by Jason Hickel
Brazil, too, was hit with a coup supported by the United States. After assuming the presidency in 1961, João Goulart – a former football player and national hero – began to roll out his signature Basic Reforms plan. He aimed to extend voting rights to illiterate people, deliver adult education to the poor, tax any profits that multinational companies attempted to transfer abroad and redistribute non-productive landholdings larger than 600 hectares. These reforms were a gift to Brazil’s poor, but the elite were not pleased. Nor were US multinational companies. In 1962, the Brazilian government nationalised the country’s failing telephone provider, a subsidiary of the American-owned ITT Corporation. ITT’s CEO, Harold Geneen, happened to be friends with the director of the CIA at the time and lodged a complaint – not so much because he cared about the subsidiary, but because he worried that ITT’s interests elsewhere in Latin America might eventually be affected by governments mimicking Goulart’s policies. President Kennedy demurred. But shortly after Lyndon Johnson took office, the CIA took action, with the help of Britain. In 1964, in an operation called Brother Sam, the US assisted a military coup that deposed Goulart and installed a junta that would rule for twenty-one years. The new regime was overtly friendly to Western corporate interests and deregulated foreign investment. This rapid market liberalisation reversed the gains against poverty that Goulart had won and restored the profit levels of American and European companies. In response to growing citizen discontent, the junta suspended democratic freedoms and openly tortured and assassinated political dissidents.
We could rehearse many more examples of Western-backed interventions in Latin America. In 1953, Britain overthrew the world’s first democratically elected Marxist president in Guyana. In 1961, the US attempted to overthrow the revolutionary government in Cuba, with the failed Bay of Pigs invasion. In 1965, President Johnson ordered the invasion of the Dominican Republic in order to quash a popular rebellion against the military junta. Similarly, in El Salvador the US armed and supported a violent military government through the 1980s against a popular revolution, tacitly approving its use of death squads, torture and mass displacement of civilians. In Nicaragua, the US provided illegal financial and military support to a right-wing insurgency known as the Contras throughout the 1980s, in the hope of overthrowing the democratically elected government of Daniel Ortega, a politician known for his commitment to developmentalism and social democracy. The US also supported right-wing dictatorships at various times in Bolivia, Ecuador, Haiti, Paraguay, Honduras, Venezuela and Panama. The tactical support for many of these operations came from the School of the Americas. Located on a US military base in Georgia, it has long been crucial to training the assassins and dictators dispatched across Latin America to serve US interests in the region, and is still operating today as the Western Hemisphere Institute for Security Cooperation.
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Latin America was not the only region where the US sought to quell developmentalism. A year after the US-backed coup in Brazil, similar – but even more devastating – events unfolded in Indonesia. After gaining independence from Dutch rule, the leader of Indonesia’s nationalist struggle, Sukarno, son of a primary-school teacher, assumed the presidency and rolled out classic developmentalist policies. He protected the economy from cheap foreign imports, redistributed wealth to the poor and evicted the IMF and the World Bank. Western powers resented Sukarno for these policies, and for the key role he played in mobilising the Non-Aligned Movement. So when he began to nationalise American and European assets, such as oil and rubber facilities, they took the opportunity to intervene.
When the CIA made it clear that they would back a coup, General Suharto – who was upset with President Sukarno for supporting policies that undermined the military’s power – offered to lead it. In 1965, with the aid of weapons and intelligence from the United States, Suharto hunted down and killed between 500,000 and 1 million of Sukarno’s supporters in one of the worst mass murders of the 20th century. By 1967, Sukarno’s base had been either eliminated or intimidated into submission, and Suharto took control of the country. His military regime – which ruled until 1998 – was open to Western corporate interests. Time magazine famously described the political transformation of the 1960s as ‘The West’s best news for years in Asia’. Suharto’s regime relied for its economic policies on a group of Indonesian economists who had been trained at the University of California, Berkeley, with funding from the Ford Foundation. Known as the Berkeley Mafia, they worked closely with Suharto to liberalise the economy and eliminate the last vestiges of developmentalism in the country.
In Africa, Ghana was the country to watch. In 1957, Ghana became one of the first countries in Africa to win independence, and the liberation leader Kwame Nkrumah became its first elected president. The continent’s leading developmentalist thinker, Nkrumah built up Ghana’s manufacturing capacity and significantly reduced the country’s dependence on European imports; he nationalised the mines and regulated foreign corporations; he rolled out free healthcare and education; and he put people to work building infrastructure in rural areas. Nkrumah also became a leading voice for the liberation of the rest of Africa, and articulated a Pan-Africanist vision for uniting the continent in economic and political cooperation, abolishing once and for all the artificial divisions that colonial powers had inscribed and manipulated for their own benefit. But his vision was not limited to Africa. Like Sukarno, he was a founding member of the Non-Aligned Movement and – having watched the Western-backed coups unfold in the 1950s and early 1960s – became a fierce critic of continuing Western intervention in global South affairs. His iconic 1965 book, Neo-Colonialism: The Last Stage of Imperialism, put this critique into powerful prose and gave voice to the frustrations of people across the South.
All of this made Nkrumah an immediate target. Britain and the United States began plotting his removal as early as 1961. And in 1966 it happened: while Nkrumah was out of the country on a state visit, a CIA-backed coup toppled his government and installed a military junta to rule in its place. The junta brought the IMF and the World Bank in to manage the economy, privatised the country’s assets, cut down barriers to foreign corporations and forced Ghana back into its previous role as exporter of raw materials. Nkrumah, for his part, lived the rest of his life in exile in Conakry, Guinea. He never returned home.
A number of other African countries experimented with the developmentalist revolution – mostly north of the Sahara – but many never got the opportunity, Western intervention was so swift. Patrice Lumumba, the young Pan-Africanist who was elected the Congo’s first post-independence leader in 1960, was in office for only two months before being assassinated in a violent a coup orchestrated by Belgium and the US, on the direct orders of President Eisenhower. The US feared Lumumba would loosen their grip on the Congo’s vast mineral resources, including the uranium they relied on for their nuclear programme and the cobalt they needed for their jet engines. Lumumba was shot, chopped to pieces and burned to ashes in a barrel. In his place, Western governments installed the military officer Mobutu Sese Seko, one of the world’s most notorious dictators, who went on to command the country for nearly forty years with the support of aid from the US, France and Belgium, most of which he siphoned into his own offshore accounts. During Mobutu’s long reign, per capita income in the Congo, which he renamed Zaire, declined at an average of 2.2 per cent each year – an extraordinary collapse. The Congolese experienced poverty on a scale even worse than they had known under Belgian colonial rule.
In Uganda, the independence leader Milton Obote became the nation’s first elected prime minister in 1962. He was not the most savoury of characters, to be sure: as his tenure in office wore on he became increasingly paranoid, violent and authoritarian. But in the end he did begin to take decisive steps towards developmentalist policy. In 1969, the parliament authorised his ‘Common Man’s Charter’, which stated: ‘We hereby commit ourselves to create in Uganda conditions of full security, justice, equality
, liberty, and welfare for all sons and daughters of the Republic. We reject exploitation of material and human resources for the benefit of a few [and resolve to] fight relentlessly against poverty, ignorance, disease, colonialism, neocolonialism, and apartheid. We must move in accordance with the principles of democracy; political power must be vested in the majority of the people and not the minority.’ Britain, Uganda’s former coloniser, was not pleased by this shift to the left, particularly when Obote’s government moved to partially nationalise some of the country’s major private corporations, including a number of well-known British banks. Britain intervened – with Israeli support – to topple the Obote government in 1971, and paved the way for their preferred replacement: Idi Amin, a former officer of the British Colonial Army. Amin suspended the constitution, announced military rule, forcibly expelled the Asian population and, according to evidence compiled by Amnesty International, proceeded to murder more than 500,000 of his detractors.
Portugal continued to cling to its African colonies until as late as 1975, well after the rest of the global South won its independence. They assisted in the assassination of Amílcar Cabral, the liberation leader of Guinea-Bissau and Cape Verde, depriving Africa of one of its best-known intellectuals. In Angola, they waged a long war against independence leader Agostinho Neto, an accomplished poet and devoted social reformer. When Neto sought assistance from the US for his struggle against Portuguese colonial rule, the US refused, as they were more interested in retaining their access to Angolan oil under the colonial government. When Angola finally won its independence and Neto became president, the US feared that Neto, a developmentalist, would nationalise the oil reserves, so they threw substantial support behind his opponent, the brutal rebel leader Jonas Savimbi, fuelling a civil war that would last until 2002 and leave Angola in ruins.
And then there was South Africa. Both the United States and Britain actively supported the apartheid regime all the way through the 1980s, for they feared that if Nelson Mandela and the African National Congress ever came to power they would nationalise the country’s enormous deposits of gold, diamonds and platinum, which American and British companies controlled.
But no Western power intervened in postcolonial Africa as much as France. After Francophone Africa won formal independence in 1960, France worried it would lose control over the region’s resources to the nationalist movements. François Mitterrand, minister of the interior at the time, famously confessed in a rare moment of honesty that ‘Without Africa, France will have no history in the 21st century.’ To prevent this outcome, President Charles de Gaulle and his successors intervened covertly to install puppet leaders – ridiculed in France as ‘black governors’ – in newly independent African nations. Known as Françafrique, this agenda was spearheaded by a secret cell headed by Jacques Foccart, chief adviser on African affairs, and funded by Elf Aquitaine, the French state-owned oil company (now Total). They rigged Cameroon’s first elections and hand-picked the president, Ahmadou Ahidjo, after poisoning his main opponent. France kept Ahidjo in power for twenty-two years in return for backing French interests. They also picked Gabon’s first president, Léon M’ba, and when he died installed the dictatorship of Omar Bongo, whom they supported for forty-two years in exchange for direct access to the country’s oil, which has long been a major source of French wealth. In Côte d’Ivoire, France kept their man Félix Houphouët-Boigny in power from 1960 to 1993.
Many other African states have been wrapped up in the scandal of Françafrique, including Nigeria, Guinea, Niger, Congo Brazzaville, the Central African Republic and, most importantly, Burkina Faso, one of the few African countries that did successfully implement a developmentalist programme. The full scale of this vast network of political corruption and coups did not become clear until 1994, when French magistrate Eva Joly exposed it during her landmark investigation of Elf Aquitaine – what the Guardian called ‘the biggest fraud inquiry in Europe since the Second World War’. But this did not stop France from continuing to intervene in African affairs. As recently as 2009, France is said by some to have supported rigged elections in Gabon to ensure that Bongo’s son came to power after his father’s death, guaranteeing France’s continued access to the country’s resources.
This legacy complicates some commonly held assumptions about African politics. In the Western imagination, Africa is stereotyped as a continent plagued by corrupt dictators, with the supposition being that Africans are perhaps too ‘primitive’ to appreciate the virtues of Western-style democracy. But the truth is that ever since the end of colonialism, Africans have been actively prevented from establishing democracies. The legacy of strongman rule in Africa is largely a Western invention, not an indigenous proclivity. Western powers have thwarted countless attempts at real independence, which casts a rather ironic light on the West’s historical image as a beacon of democracy and popular sovereignty.
Meanwhile, Back in America
It was not only abroad that the Western elite found their interests blocked by the growing Keynesian consensus. The extension of Keynesian policies across the West led to higher growth rates, poverty reduction and improved social well-being. But it had its enemies. The elite who had gained so much during the Gilded Age and the Roaring Twenties suffered a serious hit to their wealth as a result of these policies. In the United States, the share of national income going to the richest 1 per cent was cut in half, to 8 per cent. It was even worse for the richest 0.1 per cent. The share of national income going to this cohort reached historic lows in the 1960s and 1970s.
Source: Thomas Piketty’s data on www.quandl.com
Part of this had to do with the higher taxes levied on the upper classes; in the United States, the top marginal tax rate hovered around 90 per cent during the 1940s and 1950s. (Today, politicians like to claim that higher taxes will slow down the economy, yet historical data shows that the US enjoyed some of its highest rates of growth during the period of 90 per cent tax.) But it also had to do with higher wages commanded by workers who were increasingly empowered – through unions – to bargain for a fairer share of profits. During the 1940s and 1950s, around 35 per cent of workers in the United States were unionised – higher than ever before.
The elite – those whose wealth was eroded by higher taxes and higher wages – were desperate for a solution, and they found it in the ideas of Friedrich Hayek and Milton Friedman. Friedman was an American economist born to immigrant parents from Eastern Europe who ran a textile sweatshop in New Jersey. His father was vehemently against unions and state regulations – anything that might compromise his business profits – and Friedman grew to share his views. Since the 1930s, Friedman had openly called for the destruction of the New Deal, particularly its price- and wage-fixing mechanisms. His chief inspiration was Hayek, the Austrian-born economist at the London School of Economics who had become known for his 1944 book The Road to Serfdom, in which he argued that any intervention in the economy would inevitably lead to the kind of totalitarianism that characterised fascist Germany and Communist Russia. But there was virtually no audience for these views at the time. Everyone was Keynesian, and the memory of the Great Depression meant that people were reluctant to return to the dangerous days of laissez-faire capitalism. Nonetheless, the two men continued to propagate their ideas, hoping they would eventually take hold. In 1947, they formed the Mont Pèlerin Society along with others who shared their ideology. It was a club of free-market economists, named for its location in the elite Swiss resort town, established to push these ideas as urgently as possible into the public sphere.
By 1950, both Hayek and Friedman had accepted posts in the economics department at the University of Chicago, which soon became a hub for the liberal revival in economics. Friedman, as head of the department, pursued his ideas with a kind of activist fervour. He believed in the vision of a totally pure market, and held that the economy should be returned to its ‘natural’ state, prior to what he saw as the distortions of human intervention. Once f
reed of such distortions, his thinking went, the market – left to its own devices – would function smoothly and perfectly, distributing wealth and goods in the most efficient manner possible. Friedman sought to achieve a sort of utopian perfection, a universe playing out according to simple, logical economic models, where everyone acting in their own self-interest would yield the maximum benefit for all. For Friedman, economic problems like high inflation or unemployment were signs that the market was not truly free, that some form of artificial interference needed to be removed.
What made Friedman’s ideas so powerful was that he insisted that the free market was not only in accordance with the economic laws of nature, but also with the values of democracy and freedom. He worked to establish strong connections in the public imagination between the ideas of market freedom and individual liberty. We should all be free to express our own desires in the market, he claimed; indeed, he regarded this as the very essence of democratic participation. These views eventually became the basis for his 1962 book, Capitalism and Freedom. This version of freedom was to compete with the Keynesian idea of freedom, in which real freedom lay in freedom from want, which in turn required placing constraints on elite accumulation. For Friedman and Hayek, any such constraint was a sort of evil – a flaw that marred the perfection of an otherwise beautiful system and eroded the very possibility of freedom. The theory was compelling for its sheer elegance.
For Friedman and his followers, their great enemy was not only Keynesianism in the United States, but also social democrats in Europe and the developmentalists in the global South. They saw all of these systems as contaminated forms of capitalism that needed to be purified. There was price-fixing to make basic goods more affordable. There were minimum wage laws to protect workers from exploitation. Certain services – like education and healthcare – were kept out of the market altogether to ensure universal access. These policies were improving people’s lives, but Friedman claimed that they were doing hidden harm by disrupting the equilibrium of the market. Price controls, subsidies and minimum wage laws should all be abandoned, and the state should sell off any services that corporations could run at a profit, including education, healthcare, pensions and national parks. Governments should cut back social spending so as not to interfere with the labour market. Taxes should be at a flat rate. And corporations should be free to sell their products anywhere in the world. If implemented, he claimed, these policies would lead to unprecedented growth and prosperity.
