Risking Nuclear War for Dollars

Yves here. I am a big fan of Paul Jay and his new initiative, theAnalysis.com, which is currently primarily podcasts. And it is particularly exciting to learn that Paul is working with Daniel Ellsberg on a documentary based on Ellsberg’s recent book, The Doomsday Machine, on how close the world has been and is to nuclear war.

However, a recent interview posted on Paul’s site, from Law and Disorder Radio, muddies important information about elevated nuclear war risk by including bizarre conspiracy theory that big institutional investors are behind it. I’m spilling a few pixels on this topic because Jay’s misperception is widely shared, thanks in no small measure to a “garbage in-garbage out” network analysis performed a few years back, and also in the hope that it will alert Jay to steering cheer of this argument in his documentary, since its inclusion would risk weakening the presentation.

The interview, Risking the Apocalypse for Dollars, contends that institutional investors like BlackRock and Vanguard pressure military contractors to pursue higher returns aggressivelyy, including nuclear war profiteering. More generally, it’s based on a total misperception of how little influence transient public shareholders have over corporate managers. Look, for instance, at how long Wells Fargo’s John Stumpf and Boeing’s Dennis Muilenburg held on past their sell-by dates.

Here is the short-form debunking of the notion that institutional investors “control” companies in which they own shares. What do they do when they are unhappy with performance? They unown them.

Aside from a small group of activist investors, who are typically high-fee hedge funds, institutional investors don’t bother trying to change company behavior. It takes too much time and energy relative to any payoff, which would also result in gains to the free riders who also owned the shares but didn’t participate in the costly lobbying/pressure campaign….like their direct competitors.

This mindset is even more true of passive investors, meaning ones who sell funds that seek to match the performance of an index fund, like the S&P 500. Index replicators do not care what they own. They focus relentlessly on doing the best job of matching the index at a rock bottom cost. That means they often uses futures as part of their mix and are unlikely to own all the stocks in a particular index.

Vanguard moved to the dominant position in the retail funds management business due to its founder Jack Bogle being an early evangelist for the importance of minimizing fees and passive investing as the way to achieve that. BlackRock is also primarily a passive fund manager. From a January 2020 story in Pensions & Investments, BlackRock’s $7 trillion in AUM built on passive and ETFs:

iShares are ETFs and about 85% of the dollar value of BlackRock’s ETFs are in passive bonds products.

An additional reason why big fund managers like BlackRock, Vanguard, and Fidelity don’t hassle company managements about what they are doing? They want their 401(k) business. Doing anything than making nice would be very bad for that business.

Mind you, having public shareholders who engage in no meaningful oversight of the companies in which they invest is the inevitable result of regulations that promoted liquidity. See Amar Bhide’s Harvard Business Review article Efficient Markets, Deficient Governance for details.

Unfortunately, you don’t need to look much further than the defense companies themselves for explanations as to their fondness for dialing up geopolitical risk. And while it is easier and more appealing to assign blame to known bad actors like Big Finance, power in the Beltway operates mainly through loose collaborative networks described best by Janine Wedel in her classic, The Shadow Elite. The key actors are what she calls flexians. From a review in the Pacific Standard: “A new professional class of movers and shakers—people who serve overlapping roles in government, business, and media with smiling finesse—is controlling the flow of power and money in America.”

By Micheal Smith. Produced by Law and Disorder

Michael Smith: The chance for nuclear war, which would destroy all human life on earth, has never been higher.

Just last week, President Donald Trump withdrew America from the Open Skies Treaty. The treaty is an agreement between 34 nations that allows each country to fly over each other’s territories. The treaty is designed to provide transparency and mutual observation of military developments. He also withdrew from the intermediary ballistic missile treaty with Russia as a consequence. The Bulletin of Atomic Scientists has pushed the hands of its Doomsday Clock on its magazine cover forward to almost midnight.

Shortly after taking office, Trump pulled out of the Iran nuclear deal. Trump enjoys the financial and political backing of big businesses the banks, the hedge funds, and the military-industrial complex. These moneyed interests profit greatly from nuclear rearmament, which is now going on. First under Obama and then Trump, one trillion dollars is planned to be spent over the next 30 years for a new generation of nuclear weapons, including low yield ones which are likely to be used.

A whistleblowing truth-teller, Daniel Ellsberg, has recently written the grimly important book, The Doomsday Machine. He believes that so far avoidance of a nuclear war has been miraculous and that the danger is as present today as it was during the Cold War. He thinks seeking profit, in spite of the risk of nuclear winter, is institutional madness.

We’re joined today by Paul Jay. The founder and editor of the Analysis.News. He’s a journalist, filmmaker, and the founder of The Real News. He’s currently working with Daniel Ellsberg on a documentary series based on Ellsberg’s book, The Doomsday Machine–Confessions of a Nuclear War Planner. We will discuss with him the kind of movement that’s needed to reverse the nuclear arms race, as well as the Democratic Organization of the Society. Paul Jay, welcome back to Law and Disorder.

Paul Jay: Thank you, Michael. Thanks for inviting me.

Michael: Paul, let’s talk about the nuclear threat and how we could force them to stop gambling with our lives. Do you think a nuclear war, accidentally or otherwise, is likely?

Paul Jay: The people I have interviewed, from Daniel Ellsberg to Larry Wilkerson, who used to be Colin Powell’s chief of staff; I’ve seen interviews with the former diplomats, military people. They all think that nuclear war is not likely. They think it is assured. It’s not that there’s a chance, they think, of nuclear war. They think there is 100 % certainty that if things continue as they are at some point sooner, it could be today or tomorrow or later, it could be some years from now, there will be, at the very least, accidental nuclear war. The safeguards simply aren’t safe enough, and that this new investment, the new nuclear arms race that has started under Obama, but it’s also happening under Putin, driven by the military-industrial complexes of Russia and the United States, although the Americans are certainly more the instigators. But these whole new whack of nuclear weapons are coming online and the old ones that still exist and in deteriorating situations that are not safe, the possibility of accidental nuclear war is not possible, it is certain. They think the possibility of some kind of terrorist attack using dirty bombs could be mistaken for an attack by a major power. And if the dirty bomb went off in New York, as someone would have put a small nuclear bomb in a container ship and it blows up in New York Harbor, there’s only a 10 second window. We’re still on a hair-trigger alert between Russia and the United States. 10 seconds for the militaries of both countries to decide, if what just happened was an attack or terrorist attack, an accident, ten seconds.

Michael: All the people are not talking 10 minutes. You’re talking ten seconds.

Paul Jay: Ten seconds. Hair-trigger that on a radar map they see blips coming in to decide whether it’s geese or bombers. Everyone uses the same phrase. It is a miracle we are still here. The miracle is because, on several occasions, I think it’s close to a dozen If the protocols had been followed the soldiers who saw the blips or depending on the case, what the situation was. But they didn’t follow orders.

And that’s why we’re still here talking about it. And I know if you want, I can give a couple examples of those cases.

Michael: Please do.

Paul Jay: I know it’s out there in the press somewhat, but I learned more about it in talking with Daniel Ellsberg. I’m working on a film with Ellsberg, which is kind of why I’m into this topic because before I started interviewing Ellsberg, I was in nuclear war denial as much as everybody else was. It was just not anywhere near the front of my consciousness. You know, all of this, I think when the Cold War ended, just kind of the whole anti-nuclear movement went away, and people thought, oh, well, you know, Russia and United States are going to get along now. They’ll figure out the old nukes and all this, and it just receded as an issue. But all the people that know the issue say it’s actually more dangerous now than it was during the Cold War.

But Ellsberg woke me up to this. And one of the stories in his book, Doomsday Machine, and this documentary series I’m going to be doing is based on that book, it was during the Cuban Missile Crisis. There was a Russian submarine underneath the American ships as the American ships were blockading Cuba. What the Americans didn’t know is that the Russians had a protocol that if the submarine was out of contact with Moscow for 48 hours, if they couldn’t establish radio communication, they should assume nuclear war had broken out and fire. They had some kind of nuclear-tipped small missiles, and they were only 40 miles off the coast of the United States. And they should fire into the United States, assuming that Russia had been attacked, the Soviet Union had been attacked.

Well, while the Americans didn’t know about that protocol, what the Russians didn’t know is the Americans had figured out how to jam communication between the submarine and Moscow. So the communication does go down for 48 hours because it’s being jammed. The Russians don’t know that that’s the reason. The 48 hours go by, and it’s time to break out the envelopes that give the trigger orders to shoot order. So they bring out the envelope, and the protocol is three senior officers have to sign that they’ve agreed it’s appropriate to fire. So the captain signs, number two in command signs and then it’s up to the number three. Number three is the guy who’s the party official, and he represents the Soviet Communist Party on the ship, and he has to sign and he refuses. He says, “What if this is a technical problem?” And he actually gets disciplined when he gets home, but it’s only because he refused to sign that nuclear war didn’t break out during the Cuban crisis. And then there’s other examples like this both in Ellsberg’s book, and other places. We’re only here because a few people refused to follow orders. And it is a miracle.

Michael: Who owns the nuclear weapons production industry? And is it very profitable?

Paul Jay: Well, profit is what it’s all about, and this is what’s ridiculous. People have to understand how systemically dangerous capitalism is now. And this nothing says it more than the fact that it purely profits driving the nuclear war strategy of the United States. Daniel Ellsberg has a line which he says the nuclear weapons program after World War Two was a commercial subsidy for the aerospace industry. That there simply was no military justification to develop a nuclear weapons program after World War Two.

He points to the ICBM. The whole ICBM program is obsolete. Billions and billions invested in the existing ICBM and new ICBM are coming online. But ICBM is, according to all the military experts that I’ve read, are easy targets. Intelligence on both sides, Russia and the United States and Chinese, for that matter. The Chinese are a little bit of an exception here because the Chinese have not built their nuclear force out anywhere near to the extent of Russia and the United States.

But they know where the ICBM is, They’re essentially targets and they’re not that effective as a deterrent. What is effective as a deterrent are nuclear-armed submarines because they move around. It’s hard to track where they are and they have more than enough armaments to end life on Earth. But ICBM continues because they’re very expensive and the armaments industry makes tons of money out of making them. But if you want to go to the beginnings of this and understand the profit motive, I interviewed a guy named Lester Ernest and he was part of a program at M.I.T. in around 1959/1960.

He had joined the army. He got into the early computer program of the U.S. Army. When he got out, M.I.T. asked him to come and he started working on something called the Sage Radar System. And the Sage Radar System is in the Dr. Strangelove movie and maybe in some others. And you see this great big board where they can track incoming airplanes and then they supposedly know everything. And the Stage Radar System was connected to bomarc missiles. And what Sage would do is if Russian bombers were flying in, the computer system, and this was the largest gathering of computer power in the history of the world, at the time. And in fact, some of the technology that led to the creation of the Internet came out of the work done to develop the Sage radar system.

And they were going to track these bombers and then hit them with bomb arc missiles. And this gave everyone the assurance that the United States would be safe with developing their own nuclear armaments threat. And this defense system, they didn’t have to worry. There was even an underlying suggestion that the United States could conduct a first strike against the Soviet Union and still be safe because of sage and the Bomarc missiles.

So anyway, Lester goes to work at M.I.T. and he gets there in two or three days. And he turns to one of his colleagues and he says, ‘How did you guys figure out the radar jamming systems?’ Because we know the Soviet planes and our planes, everybody’s got radar jamming now. And Lester told me and I have this on camera, Lester says, ‘There’s a long silence. And the guy says to him, well, we didn’t really figure that out. And Lester says, ‘Well, then none of this works. And the guy says, well, we don’t talk about that,’. The whole thing was a fraud. They spent in today’s dollars a trillion dollars over about 25 years. And the whole thing was a scam. And the manufacturers of the Sage Radar System, the manufacturer of the bomarc missiles, which they then, this is another great one. I love this one.

Lester has to go to Congress. And this is asked by the armaments people, some of the Pentagon people, to go to Congress and get them to agree that the Bomark missiles that are going to shoot down these Soviet planes should be armed with nuclear missiles, nuclear warheads. I said to Lester, I said, ‘hold on for a second, so you’re gonna go to Congress and get them to recommend that Soviet bombers flying over Canada and the United States with nuclear weapons are going to be hit by missiles with nuclear weapons’. And all this is going to happen over Canadian and American territory. And this is making everyone safe. I said, I’m sorry excuse my language, ‘That’s F’ing insane’, and Lester says, ‘Of course it’s insane’. I said, ‘did you do it?’ He said, ‘Yeah, I went and they agreed. And the Bomarc missiles were armed with nuclear-tipped nuclear missiles’. I said, ‘Why did you do it?’. He said, ‘You know, we were just at that point in it for the money. We all thought we were all going to die. We all thought nuclear war was going to end everything. And we were just so cynical and we were getting paid so much. And the whole culture was about money sloshing around the manufacturers of the radar, the weapons and so on. The Pentagon, everybody was in on it and we went along with it’. He’s since regrets at all. He became the founder of the artificial intelligence lab at Stanford University and fought for open source and against trademark and copyrights and things. It kind of woke him up eventually.

But this whole fraud is at the heart of nuclear war planning. As we know that that nuclear war doesn’t now just mean the destruction of all the major cities of the United States, the Soviet Union, of course, Europe is gone. But it used to be thought, oh, well, that’s only the northern hemisphere. At least humans will survive in the southern hemisphere. Well, that’s not true either.

It’s now pretty clear that there’ll be something called nuclear winter and that the firestorms created by the burning of the cities will create so much smoke and ash in the atmosphere, that will be the end of agriculture all around the globe. And this business, the manufacturing of the nuclear weapons, the Pentagon strategists, Congress that buys into it, Obama and then Trump and of course, all of the presidents since Truman. They go along with this because of the pressure of the military-industrial complex and the whole culture of proving that America’s the greatest Hegemon and so on. It’s put life on Earth at risk. But while there are political considerations, geopolitical considerations, this is still the grand chessboard for the people that think about these things. The heart of it is money making.

Michael: We’ve got about ten more minutes, Paul. I’ve got three more questions for you. Does America’s dominant global commercial position depend on military might, including the nuclear arsenal?

Paul Jay: That’s a good question. It certainly doesn’t depend on the nuclear arsenal, really. But that’s not to say the nuclear arsenal isn’t used. It is used as a threat against non-nuclear countries. Take Iran. There’s always sort of in the back of the confrontational discourse between the United States and Iran, the threat that a tactical nuclear weapon could be used against Iran. And in fact, Sheldon Adelson, the billionaire who is the big supporter of the far-right forces in Israel, and he helped elect Trump, he’s the one that financed Trump. He’s actually said on a panel in 2013, in New York, that the United States should seriously consider dropping a tactical nuclear weapon in an Iranian desert to send the Iranians a message of what’s in store for them. And as insane as that is, and insane as Sheldon Adelson is. Sheldon Adelson has the ear of Donald Trump. And even before that, Adelson had the ear of very powerful Republicans that he would donate money to.

So nuclear weapons are a threat to help enforce American dominance but it’s not needed. Is the military might needed? Well, look at the inroads China’s making. China’s become the greatest trading partner of Brazil. It’s the number two or number one trading partner of every other country in Latin America. It’s ahead of the United States now in Africa. It certainly competes with and in many countries is ahead of commercial relationships throughout Asia. So where is this great military machine preventing the growth of the commercial power of China? It’s not. So the competition for a commercial hegemony, commercial global dominance, the military may be in the older days played that kind of role where Americans would directly go intervene with American troops and do regime change and get a pro-American regime. But how’d that work out in Iraq? They not only did not get a pro-American government, they did not even get control of the oil in Iraq. Interestingly enough, Chinese oil companies last I saw had more contracts than the American ones did because of the great anti-American sentiment amongst the Iraqi people. They got a government in Iraq that’s at least as aligned with Iran as it is with the United States.

You know, those days of being able to just go in and get regime change, like look at Libya. Libya was a grab. Libyan war was about Libyan oil, obviously. Well, whichever’s chaos and the Russians are making a big inroad in Libyan oil.

So where is it that the military supports such commercial dominance?

I’m not saying it doesn’t do anything. I’m sure in some situations the power of the American armed forces, certainly in the Middle East, where they in Bahrain, where they have a big fleet. The fact that the army is right there, it helps prop up the monarchy of Bahrain and Saudi Arabia. It’s not that it doesn’t play any role, but it doesn’t play that significant role because every time they actually try to use the military to intervene, it’s a debacle.

Michael: Paul Jay, why, in this time of the COVID 19 pandemic, the great civil unrest, 40 million people unemployed, why is this a good time to raise the issue of nuclear disarmament?

Paul Jay: Well, because the threat is so imminent and most people have no sense of it at all. Even on the left, when I tell people I’m working on a film with Ellsberg about the Doomsday Machine, they raise their eyebrows and say, well, we’ve lived we’ve survived it this long. There’s no reason to think we won’t survive it longer. And the climate is far more dangerous an issue with the climate crisis.

And, well, I would say the answer’s two things. One is, would you do want to trust a class political institutions that couldn’t deal with a virus with nuclear weapons and Armageddon? You’re going to trust our fate to those people? They couldn’t prepare for a virus that they knew about for years. These are the people you’re going to trust with the survival of humans. The second reason I say why now is I think the pandemic has made the unthinkable thinkable.

This idea, even though we knew there was a pandemic coming, it just wasn’t real, it was abstract. The same way climate change is still abstract for so many people. But it’s a dose of reality and it’s a shredding of the sort of bubble that entertainment culture creates that we’re all, you know, as long as you’re not poor, as long as you’re not a poor person of color, life is OK and okay, enough that it’s better to just live in the comfort of denial. Well, the pandemic has broken down a lot of that comfort of denial. The other thing about the issue of nuclear weapons, while there are some immediate issues that need to be demanded, for example, the elimination of ICBM’s, the reduction at the very least of nuclear weapons down to 10 or 20 at the max, enough that you could say there’s a deterrent because Ellsberg believes you just can’t win the argument at this stage of not having any weapons at all. But you make the situation so much safer if you’re down to 10 or 20 and not thousands.

So that’s an immediate issue. But when you go beyond that kind of issue, the solution to the problem of the nuclear threat is the same solution as it is for climate crisis. Frankly, it’s the same solution for dealing with future pandemics. It’s the same solution for dealing with poverty. We have to deal with who has power. We have to deal with democratizing the economy and the development of converting military production to green production and democratizing politics. And it’s all about developing, I think, public economic institutions, starting with banking as a public utility and eroding the power of Wall Street. Because you asked who owns the nuclear armaments manufacturing companies?

Well, the same companies that interesting enough on the media, the same institutional investors, BlackRock, Vanguard, State Street, the other big asset managers and financial institutions that own 93% of the New York Times own Lockheed Martin, Raytheon, Boeing, the 12 companies that are the major manufacturers of nuclear weapons are all primarily owned by the same institutional investors that control, ready for this, 90% of the S&P 500. The concentration of ownership that’s taken place since 2007/08 crisis where these massive asset management companies like BlackRock, led by this guy, Larry Fink, who might be Biden’s secretary of the Treasury.

BlackRock is the company that just got handed the contract by the Federal Reserve to dole out this trillion to 700 billion or trillion. I can’t remember the number, to corporations, and so on. They own the companies that make all the weapons, including nuclear weapons. The same companies own the majority controlling interest of all the major fossil fuel companies, except for Total from France. They owned all the major corporate media, with the exception of Bloomberg, which is privately owned, and the Washington Post, which is privately owned. But everything that’s publicly owned is controlled by the same massive asset management companies. And it’s not like this is the evil Dr. Strangelove. These guys are just, that’s what they do.

They invest and they need maximum return on their capital. Like whose money is BlackRock investing? Pension funds, sovereign wealth funds, billionaires’ money. Between the three top asset management companies, they control 14 trillion dollars. That’s more than the GDP of China. Bloomberg says by 2020, their going to control more assets than the GDP of the United States. It’s a machine. It’s a blind machine. The way this capitalism works. The consciousness it creates in the people that are the elites and the people that manage these big institutions, they may individually understand how bloody insane it is, just the way Lester Earnest understood how insane the Sage Radar System was. But they can’t stop doing it. It’s just what it is and who they are. It only changes with a mass movement that demands these kinds of economic and democratic reforms with power in the streets that far surpasses what we’re seeing and far more conscious, not burning down buildings for no reason, but millions and millions of people in the streets combined with an electoral strategy to elect progressive candidates. And if we don’t do it, we’re doomed.

Michael: Well, Paul Jay. I think this is a fitting time to end our interview. How can people follow your work?

Paul Jay; We’re out on the web. WWW, if people still say that, theAnalysis.news, if it’s easier to remember, you can do theanalysis.com.

Michael: Excellent. Paul Jay. It’s been very enlightening having a chance to talk with you. I thank you very much for being on law and disorder. And you be safe and be well.

Paul Jay: Same for you, Michael.

Michael: Take it easy.