharply since 2003, from over $70bn to a little over $20bn, leaving it with

far less leverage over the economic policies of developing nations, and a smaller income

than its expensive operations require. The IMF admits it has been “quantitatively mar

ginalised” (1). Many of its problems are due to the doubling since 2003 of world prices for

all the commodities (oil, copper, silver, zinc, nickel, etc) which are traditionally exported

by developing nations. So developing nations have been able to bring forward repayment of

their debts, further reducing IMF resources.

Higher prices for raw materials are likely to continue because rapid economic growth

in China, India and elsewhere has created burgeoning demand that did not exist

before, when the balance of trade systematically favoured rich nations. The US has seen

its net foreign asset position fall, whereas Japan, emerging Asia and oil-exporting

nations have become far more powerful over the past decade and have become creditors to

the US. As US defi cits mount, with imports far greater than exports, the value of the dollar

has declined, falling by 28% against the euro between 2001 and 2005.

The IMF and World Bank were also severely chastened by the 1997-2000 fi nancial melt

downs in East Asia, Russia and elsewhere. Many of their leaders lost faith in the anarchic

premises, inherited from classical laissez-faire economic thought, which had guided their

policy advice until then. Intellectually both institutions are now far more defensive and

concede that the premises that led to their creation in 1944 are hardly relevant to the way

the real world now operates. Our “knowledge of economic growth is extremely incomplete,”

many in the IMF now admit, and it now needs “more humility”. The IMF concedes that the

international economy has been transformed

Continued on page 2

INSIDE THIS ISSUE

US: losing both the battles and the

global asymmetric war page 4

US: what happens when the right

falls out of love with war? page 6

Serbia: the Balkans wait and wait

for admission to the EU page 7

Yemen: buffeted buffer state

between East and West page 8

Pakistan: Baluchistan revives its

armed claim for autonomy page 10

Cambodia: Khmer Rouge trials

begin in Phnom Penh page 11

China: two minds, two systems,

a third way of business page 12

Russia: revival in movies draws on

grand old Soviet cinema page 14

The walls that were built to keep

us in and them out page 14

Iran: tents, chadors, hijabs and

contemporary dance page 16