Reviewing James Petras' "Rulers and Ruled in the US Empire"

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 headings.

 

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 hugely.

 

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 out.

 

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 because:

 

-- 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 apocalypse;

 

-- 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 underestimated;

 

-- 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 services;

 

-- 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 China.

 

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 below.

 

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 Afghanistan."

 

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 Co