Neoliberalism on Trial: A History of Military Coups to Depose of Democratically Elected Governments
By lucas@endneoliberalism On 12 Nov, 2015 At 11:30 AM | Categorized As Neoliberalism on Trial | With 0 Comments

As Greg Grandin argues in The Empire’s Workshop, covert operations in Iran, Guatemala, and Chile served as training grounds for covert operations and military action worldwide, leading up to the illegal invasion of Iraq. As we now know, the chances of finding weapons of mass destruction in the Middle Eastern country were virtually non-existent. In like manner, the Communist threat served as a mere subterfuge for maintaining colonial control over natural resources and preventing democratically elected leaders to implement protectionist policies that would had developed their local markets.

The first CIA covert operation took place in Iran right after the end of World War II. The Anglo-Iranian Oil Company (AIOC) was the largest oil firm operating in Iran and had been under British control for forty years. In 1950, Iran only received 10% in royalties from AIOC profits, which amounted to a total of 170 million pounds. [i] In fact, from 1948 to 1950, “Iran received less in royalties than they had to pay the British in taxes. Iran received 9, 13.5, and 16 million pounds in royalties during the three years, but paid 28, 23, and 50.5 million pounds in taxes”[ii].

In November 1950, Iran rejected a draft agreement in which the AIOC had offered the government slightly improved terms but which did not include the fifty-fifty profit-sharing provision that was then the new norm for Persian Gulf oil concessions[iii],  such as was agreed upon by the USA and Saudi Arabia. By 1951, pervasive nationalistic sentiment motivated the AIOC to make the Iranians a 50-50 offer, which, however, was ultimately rejected.

In 1951, the Iranian Mossadegh government, “backed up by parliament and the overwhelming majority of the Iranian people passed a bill to nationalize the oil company”[iv] . In addition, “[t]he Mossadegh government handed a very ethical offer of 25% of the net profits, guaranteed the safety and the jobs of British employees, and was willing to sell its oil without disturbance”.[v]

The US government overthrew the Iranian leader on the basis that his ‘communist’ aspirations would transfer the richest oil fields at the time to the USSR. The following State Department archives confirm that Mossadegh’s democratic and capitalist intentions had in fact posed no “communist threat” to Iran or the United States, and that the communist Tudeh party, which the United States feared, actually lacked the means to seize control.

A top secret report written on November 20, 1952 states: “It is now estimated that Communist forces will probably not gain control of the Iranian government during 1953….The United States shall be prepared to take the necessary measures to help Iran start up her oil industry and to secure markets for her oil so that Iran may benefit from substantial oil revenues.”[vi]

Despite increasing levels of paranoia, top secret records from one year later, in August 10  of 1953, reveal that “[t]he government has gained more effective control of the army which constitutes the most important single deterrent to the communists…. Prime Minister Mosadegh is in complete control of the political situation in Iran. It is unlikely that a coup d’etat by Mosadegh’s opponents among former governing groups or by the Tudeh Party would be attempted because neither is sufficiently strong or well-organized… The Government could also meet its fiscal needs, at least through March 1954, even when marketing channels for its sale of oil have not been cleared by the United States, as previous recommendations have been made”[vii].

Despite all evidence to the contrary, the CIA had spent millions of dollars since 1951 through operation BEDAMN with the intention of infusing propaganda by mediums such as articles, cartoons, leaflets, and books, and had moreover been found responsible for organizing acts of violence against businesses and clergies, placing the blame on Tudeh party activists. The CIA also funded mob organizers and even carried out “sham bombings” in mosques and homes of religious leaders in order to create the impression that Mossadegh’s government was unwilling or unable to protect them from the communists.[viii]

Just after the 1953 military coup that finally brought down Mossadegh, “US companies enjoyed 40% of the share that was previously fully controlled by Britain. Meanwhile, the Iranian Secret police, established by the CIA, persecuted and tortured Iranians who were immersed in poverty and misery during the 25 years that the Shah of Iran was in power”[ix].

In 1954, the CIA overthrew the president of Guatemala, Jacobo Arbenz, because he had expropriated 40 percent of the American-owned United Fruit Company’s land one year earlier[x].  Arbenz sought to implement protectionist developmentalism  in a country where former dictator Jorqe Ubico provided the fruit company with forty-two percent of Guatemala’s land during his brutal 13-year rule,[xi] yet United Fruit Company was only using 8 percent of its property in Guatemala[xii]. The Latin American country was a quasi-American colony where 77% percent of all exports went to the US and 65% of imports came from the US, and where US companies abused peasants under a system titled ‘debt slavery’.

Arbenz’s Agrarian Reform Law, “provided the government to seize and redistribute all uncultivated land on estates larger than 672 acres, compensating owners according to the land’s declared tax value. United Fruit (Now Chiquita Banana) owned more than 550,000 acres- about one-fifth of the country’s arable land- but cultivated less than 15% of it.”[xiii]  William Blum highlights that the Agrarian Law “aimed to transfer ownership from the 2.2% of landowners who owned 70% of the arable land to the locals, thus bringing the benefits of ownership and competition, standards that the US proudly claims to pursue as a capitalist and free society”[xiv]

Furthermore, Arbenz planned to build a highway to the main port, which would challenge the the American International Railways’ monopoly, as well as a hydroelectric plant, which would challenge the electricity monopoly of Bond and Share, also an American-owned company.[xv]

Arbenz’s policy of direct competition represented a bold attempt to nourish a capitalist state in a country ravaged by colonialism. The United States, however, and more specifically the Dulles Brothers- both of which were major United Fruit stock holders, as well as a Secretary of State and a head of the CIA during the Eisenhower administration- accused Arbenz of propping up a communist state with strong ties to the USSR.

Larry Tye writes in The Father of Spin that “[a]rticles began appearing in the New York Times, the Herald Tribune, the Atlantic Monthly, Time, Newsweek, the Neif Leader, and other publications, all discussing the growing influence of Guatemala’s Communists”[xvi]. These articles were written by none other than Edward Bernays, Sigmund Freud’s cousin and the godfather of the public relations industry that servedthe United Fruit Company at the time of the coup, and who gave the “first news anyone received on the situation to the Associated Press, United Press, the International News Service, and the New York Times, with contacts intensifying over the next several days”.

After the 1954 coup, CIA case officer Frank Wisner and his team were ordered to collect and analyze 150,000 documents under Operation PBHistory,  designed to gather information which could incriminate Guatemala under the pretense that they maintained ties with the USSR. The operation concluded that there were no indications of Guatemala’s involvement withthe USSR and that of the150,000 documents, the only veritable contact found to have beenestablished between the Soviet Union and the Árbenz government involved a failed business deal between a Soviet diplomat negotiating an exchange of bananas for agricultural machinery, and two invoices for a total of $22.95 issued to the Guatemalan Labour Party from a book shop in Moscow.[xvii]

The US coup in Guatemala led to a 50-year period of military dictators and civil wars which claimed 200,000 lives[xviii]. To this day, Guatemala remains one of the poorest and most violent nations in all of Latin America.

Even with the rise to power of a communist party in Chile, the United States failed to prove that the rise of communism constituted an imminent threat to the world- that such a threat had originated from the “evil” Soviet Empire, and that military action was the only plausible way to stop it.  As a matter of fact, the democratically elected president of Chile displayed a strong inclination towards establishing trade relations with the United States, and not a single case of evidence attesting to the alleged partnership between Chile and the “evil” Soviets was to be found. William Blum has argued in Killing Hope that American suppliers refused to sell to Chile, despite their offer to pay cash in advance, even though fostering trade relations with a communist country would have proven the most effective way of opening up the floor to peaceful discussions aimed at improving the level of understanding harnessed by both ideologies regarding economic efficiency and freedom.

By earning a fair income from the resources that belong to them, developing countries that turn to communism perform as any other capitalist economy seeking to trade in exchange for products they truly need. Instead, the United States embargo was aimed at creating shortages and at pronouncing the failure of socialism, while over in Panama they trained Chilean military personnel and launched CIA propaganda.

Following all failed attempts to destabilize the economy and the minds of the people, Pinochet’s army deposed of Allende while US Navy ships were present offshore and fighter planes were landing at the US air base in Mendoza, Argentina[xix].

The San Francisco Cronicle reported that “[i]n 1992, a truth commission found the 17-year Pinochet regime (1973-1990) responsible for the death or disappearance of 3,197 people. An estimated 1 million people were forced into exile and 28,000 were tortured.”[xx]

The economic costs have been as appalling as the human ones. Naomi Klein reports in The Shock Doctrine that “[i]n the first year that Pinochet followed Milton Friedman’s prescriptions, Chile’s economy contracted by 15 percent, and unemployment—only 3 percent under Allende—reached 20 percent. By the mid eighties, manufacturing as a percentage of the economy dropped to levels last seen during World War II. By 1988, 45 percent of the population had fallen below the poverty line while the richest 10 percent of Chileans had seen their incomes increase by 83 percent”[xxi]. Chile had lost its sovereignty and its right to choose its destiny as a democratic nation that favored the will of the people. “Democracy and freedom” was toppled by an evil dictatorship that imposed legislation friendly to foreign corporations and austerity for the local people under a firm grip.

All three case studies expose a recurrent trend reflective of the criminal state of mind characteristic of the Neoliberal era.  The protectionist aspirations of leaders from developing countries had been aimed at steeringthe world economy towards peace and development through global decentralization and dynamic trade, whereas the protectionist aspirations of the United States government and the corporations controlling it promoted and exacerbated violence, economic scarcity, and environmental destruction.

Competition is the basis of a well-functioning capitalist society and a major pre-requisite for an economy that utilizes resources efficiently so as to produce real value for its society. Market Theory tells us that competition forces businesses to implement new technologies and methods of production, and to use resources more efficiently while innovative, and there is good reasons to believe that byrespecting democracy and freedom abroad, a global economy where peoples’ needs are met, where GDP growth is related to real value, and where environmental resources are honoured and protected, could flourish.

The first of these reasons is that economic development in a post-colonial country leads to higher local demand for its own resources. This means that Iran’s oil, Chile’s aluminum, and Guatemala’s fruit would have become more expensive to the world market had these countries been able to develope their local economies.

Secondly, Market Theory suggests that competitive forces which increase the price of resources push businesses in developed nations to implement new technologies in order to use resources more efficiently, thus upgrading the economic potential and carrying capacity of the global economy.  In time, developed countries increase productivity and continue to enjoy a prosperous lifestyle even with a lower supply of resources.  For example, a competitive world economy would have much sooner signaled the necessity of eliminating the need for oil. Oil would have ceased to fuel our global economy as an immediate consequence of the rising prices resulting from the fact that nations would be using their own energy to develop their local economies. If oil states had industrialized, as Market Theory suggests, new technologies and methods of production would had emerged to provide alternative forms of energy.

Third and finally, a competitive global economy pushes our potential and improves our quality of life by providing greater quality products at a sustainable growth rate.  When the new economic equilibrium makes valuable resources more expensive, societies simply refrain from wasting valuable resources – such as aluminum to carry harmful soda drinks – and choose to use them carefully, as durable goods they are in need of and which can be used for trains, airplanes, cars, etc.  A competitive economy not only forces developed countries to use resources more efficiently, but new and better alternatives show up in the market thanks to competitive forces, as is the case of the Circular Economy model.

History shows that once the gap is bridged between the developed (manufacture intensive economies) and the developing (resource intensive economies), protectionist controls are lifted in a natural manner that enhances the competitiveness of the market; however, a real dynamic trade cannot exist without local industries established in the first place.

Market extremists claim that protectionism hurts trade and efficiency, albeit they fail to mention that between Neoliberal globalization, where corporations move resources as they please, and a truly globalized world where dynamic trade among developed nations drives sustainable economic growth, there are significant differences.  The current global linerar economic model that externalizes costs and allows businesses to profit from dangerous products could not exist as it exists today had military and IMF interventions not previously destroyed development worldwide.  Had developing countries been able to industrialize, corporations would not have been able to outsource jobs that pay $16 an hour at home to sweat shops abroad which pay 6 cents an hour, and the same multinational corporations would not have had the unrestrained access to the cheap minerals and resources that fuel these inefficient and wasteful global enterprises.

In this chapter, three widely known case studies of dictatorial interventions were considered.  The results of totalitarian interventions are the same worldwide: they increased supply of commodities and labour, while centralizing the global economy in the hands of 200 multinational corporations. Such global monopoly discourages multinational corporations from investing in more productive technologies and internalize the costs of production.

Read: Ratifying Totalitarianism Through Odious Debts

[ii]US-backed coup ousts nationalist Mossadegh government in Iran. “The History They Didn’t Teach You in School”‘–an occasional series.

[iii] Iran Chamber Society. History of Iran: Oil Nationalization.

[iv] Kinzer, Stephen. Overthrow: America’s Century of Regime Change From Haiwaii To Iraq. Times Books; Reprint edition (February 6, 2007)

[v] Blum, William. Killing Hope: US Military and CIA Interventions Since World War II. Common Courage Press; Updated edition (October 1, 2008)

[vi] Document No. 1: National Security Council, NSC 136/1, “United States Policy regarding the Present Situation in Iran,” Top Secret Report, November 20, 1952

Source: National Archives and Records Administration (NARA), Record Group 59, “Records relating to State Department Participation in the Operations Coordinating Board and the National Security Council, 1947-1963,” Lot 63D351, National Security Council, Box 68, Folder: “NSC 136: U.S. and Policy regarding the Present Situation in Iran”

[vii] Document No. 4: State Department, “Proposed Course of Action with Respect to Iran,” Top Secret Draft Memorandum, August 10, 1953

Source: National Archives and Records Administration (NARA), Record Group 59, Policy Planning Staff 1947-53, Box 42, Lot 64D563, Folder: Record Copies, July-Aug 1953

[viii] Norouzi, Ebrahim. All The Sham’s Men: How the CIA used “anti-Communism” to extinguish Iran’s democracy. August 18, 2010

[ix] Blum, William. Killing Hope: US Military and CIA Interventions Since World War II. Common Courage Press; Updated edition (October 1, 2008)

[x]Calderon, Maria Jose. Timeline: Guatemala’s HIstory of Violence. FRONTLINE World. 2011

[xi] Third World Traveler. A “killing field” in the Americas: US policy in Guatemala

[xii]Calderon, Maria Jose. Timeline: Guatemala’s HIstory of Violence. FRONTLINE World. 2011

[xiii] Kinzer, Stephen. Overthrow: America’s Century of Regime Change From Haiwaii To Iraq. Times Books; Reprint edition (February 6, 2007)

[xiv] Blum, William. Killing Hope: US Military and CIA Interventions Since World War II. Common Courage Press; Updated edition (October 1, 2008)

[xv] PR Newswire.Guatemalan Government Issues Official Apology to Deposed Former President Jacobo Arbenz’s Family for Human Rights Violations – 57 Years Later. October 20, 2011—57-years-later-130777253.html

[xvi] Tye, Larry. The Father of Spin: Edward L. Bernays and The Birth of Public Relations. Picador; Reprint edition (September 1, 2002)


[xvii]  Gaddis, John Lewis. We Now Know: Rethinking Cold War History (A Council on Foreign Relations Book). Oxford University Press, USA; Reprint edition (July 9, 1998)

[xix] Blum, William. Killing Hope: US Military and CIA Interventions Since World War II. Common Courage Press; Updated edition (October 1, 2008)

[xx] Epstein, Jack. Augusto Pinochet/ Chilean Leader’s Regime Left Thousands of ‘Disappeared’. December 10, 2006

[xxi] Klein Naomi. The Shock Doctrine: The Rise of Disaster Capitalism. Picador; 1st edition (June 24, 2008)

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