Things to consider—

Since early 2011, Obama's been waging proxy war on Syria. Imported death squads masquerade as freedom fighters. The scheme's familiar. It repeats. It reflects US imperialism's dark side. In the 1980s, CIA-recruited mujahideen fighters battled Afghanistan's Soviet occupiers. Ronald Reagan called them "the moral equivalent of our founding fathers." He characterized Contra killers the same way. —Stephen LendmanFor over a century now US ambassadors have acted as fifth columns in the nations they are embedded in, their role chiefly to foster corporate and plutocratic power and coordinate machinations against any truly pro-democratic government.•••••"The dead end identity politics of SF Pride, which sells out a peace hero like Bradley Manning to curry favor with the American ruling class, is what I had in mind. The empire loves your tameness, irrelevance and cowardice, SF Pride. You don’t bother the American ruling class — a five foot two, 105 pound soldier does because he has a conscience and because he didn’t make comfort the guiding principle of his life...." —Randy Shields
Apr 192010
 
goldman-sachsHQ

More Kabuki theater for the gullible masses

The lawsuit will accomplish exactly nothing

Dateline: 19 April 2010

 

Goldman-Sachs' HQ in Lower Manhattan

By Patrick O’Connor and Barry Grey [print_link]

The Securities and Exchange Commission (SEC) filed a civil case Friday against giant investment bank Goldman Sachs charging “fraudulent misconduct” in relation to $1 billion of worthless sub-prime mortgage securities Goldman palmed off to its clients in 2007.

The SEC’s submission to New York’s Southern District Court provides a devastating glimpse into the criminal activities of a financial oligarchy that was not only indifferent to the destructive social consequences of its operations, but eager to profit from a crisis precipitated by its own speculative activities.

In April of 2007, just prior to the sub-prime mortgage collapse, Goldman Sachs received $15 million from hedge fund operator John Paulson to help put together a package of securitised home loans—a collateralised debt obligation (CDO)—and market it to Goldman’s clients. According to the SEC, Paulson and Goldman knew that the CDO, called ABACUS 2007-AC1, was comprised of junk assets, but they led the public to believe that a sound investment was being offered.  Paulson had staked the fortunes of his hedge fund betting on a market collapse. He therefore selected the worst sub-prime mortgage securities on the market for the Goldman CDO, mostly derived from mortgages in Arizona, Florida, Nevada and California—states which were subsequently among the hardest hit by the wave of foreclosures.

Goldman Sachs, the SEC alleges, covered up Paulson’s involvement in the CDO’s creation when it marketed the investment to its clients. Goldman hired collateral manager ACA and, according to the SEC, falsely told its clients that ACA had decided what mortgages were to be bundled into the CDO. Ratings agencies Moody’s and Standard & Poor’s rubber-stamped the operation, issuing the CDO a triple-A rating. Paulson then short-sold the CDO.  The Wall Street bank was paid by Paulson to package and market the toxic CDO, then paid by investors who bought into it. By January of 2008, 99 percent of the CDO’s loans had been downgraded. Paulson’s hedge fund, having bet on precisely this outcome, made approximately $1 billion—about the same amount lost by Goldman Sachs’ customers.

This particular Goldman Sachs shake-down operation was by no means an aberration. It was only a fairly flagrant example of the criminality that pervades the American financial and corporate elite. The fall in the market price of leading bank stocks triggered by Friday’s SEC announcement reflects the fear that any one of the major US banks and hedge funds could be next.

The public marketing and secret short-selling of junk assets was a common practice carried out by virtually every major Wall Street firm. It was part of a colossal fraud perpetrated on the American people.  The banks lured people into taking out mortgages they knew the purchasers could not afford. They then packaged these toxic loans into securities—collateralised debt obligations—and made billions in profits by selling them to investors around the world, including pension funds, 401(k) plans, insurance companies and private investors. Those involved knew very well they were running the equivalent of a giant Ponzi scheme—a fraud far more massive and destructive than the criminal operation headed by Bernard Madoff.

Before and during 2007, Goldman Sachs, conscious that the entire edifice of CDOs based on the sub-prime mortgage bubble was about to topple, deliberately sought to hasten the crisis. A New York Times investigative report published in February revealed that before the American International Group (AIG) bailout in September 2008, Goldman strove to undermine investor confidence in the insurance giant in order to drive down the market value of mortgage-backed securities. When the crash finally came, Goldman—bolstered by $10 billion in public bailout money received at the height of the financial free-fall—cashed in, reporting a record $13.4 billion profit last year.

CEO Lloyd Blankfein and other Goldman executives, as well as John Paulson—who was not named in the SEC indictment—are, in fact, criminals. They should be criminally prosecuted and held legally accountable for their violations of the law and their crimes against society.

Their actions—exhibiting an insatiable and manic drive for personal enrichment—have produced devastating consequences for tens of millions of ordinary people, not only in the United States, but around the world. Millions have lost their jobs, their homes and their life savings. Untold numbers of young people have lost their chance for a college education. Untold numbers of old people have been driven into poverty and an early death.

It is no exaggeration to say that senior executives at Goldman Sachs and other leading banks have blood on their hands. Many lives have been lost in the US and internationally as a result of the economic crisis precipitated by their fleecing operations—through poverty, disease, stress, malnutrition, house fires resulting from utility shutoffs, etc.

The SEC indictment, it can be safely predicted, will result either in a white-wash of Goldman and its executives or, at the most, a financial slap on the wrist.  The SEC’s civil case lets senior Goldman executives off the hook. The sole individual named as defendant, alongside the bank, is a 31-year-old who was a junior trader in 2007.  In 2007, Goldman CEO Blankfein, who is not named in the indictment, received, according to Reuters, $100 million in pay and stock. Paulson, exonerated by the SEC, pocketed $3.7 billion in 2007 and another $2 billion in 2008.

The worst Goldman will suffer is a multi-million-dollar fine, a drop in the bucket compared to the financial giant’s profits.  The Obama administration, loaded with executives from Goldman and other Wall Street firms, will do nothing to stop the banks and hedge funds from continuing their fleecing operations now and in the future, and none of those chiefly responsible will be held to account.

An independent political intervention of the working class is urgently required. The trillions in ill-gotten wealth of Wall Street operators must be re-appropriated and used to help fund public works programs to provide jobs for the unemployed and rebuild the social infrastructure. This money, stolen from the American people, must be used as well to provide relief for the millions victimized by the financial robber barons.

A full public disclosure of all the operations of the banks and hedge funds is required as the first step in launching criminal prosecutions, not just civil proceedings, against culpable individuals. The commanding heights of the banking and financial sector must be nationalised and placed under the democratic control of the working population as part of the socialist reorganisation of the US and world economies.

Patrick O’Connor and Barry Grey are senior political analysts with the World Socialist Web Site.

BONUS FEATURE: Update

Fallout from Goldman Sachs indictment spreads

By Barry Grey
20 April 2010

Britain and Germany announced their own investigations into the role of investment bank Goldman Sachs in losses incurred by UK and German banks, following Friday’s indictment of Goldman by the US Securities and Exchange Commission (SEC).  In calling for the British Financial Services Authority to begin an inquiry, Prime Minister Gordon Brown angrily accused Goldman of “moral bankruptcy.”  According to the civil complaint filed by the SEC, among the clients defrauded by Goldman was ACA Management LLC, the biggest investor in a subprime mortgage-backed collateralized debt obligation (CDO) marketed by Goldman in April of 2007.

ACA Management was subsequently absorbed by the Royal Bank of Scotland, which in 2008 paid Goldman $841 million to unwind ACA’s exposure to the Goldman CDO. The British government bailed out the Royal Bank of Scotland and currently holds an 82 percent stake in the firm.  The German government said its BaFin regulatory agency would look into the $150 million in losses suffered by IKB Deutsche Industriebank AG on its investment in the Goldman CDO, called Abacus 2007-AC1. IKB failed in late 2007 and was taken over by a state-owned bank.

The British and German announcements point to the financial havoc wreaked internationally as well as in the US by the machinations of Goldman, the most profitable company in Wall Street history. The complaint filed by the SEC describes a plot between Goldman and hedge fund manager John Paulson to sucker institutional investors into buying into the Abacus CDO so that Paulson could reap a huge profit by betting on the failure of the CDO’s underlying mortgage-backed securities.  In return for Goldman’s services in packaging the CDO and marketing it as a sound investment, Paulson paid the bank $15 million. Goldman made money as well from selling tranches of the CDO to unwitting investors.

Paulson, who is not charged in the SEC indictment, approached Goldman in early 2007 seeking its help in enabling him to place a large bet that the mortgage market bubble would soon burst. Paulson needed to lure investors into betting the opposite—that it would continue to grow.  The Abacus CDO, the SEC indictment indicates, was devised as the means of essentially swindling investors into betting on a rise in the value of risky subprime mortgage-linked securities, so that Paulson and Goldman could profit from the expected failure of these same securities. The CDO was a so-called “synthetic” instrument—meaning investors did not actually buy any securities. Rather, they gambled on the future price of a selection of securities, much as people gamble on a horse race.

The SEC charges Goldman with “making materially misleading statements and omissions” in marketing the $2 billion Abacus CDO. Specifically, Goldman did not inform investors that the securities underlying the CDO had been selected by Paulson, instead claiming they had been chosen by ACA Management. And the bank led ACA Management to believe that Paulson & Co. was taking a $200 million “long” position—i.e., that the hedge fund was betting the securities would rise in value.

Meanwhile, with Goldman’s knowledge and approval, Paulson loaded the CDO with the worst subprime securities on the market, to ensure that it would collapse. By January of 2008, some 99 percent of the CDO’s securities had been downgraded. Paulson pocketed $1 billion from the failure of the CDO, while investors, including ACA Management and IKB Deutsche Industriebank, lost a total of $1 billion.  The SEC indictment cites Goldman emails reflecting the sense of urgency behind the creation of the Abacus CDO. The bank and Paulson had to launch the investment vehicle before the housing market crashed, or they would be unable to profit from the disaster.  An email from the Goldman trader who directly organized the CDO—and who is the only Goldman official named in the SEC indictment—states, “The whole building is about to collapse anytime now…” Another email to the trader from a more senior Goldman employee declares that “the CDO biz is dead, we don’t have a lot of time left.”

The type of financial plundering exhibited by Goldman Sachs and Paulson in this particular venture was by no means an aberration. It was—and remains—business as usual on Wall Street.   The New York Post reported Monday that the SEC is investigating transactions by Deutsche Bank, the Swiss bank UBS and the former Merrill Lynch (now owned by Bank of America) in the mortgage securities market in the run-up to the collapse of the housing market in 2007 and 2008.

In a letter Friday to New York District Court, where the SEC indictment against Goldman was lodged, the Dutch bank Rabobank alleged that Merrill Lynch “engaged in precisely the same type of fraudulent conduct in the structuring and marketing” of one its CDOs as Goldman did with its Abacus CDO. The Dutch bank said Merrill permitted an investor, Magnetar Capital LLC, to select risky assets for inclusion in Merrill’s “Norma” CDO, while telling Rabobank the assets had been chosen by a neutral third party.

In a reply to the SEC indictment, Goldman argues that there was nothing unusual about its actions in relation to the Abacus CDO and denies that it misled ACA Management or any other investor. It also claims that it lost money on the CDO deal.

In fact, such machinations precipitated a financial meltdown and slump that have cost tens of millions of jobs and inflicted incalculable social misery in the US and around the world. The resulting mass unemployment is being used to permanently drive down wages and slash workers’ benefits, and the bankrupting of national treasuries as a result of government bank bailouts is serving as the pretext for slashing basic social programs.

Those at Goldman Sachs and the rest of the Wall Street firms who are responsible for such policies are criminals and should be prosecuted as such.

These same individuals, due to the largess of the Bush and Obama administrations, have profited handsomely from the catastrophe of their own creation. They are making more money than ever.  Goldman made a record $13.4 billion profit in 2009. JPMorgan Chase, Bank of America and Citigroup have all reported bumper profits for the first quarter of 2010, and Goldman is expected to do the same when it issues its first quarter report today.   There are already signs that Wall Street feels confident it has nothing to fear from the SEC or the Obama administration. While the Dow dropped 125 points on Friday, led by a sharp decline in the share price of Goldman and other banks, and Asian and European markets closed down on Monday, the Dow rose 73 points, spearheaded by a rebound in Goldman stock and bank stocks in general.

When press reports emerged Monday that the SEC split 3-to-2 on the decision to indict Goldman, with the two Republicans on the commission voting against the move, Goldman shares, which had been down, rallied and ended the trading day up 1.6 percent at $162.32.

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Apr 192010
 
Ngo_Dinh_Diem_at_Washington_-_ARC_542189

Alfred W. McCoy: America and the Dictators

From Ngo Dinh Diem to Hamid Karzai

<<—>> Diem, the Vietnamese stooge, and his cynical handlers.

The crisis has come suddenly, almost without warning. At the far edge of American power in Asia, things are going from bad to much worse than anyone could have imagined. The insurgents are spreading fast across the countryside. Corruption is rampant. Local military forces, recipients of countless millions of dollars in U.S. aid, shirk combat and are despised by local villagers. American casualties are rising. Our soldiers seem to move in a fog through a hostile, unfamiliar terrain, with no idea of who is friend and who is foe.

After years of lavishing American aid on him, the leader of this country, our close ally, has isolated himself inside the presidential palace, becoming an inadequate partner for a failing war effort. His brother is reportedly a genuine prince of darkness, dealing in drugs, covert intrigues, and electoral manipulation. The U.S. Embassy demands reform, the ouster of his brother, the appointment of honest local officials, something, anything that will demonstrate even a scintilla of progress.

After all, nine years earlier U.S. envoys had taken a huge gamble: rescuing this president from exile and political obscurity, installing him in the palace, and ousting a legitimate monarch whose family had ruled the country for centuries. Now, he repays this political debt by taunting America.  He insists on untrammeled sovereignty and threatens to ally with our enemies if we continue to demand reforms of him. Yet Washington is so deeply identified with the counterinsurgency campaign in his country that walking away no longer seems like an option.

This scenario is obviously a description of the Obama administration’s devolving relations with Afghan President Hamid Karzai in Kabul this April. It is also an eerie summary of relations between the Kennedy administration and South Vietnamese President Ngo Dinh Diem in Saigon nearly half a century earlier, in August 1963. If these parallels are troubling, they reveal the central paradox of American power over the past half-century in its dealings with embattled autocrats like Karzai and Diem across that vast, impoverished swath of the globe once known as the Third World.

Our Man in Kabul

With his volatile mix of dependence and independence, Hamid Karzai seems the archetype of all the autocrats Washington has backed in Asia, Africa, and Latin America since European empires began disintegrating after World War II. When the CIA mobilized Afghan warlords to topple the Taliban in October 2001, the country’s capital, Kabul, was ours for the taking — and the giving. In the midst of this chaos, Hamid Karzai, an obscure exile living in Pakistan, gathered a handful of followers and plunged into Afghanistan on a doomed CIA-supported mission to rally the tribes for revolt.  It proved a quixotic effort that required rescue by Navy SEALs who snatched him back to safety in Pakistan.

Desperate for a reliable post-invasion ally, the Bush administration engaged in what one expert has called “bribes, secret deals, and arm twisting” to install Karzai in power.  This process took place not through a democratic election in Kabul, but by lobbying foreign diplomats at a donors’ conference in Bonn, Germany, to appoint him interim president. When King Zahir Shah, a respected figure whose family had ruled Afghanistan for more than 200 years, returned to offer his services as acting head of state, the U.S. ambassador had a “showdown” with the monarch, forcing him back into exile.  In this way, Karzai’s “authority,” which came directly and almost solely from the Bush administration, remained unchecked. For his first months in office, the president had so little trust in his nominal Afghan allies that he was guarded by American security.

In the years that followed, the Karzai regime slid into an ever deepening state of corruption and incompetence, while NATO allies rushed to fill the void with their manpower and material, a de facto endorsement of the president’s low road to power. As billions in international development aid poured into Kabul, a mere trickle escaped the capital’s bottomless bureaucracy to reach impoverished villages in the countryside. In 2009, Transparency International ranked Afghanistan as the world’s second most corrupt nation, just a notch below Somalia.

As opium production soared from 185 tons in 2001 to 8,200 tons just six years later — a remarkable 53% of the country’s entire economy — drug corruption metastasized, reaching provincial governors, the police, cabinet ministers, and the president’s own brother, also his close adviser. Indeed, as a senior U.S. antinarcotics official assigned to Afghanistan described the situation in 2006, “Narco corruption went to the very top of the Afghan government.”  Earlier this year, the U.N. estimated that ordinary Afghans spend $2.5 billion annually, a quarter of the country’s gross domestic product, simply to bribe the police and government officials.

Last August’s presidential elections were an apt index of the country’s progress. Karzai’s campaign team, the so-called warlord ticket, included Abdul Dostum, an Uzbek warlord who slaughtered countless prisoners in 2001; vice presidential candidate Muhammed Fahim, a former defense minister linked to drugs and human rights abuses; Sher Muhammed Akhundzada, the former governor of Helmand Province, who was caught with nine tons of drugs in his compound back in 2005; and the president’s brother Ahmed Wali Karzai, reputedly the reigning drug lord and family fixer in Kandahar. “The Karzai family has opium and blood on their hands,” one Western intelligence official told the New York Times during the campaign.

Desperate to capture an outright 50% majority in the first round of balloting, Karzai’s warlord coalition made use of an extraordinary array of electoral chicanery. After two months of counting and checking, the U.N.’s Electoral Complaints Commission announced in October 2009 that more than a million of his votes, 28% of his total, were fraudulent, pushing the president’s tally well below the winning margin. Calling the election a “foreseeable train wreck,” the deputy U.N. envoy Peter Galbraith said , “The fraud has handed the Taliban its greatest strategic victory in eight years of fighting the United States and its Afghan partners.”

Galbraith, however, was sacked and silenced as U.S. pressure extinguished the simmering flames of electoral protest.  The runner-up soon withdrew from the run-off election that Washington had favored as a face-saving, post-fraud compromise, and Karzai was declared the outright winner by default. In the wake of the farcical election, Karzai not surprisingly tried to stack the five-man Electoral Complaints Commission, an independent body meant to vet electoral complaints, replacing the three foreign experts with his own Afghan appointees. When the parliament rejected his proposal, Karzai lashed out with bizarre charges, accusing the U.N. of wanting a “puppet government” and blaming all the electoral fraud on “massive interference from foreigners.” In a meeting with members of parliament, he reportedly told them: “If you and the international community pressure me more, I swear that I am going to join the Taliban.”

Amid this tempest in an electoral teapot, as American reinforcements poured into Afghanistan, Washington’s escalating pressure for “reform” only served to inflame Karzai. As Air Force One headed for Kabul on March 28th, National Security Adviser James Jonesbluntly told reporters aboard that, in his meeting with Karzai, President Obama would insist that he prioritize “battling corruption, taking the fight to the narco-traffickers.” It was time for the new administration in Washington, ever more deeply committed to its escalating counterinsurgency war in Afghanistan, to bring our man in Kabul back into line.

A week filled with inflammatory, angry outbursts from Karzai followed before the White House changed tack, concluding that it had no alternative to Karzai and began to retreat.  Jones now began telling reporters soothingly that, during his visit to Kabul, President Obama had been “generally impressed with the quality of the [Afghan] ministers and the seriousness with which they’re approaching their job.”

All of this might have seemed so new and bewildering in the American experience, if it weren’t actually so old.

Our Man in Saigon

The sorry history of the autocratic regime of Ngo Dinh Diem in Saigon (1954-1963) offers an earlier cautionary roadmap that helps explain why Washington has so often found itself in such an impossibly contradictory position with its authoritarian allies.

Landing in Saigon in mid-1954 after years of exile in the United States and Europe, Diem had no real political base.  He could, however, count on powerful patrons in Washington, notably Democratic senators Mike Mansfield and John F. Kennedy. One of the few people to greet Diem at the airport that day was the legendary CIA operative Edward Lansdale, Washington’s master of political manipulation in Southeast Asia. Amid the chaos accompanying France’s defeat in its long, bloody Indochina War, Lansdale maneuvered brilliantly to secure Diem’s tenuous hold on power in the southern part of Vietnam.  In the meantime, U.S. diplomats sent his rival, the Emperor Bao Dai, packing for Paris. Within months, thanks to Washington’s backing, Diem won an absurd 98.2% of a rigged vote for the presidency and promptly promulgated a new constitution that ended the Vietnamese monarchy after a millennium.

Channeling all aid payments through Diem, Washington managed to destroy the last vestiges of French colonial support for any of his potential rivals in the south, while winning the president a narrow political base within the army, among civil servants, and in the minority Catholic community. Backed by a seeming cornucopia of American support, Diem proceeded to deal harshly with South Vietnam’s Buddhist sects, harassed the Viet Minh veterans of the war against the French, and resisted the implementation of rural reforms that might have won him broader support among the country’s peasant population.

When the U.S. Embassy pressed for reforms, he simply stalled, convinced that Washington, having already invested so much of its prestige in his regime, would be unable to withhold support. Like Karzai in Kabul, Diem’s ultimate weapon was his weakness — the threat that his government, shaky as it was, might simply collapse if pushed too hard.

In the end, the Americans invariably backed down, sacrificing any hope of real change in order to maintain the ongoing war effort against the local Viet Cong rebels and their North Vietnamese backers. As rebellion and dissent rose in the south, Washington ratcheted up its military aid to battle the communists, inadvertently giving Diem more weapons to wield against his own people, communist and non-communist alike.

Working through his brother Ngo Dinh Nhu — and this should have an eerie resonance today — the Diems took control of Saigon’s drug racket, pocketing significant profits as they built up a nexus of secret police, prisons, and concentration camps to deal with suspected dissidents. At the time of Diem’s downfall in 1963, there were some 50,000 prisoners in his gulag.

Nonetheless, from 1960 to 1963, the regime only weakened as resistance sparked repression and repression redoubled resistance.  Soon South Vietnam was wracked by Buddhist riots in the cities and a spreading Communist revolution in the countryside. Moving after dark, Viet Cong guerrillas slowly began to encircle Saigon, assassinating Diem’s unpopular village headmen by the thousands.

In this three-year period, the US military mission in Saigon tried every conceivable counterinsurgency strategy.  They brought in helicopters and armored vehicles to improve conventional mobility, deployed the Green Berets for unconventional combat, built up regional militias for localized security, constructed “strategic hamlets” in order to isolate eight million peasants inside supposedly secure fortified compounds, and ratcheted up CIA assassinations of suspected Viet Cong leaders. Nothing worked. Even the best military strategy could not fix the underlying political problem. By 1963, the Viet Cong had grown from a handful of fighters into a guerrilla army that controlled more than half the countryside.

When protesting Buddhist monk Quang Duc assumed the lotus position on a Saigon street in June 1963 and held the posture while followers lit his gasoline-soaked robes which erupted in fatal flames, the Kennedy administration could no longer ignore the crisis. As Diem’s batons cracked the heads of Buddhist demonstrators and Nhu’s wife applauded what she called “monk barbecues,” Washington began to officially protest the ruthless repression. Instead of responding, Diem (shades of Karzai) began working through his brother Nhu to open negotiations with the communists in Hanoi, signaling Washington that he was perfectly willing to betray the U.S. war effort and possibly form a coalition with North Vietnam.

In the midst of this crisis, a newly appointed American ambassador, Henry Cabot Lodge, arrived in Saigon and within days approved a plan for a CIA-backed coup to overthrow Diem. For the next few months, Lansdale’s CIA understudy Lucien Conein met regularly with Saigon’s generals to hatch an elaborate plot that was unleashed with devastating effect on November 1, 1963.

As rebel troops stormed the palace, Diem and his brother Nhu fled to a safe house in Saigon’s Chinatown. Flushed from hiding by promises of safe conduct into exile, Diem climbed aboard a military convoy for what he thought was a ride to the airport. But CIA operative Conein had vetoed the flight plans.  A military assassin intercepted the convoy, spraying Diem’s body with bullets and stabbing his bleeding corpse in a coup de grâce.

Although Ambassador Lodge hosted an embassy celebration for the rebel officers and cabled President Kennedy that Diem’s death would mean a “shorter war,” the country soon collapsed into a series of military coups and counter-coups that crippled army operations. Over the next 32 months, Saigon had nine new governments and a change of cabinet every 15 weeks — all incompetent, corrupt, and ineffective.

After spending a decade building up Diem’s regime and a day destroying it, the U.S. had seemingly irrevocably linked its own power and prestige to the Saigon government — any government. The “best and brightest” in Washington were convinced that they could not just withdraw from South Vietnam without striking a devastating blow against American “credibility.” As South Vietnam slid toward defeat in the two years following Diem’s death, the first of 540,000 U.S. combat troops began arriving, ensuring that Vietnam would be transformed from an American-backed war into an American war.

Under the circumstances, Washington searched desperately for anyone who could provide sufficient stability to prosecute the war against the communists and eventually, with palpable relief, embraced a military junta headed by General Nguyen Van Thieu. Installed and sustained in power by American aid, Thieu had no popular following and ruled through military repression, repeating the same mistakes that led to Diem’s downfall. But chastened by its experience after the assassination of Diem, the U.S. Embassy decided to ignore Thieu’s unpopularity and continue to build his army. Once Washington began to reduce its aid after 1973, Thieu found that his troops simply would not fight to defend his unpopular government. In April 1975, he carried a hoard of stolen gold into exile while his army collapsed with stunning speed, suffering one of the most devastating collapses in military history.

In pursuit of its Vietnam War effort, Washington required a Saigon government responsive to its demands, yet popular with its own peasantry, strong enough to wage a war in the villages, yet sensitive to the needs of the country’s poor villagers.  These were hopelessly contradictory political requisites. Finding that civilian regimes engaged in impossible-to-control intrigues, the U.S. ultimately settled for authoritarian military rule which, acceptable as it proved in Washington, was disdained by the Vietnamese peasantry.

Death or Exile?

So is President Karzai, like Diem, doomed to die on the streets of Kabul or will he, one day, find himself like Thieu boarding a midnight flight into exile?

History, or at least our awareness of its lessons, does change things, albeit in complex, unpredictable ways.  Today, senior U.S. envoys have Diem’s cautionary tale encoded in their diplomatic DNA, which undoubtedly precludes any literal replay of his fate. After sanctioning Diem’s assassination, Washington watched in dismay as South Vietnam plunged into chaos. So chastened was the U.S. Embassy by this dismal outcome that it backed the subsequent military regime to a fault.

A decade later, the Senate’s Church Committee uncovered other U.S. attempts at assassination-cum-regime-change in the Congo, Chile, Cuba, and the Dominican Republic that further stigmatized this option. In effect, antibodies from the disastrous CIA coup against Diem, still in Washington’s political bloodstream, reduce the possibility of any similar move against Karzai today.

Ironically, those who seek to avoid the past may be doomed to repeat it. By accepting Karzai’s massive electoral fraud and refusing to consider alternatives last August, Washington has, like it or not, put its stamp of approval on his spreading corruption and the political instability that accompanies it.  In this way, the Obama administration in its early days invited a sad denouement to its Afghan adventure, one potentially akin to Vietnam after Diem’s death.  America’s representatives in Kabul are once again hurtling down history’s highway, eyes fixed on the rear-view mirror, not the precipice that lies dead ahead.

In the experiences of both Ngo Dinh Diem and Hamid Karzai lurks a self-defeating pattern common to Washington’s alliances with dictators throughout the Third World, then and now.  Selected and often installed in office by Washington, or at least backed by massive American military aid, these client figures become desperately dependent, even as they fail to implement the sorts of reforms that might enable them to build an independent political base. Torn between pleasing their foreign patrons or their own people, they wind up pleasing neither. As opposition to their rule grows, a downward spiral of repression and corruption often ends in collapse; while, for all its power, Washington descends into frustration and despair, unable to force its allies to adopt reforms which might allow them to survive. Such a collapse is a major crisis for the White House, but often — Diem’s case is obviously an exception — little more than an airplane ride into exile for the local autocrat or dictator.

There was — and is — a fundamental structural flaw in any American alliance with these autocrats. Inherent in these unequal alliances is a peculiar dynamic that makes the eventual collapse of such American-anointed leaders almost inevitable. At the outset, Washington selects a client who seems pliant enough to do its bidding. Such a client, in turn, opts for Washington’s support not because he is strong, but precisely because he needs foreign patronage to gain and hold office.

Once installed, the client, no matter how reluctant, has little choice but to make Washington’s demands his top priority, investing his slender political resources in placating foreign envoys. Responding to an American political agenda on civil and military matters, these autocrats often fail to devote sufficient energy, attention, and resources to cultivating a following; Diem found himself isolated in his Saigon palace, while Karzai has become a “president” justly, if derisively, nicknamed “the mayor of Kabul.”  Caught between the demands of a powerful foreign patron and countervailing local needs and desires, both leaders let guerrillas capture the countryside, while struggling uncomfortably, and in the end angrily, as well as resentfully, in the foreign embrace.

Nor are such parallels limited to Afghanistan today or Vietnam almost half a century ago. Since the end of World War II, many of the sharpest crises in U.S. foreign policy have arisen from just such problematic relationships with authoritarian client regimes. As a start, it was a similarly close relationship with General Fulgencio Batista of Cuba in the 1950s which inspired the Cuban revolution.  That culminated, of course, in Fidel Castro’s rebels capturing the Cuban capital, Havana, in 1959, which in turn led the Kennedy administration into the catastrophic Bay of Pigs invasion and then the Cuban Missile Crisis.

For a full quarter-century, the U.S. played international patron to the Shah of Iran, intervening to save his regime from the threat of democracy in the early 1950s and later massively arming his police and military while making him Washington’s proxy power in the Persian Gulf. His fall in the Islamic revolution of 1979 not only removed the cornerstone of American power in this strategic region, but plunged Washington into a succession of foreign policy confrontations with Iran that have yet to end.

After a half-century as a similarly loyal client in Central America, the regime of Nicaragua’s Anastasio Somoza fell in the Sandinista revolution of 1979, creating a foreign policy problem marked by the CIA’s contra operation against the new Sandinista government and the seamy Iran-Contra scandal that roiled President Reagan’s second term.

Just last week, Washington’s anointed autocrat in Kyrgyzstan, Kurmanbek Bakiyev, fled the presidential palace when his riot police, despite firing live ammunition and killing more than 80 of his citizens, failed to stop opposition protesters from taking control of the capital, Bishkek. Although his rule was brutal and corrupt, last year the Obama administration courted Bakiyev sedulously and successfully to preserve U.S. use of the old Soviet air base at Manas critical for supply flights into Afghanistan. Even as riot police were beating the opposition into submission to prepare for Bakiyev’s “landslide victory” in last July’s elections, President Obama sent him a personal letter praising his support for the Afghan war. With Washington’s imprimatur, there was nothing to stop Bakiyev’s political slide into murderous repression and his ultimate fall from power.

Why have so many American alliances with Third World dictators collapsed in such a spectacular fashion, producing divisive recriminations at home and policy disasters abroad?

During Britain’s century of dominion, its self-confident servants of empire, from viceroys in plumed hats to district officers in khaki shorts, ruled much of Africa and Asia through an imperial system of protectorates, indirect rule, and direct colonial rule. In the succeeding American “half century” of hegemony, Washington carried the burden of global power without a formal colonial system, substituting its military advisers for imperial viceroys.

In this new landscape of sovereign states that emerged after World War II, Washington has had to pursue a contradictory policy as it dealt with the leaders of nominally independent nations that were also deeply dependent on foreign economic and military aid. After identifying its own prestige with these fragile regimes, Washington usually tries to coax, chide, or threaten its allies into embracing what it considers needed reforms. Even when this counsel fails and prudence might dictate the start of a staged withdrawal, as in Saigon in 1963 and Kabul today, American envoys simply cannot let go of their unrepentant, resentful allies, as the long slide into disaster gains momentum.

With few choices between diplomatic niceties and a destabilizing coup, Washington invariably ends up defaulting to an inflexible foreign policy at the edge of paralysis that often ends with the collapse of our authoritarian allies, whether Diem in Saigon, the Shah in Tehran, or on some dismal day yet to come, Hamid Karzai in Kabul. To avoid this impending debacle, our only realistic option in Afghanistan today may well be the one we wish we had taken in Saigon back in August 1963 — a staged withdrawal of U.S. forces.

Copyright 2010 Alfred W. McCoy

Alfred W. McCoy is the J.R.W. Smail Professor of History at the University of Wisconsin-Madison. He is the author of The Politics of Heroin: CIA Complicity in the Global Drug Trade , which probes the conjuncture of illicit narcotics and covert operations over the past 50 years. His latest book, Policing America’s Empire: The United States, the Philippines, and the Rise of the Surveillance State , explores the influence of overseas counterinsurgency operations on the spread of internal security measures here at home.

Published on Thursday, April 15, 2010 by TomDispatch.com

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