[Marxism] Wall Street opposed to the war?

[Louis Proyect <lnp3@xxxxxxxxx>]

http://www.thenation.com/doc/20060626/miller
Wall Street Doesn't Like This War

by KEN MILLER

(Ken Miller, a senior Wall Street investment banker, is CEO of Ken Miller
Capital, a New York merchant bank.)

About ten years ago, as part of a group visiting UN peacekeeping troops, I
found myself in a meeting with the parliament of the Republic of Abkhazia,
a country that had just lost the flower of its youth in a bloody war with
Georgia after the Soviet Union collapsed. One of our delegation had given
the lawmakers some unwelcome advice on foreign policy, but it was on me
that they focused their anger, since I had been introduced as an investment
banker. "You financiers love war!" their leader shouted. "You profit from it!"

It is true that sectors of the economy can profit from war in certain
circumstances, but Wall Street really doesn't like war--at least not the
one now raging in Iraq, which is beginning to look like a write-off. The
defense industry does like military expenditures. And US capitalists in
general do appreciate the role of a robust military budget in bolstering
the dollar as the ultimate reserve currency, in assuring that the rules of
global finance are favorable to our interests and in protecting access to
petroleum products. But we really do not like uncertainty. We like an
environment we think we understand, one in which a return- on-capital
analysis can be based on reliable assumptions of a predictable level of risk.

Wall Street hated the terrorist attacks of September 11, 2001. Not only
were they dramatically disruptive to the business of Wall Street; they also
sowed immense uncertainty in the minds of CEOs and consumers, slowing
capital and consumer expenditures. Risk premiums skyrocketed for property
and casualty insurance. Nonproductive investments of time and money for
security were required. But in time, with the delegation of the Bush
Administration's "war on terror" to professional soldiers, for-profit
contractors and first responders, and with casualties occurring at
"acceptable" levels, the Street returned to business as usual.

Today, the shares of all the big investment banks, along with the Dow Jones
and Nasdaq indexes, are trading at or near their five-year highs.
Stimulated by the fiscal deficit, huge consumer debt and a chronic trade
deficit that recycles our dollars back to us, the economy has been growing
at from 3 percent to 5 percent a year since the shock of the 2001 attacks
wore off. There remains, of course, the problem of too many dollars chasing
too few deals, a fact reflected in corporations massively buying back their
own stock, paying down debt and paying cash for acquisitions where
possible. Nevertheless, although there are none of the huge capital-eating
growth industries we have liked to finance in the past, such as railroads,
automobiles or telecommunications, we have invented other ways, such as
derivatives, securitizations and proprietary trading, of tailoring returns
on capital to the risk involved.

But despite Wall Street's golden moment, the problem of risk and
uncertainty has reasserted itself in an unexpected way. The very
unpopularity of the Bush Administration is threatening to create a seismic
shock to the system. In financial circles, the word "incompetent" is now
frequently applied to both Bush's foreign and domestic policies. The fiscal
profligacy in violation of traditional Republican principles, two weak
Treasury Secretaries and the recent loss of Federal Reserve chairman Alan
Greenspan's steady hand have begun to take their toll, creating a flight to
quality government bonds even as interest rates rise and the dollar weakens.

Wall Streeters now fall mainly into two camps: Those who think the war in
Iraq was itself a horrible mistake and those who think it could have been a
good choice but was bungled in the execution. It is not the $800 billion
the Iraq War is projected to cost that drives us nuts. A $13 trillion
economy can make adjustments. But the troop drawdown and failure to finish
the job in Afghanistan, the bad information in the run-up to the Iraq
invasion, the ever-changing rationales, the failure to develop realistic
scenarios after the collapse of Saddam Hussein and the chronic bloodletting
without an exit plan--these smack of the type of performance that, in the
brutal meritocracy of the Street, would cost us our jobs.

Perhaps the fiscal and war-fighting failures could be forgiven, but they
have metastasized into a much larger problem: a lame duck President with a
weak hand on the tiller. Even as American support for Bush and his war has
sunk to all-time lows, polls show that the ranking of potential terrorist
attacks on the nation has faded to a third-tier concern. So we know at some
level one of the hidden--and most unfortunate--costs of the war in Iraq has
been the Bush Administration's successful conflation of that military
adventure with the real challenge: the struggle to protect our country
against radical Islamic terrorists.

There is a growing feeling on the Street that the war against those who
would harm us has been and is being misfought. Democrats who once had their
lack of regard for this President to themselves are finding that this
position no longer distinguishes them from many Republicans. Democratic
politicians claim they gave this President authority relative to Iraq,
which he misused--but the electorate sees them as having voted for the war.
They put forth policies that would reorder our priorities in education,
energy, healthcare, the environment--policies that might have clicked in
the context of a nation unified in a war against a common enemy. But the
Administration remains effective in attacking its critics, portraying them
as unpatriotic whiners with nothing positive to say. So no matter how the
midterm elections come out, even if voters felt the Democrats had it in
them to help, they have no reason to believe help is on the way.

Wall Street could like a well-organized and properly prioritized "war" on
religious extremism. Reordering the education system to play a greater
national role with emphasis on teaching the skills necessary to fight a
long-term battle, developing an energy policy based on conservation and
technology, investing in human intelligence and the type of war-fighting
capabilities that the new realities imply--none of this would cause any
heartburn in the bastion of finance capital because it would involve the
steady, predictable investment of resources over time. Data mining and even
wiretapping would go down easily in the finance community if such measures
were likely to be effective in the real war on our nation. But spending
billions in a theater that has demonstrably worsened the problem, creating
the very haven for terrorists it was supposed to prevent: This no longer
has buy-in.

And Wall Street doesn't like to hear about "the long run." We mark to
market every day. It may be that in a few years, a securities position will
be worth five times what we paid today, but we are still obliged to carry
it on our books for what someone will really pay for it now. The Iraq War
is now increasingly seen as an ideologically based experiment, one that
departed radically from traditional US foreign policy. Leslie Gelb, former
head of the Council on Foreign Relations, has one plan for extrication,
Hillary Clinton another. But George W. Bush, who struggles to admit even
the smallest error, is promoting a stay-the-course program that draws on a
reservoir of trust, a pool of political capital that simply doesn't exist.

With our dollars piling up overseas and the world economy depending on
foreigners' confidence in our model, it is going to be hard for us to hold
our breath for two and a half years. The damage to our brand under this
management has been severe, and heretofore the cost has been neither paid
nor calculated. When the markets finally render their judgment for this war
and this Administration, there is likely to be a very hard landing.

--

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