Economic Principals

The war in Iraq probably is going better than you'd guess from the up-and-down stream of news coverage. But that doesn't mean it is going easy. You don't hear much these days from the Administration about Panama, as in "Iraq is just like Panama, only bigger and farther away."

The reference is to December 1989, when the first Bush Administration ordered the surprise invasion of the little Central American nation bisected by the strategically vital canal. Already we know more about the Republican Guard than we have forgotten about the Panama Defense Forces.

Yet there are certain striking similarities in the rationale behind the Panama invasion and the two wars with Iraq. The first episode was an attempt to deal with the ill-effects of drug money. Iraq has to do mainly with a dictatorial regime supported by oil booty.

To understand the common theme, it is necessary to travel even farther back in time. For the road to Baghdad began with a nearly forgotten incident in the Gulf of Siam more than a quarter century ago.

* * *

It was May 1975.

Two weeks earlier, Saigon had fallen to the North Vietnamese. The last Americans had staged an ignominious retreat from the roof of their embassy. President Gerald R. Ford, barely six months on the job in the wake of Richard Nixon's resignation, had declared that the war was "finished." He prepared to face the heat.

Whereupon the newly triumphant Khmer Rouge, intercepted the US merchant ship Mayaguez, steaming 60 miles off shore on its way to Thailand. They captured the ship and took its crew of 60 into custody. It was as it salt had been rubbed in a deep wound.

President Ford ordered an aircraft carrier, a destroyer and a Marine battalion landing team to the rescue. The US forces suffered a series of mishaps, including 23 commandos dead in a helicopter crash even before the operation began. Eventually the crew was rescued, but not before another Marine was killed, 50 wounded and 16 missing.

The incident was the first attempt to redress what already had become known as "Vietnam syndrome:" a lack of confidence in American military power so pervasive as to make it very difficult for American policy-makers to contemplate the use of force abroad. The mission was not a great public opinion success, but neither was it a fiasco, as had been an earlier attempt to rescue American prisoners of war from North Vietnam.

The White House chief of staff at the time: a hard-charging young executive named Donald Rumsfeld. His deputy: the 29-year-old Richard Cheney.

Within months, Rumsfeld and Cheney engineered a an administration shakeup designed to restore vigorous management to the American military establishment. Brent Scowcroft replaced Henry Kissinger as National Security Adviser. (Kissinger remained Secretary of State.)

Rumsfeld himself took over the Defense Department. Cheney became White House chief of staff. Named director of Central Intelligence was a former congressman from Texas named George H. W. Bush.

* * *

The Ford White House had bigger worries in 1975. There was the Organization of Petroleum Exporting Countries to contend with, too.

The year before, OPEC bureaucrats had doubled the price they demanded for oil amid elaborate threats of "boycott." Then they doubled it again.

Of all the mechanisms operating on the world stage during the 1970s, OPEC is perhaps the least understood. This much is clear: the oil price gyrations didn't just happen. Nor did they have anything to do with "running out of oil."

Such was the abundance of oil supplies in the '70s that American government complicity was required in order for the OPEC countries to organize a cartel to take control of the market, at least according to as reliable an authority as M.A. Adelman, professor of economics at MIT. His book on the oil price gyrations, Genie Out of the Bottle, remains the best source on the episode, though it is far from the whole story.

Why would the US government acquiesce to a hold-up that suddenly made the oil exporting countries rich, even to the point of helping to devise a superficially plausible cover story about running out of oil? There are all kinds of theories, but one that had great currency in and around Washington in the mid-1970s was that OPEC had been the tool, unwitting or otherwise, of global strategists of the sort personified by Richard Nixon and Henry Kissinger.

Watching the British pull back from their empire starting in the 1950s, from chokepoints such as Singapore and Suez, philosophers of "containment" worried that the men who ran the Soviet Union might one day be tempted to seek to expand their boundaries southward to include the Iraqi oil fields.

By the early 1970s, there was a pressing new question on the agenda. What force might act as a counterweight against the Soviets in the region of the Persian Gulf? Not American military power, certainly. The recent quagmire in Vietnam had ruled out that possibility. The only alternative would be to arm the Gulf States themselves with modern weapons. But of course that would be expensive. And with Vietnam still eating up huge sums of money, Congress had no appetite for appropriations to arm the Shah of Iran.

It's little more than a hypothesis -- one that has had far less than its fair share of attention from journalists and historians. Far-fetched? Not necessarily. Look at the individuals who later dreamed up Iran-Contra scheme to use sell Iran weapons to raise off-budget cash to finance the secret war against the Sandinistas in Nicaragua.

In any event, OPEC machinations in the early 1970s helped drive Gerald Ford from office in 1976 -- and Donald Rumsfeld, Dick Cheney and George H.W. Bush. Bush returned to office in 1980 as vice president. By then, the oil revenues had funded a huge arms buildup in the Middle East. A bitter war between Iraq and Iran would kill more than a million soldiers between 1980 and 1988.

That was, however, Ronald Reagan's problem. All the while the vice president's team was working on Latin America.

* * *

The problem in Latin America in the 1980s wasn't oil. It was narcotics -- marijuana, heroin and cocaine -- for which North Americans had been developing an apparently insatiable appetite. Powerful crime organizations had grown up to facilitate the trade.

A particularly nettlesome situation was Panama. There, a small-time strongman with a face marked by a childhood bout with smallpox, was giving fits to the US -- and particularly to the vice president who had been assigned to oversee the war on illicit drugs.. To refresh my memory, I re-read Kevin Buckley's gripping 1991 chronicle of the affair, Panama: The Whole Story.

Noriega had been a mere colonel when he ascended to the top job in Panamanian intelligence in 1970s. Before long, he had made him indispensable to the men in Washington overseeing relations in the hemisphere. Bush himself called on Noriega not long after taking over as director at the CIA.

By the mid-1980s, Reagan spymaster William Casey and Oliver North began depending on Noriega's support in their dealings with the Nicaraguan Contras. The Panananian soldier helped out, but he also began a deep association with the Medellin cocaine cartel.

When Noriega caused his principle rival to be brutally murdered in 1985, he became a serious embarrassment to then-vice president Bush, whose responsibilities included Latin Americas. The antagonism only escalated after that. By the time that Bush succeeded Ronald Reagan in 1989, Noriega was openly taunting Washington.

Barely a year after being elected president, Bush ordered the invasion of Panama and Noriega's arrest. The proximate cause was strongman Manuel Noriega's refusal to abide by the results of an election in which he had been defeated. The deeper purpose of "Operation Just Cause" was to rid the US of a one-time ally who had become murderous kingpin in the illicit drug trade.

Its planners were Defense secretary Dick Cheney and Chairman of the Joint Chiefs of Staff Colin Powell. The Panamanian invasion was purposefully advertised as being "the biggest contingency operation for US forces since World War II" -- evidence than the "Vietnam syndrome" was beginning to recede in importance.

And four days after the first paratroopers from the 82nd Airborne Division hit the ground Noriega surrendered to the papal nuncio in Panama City. Ten days after that he was on his way to a Florida jail cell to stand trial on a battery of charges. Two years later he was sentenced to 40 years.

American soldiers began returning home three weeks after they arrived, though not a few military police stayed behind for a time. Panama has been relatively peaceful ever since.

With the errant general finally retired to a prison near Miami, order was restored to the little nation. Ownership of the canal itself was uneventfully relinquished to the Panamanians a few years later. By and large, Central America today is peaceful.

True, drug traffic has probably actually increased since the Panamanian invasion. Today the mountainous coca-growing regions of four South American nations are in worse turmoil than ever. But that probably would have happened anyway.

The invasion of Panama turned out to be a dress rehearsal for the First Gulf War, which George H. W. Bush began, with massive international support, little more than a year later.

* * *

The Iraqi story is being told too well and variously to go into here. But a few key points merit emphasis.

For one thing, the men currently on the quarterdeck of American policy view the Second Gulf War as evolving in a more or less straight line from their initial response to the Mayaguez incident -- trivial as that rescue operation against pirates now seems to have been.

At each juncture, the question has been, how to how to deal with American opinion in the aftermath of its long war in Vietnam? How to build confidence that the military knows what it is doing? How to retain that confidence after force has been deployed?

Then, too, it is clear that the Bush administration considers the current confrontation with Saddam to be the climactic phase of a "twelve-year war." Among the costs of the long stand-off, they count at least the rise of Osama bin Laden -- and perhaps the failure of American diplomacy to bring forth a Palestinian state. Panama took three weeks. So what, they say, if the Mideast takes fifteen years, as long as the American people are willing to stand behind the effort?

Finally, and most important, the First and Second Gulf Wars should be seen as having to do mainly with cleaning up the ill effects of irregularly high oil prices for thirty years. The OPEC scam itself should be understood as an outgrowth of the Cold War. Its costs should be accounted as involving, not just a pair of global recessions, but the rise to power of wealthy states in Iran, Iraq and Saudi Arabia, free to do petty much as they pleased.

It is for that reason that Financial Times columnist Amity Shlaes wrote the other day that, when the time comes for reconstruction, "The single most important thing the US and Britain can do to facilitate stability is to privatize Iraq's oil reserves -- even if it means cutting deserving Kurdish leaders out of the bounty. And even if it means being accused of creating a 'Texas on the Tigris.'"

She's almost certainly right. Perhaps the Gulf Wars are best understood as being antitrust policy for oil -- industrial reorganization by force in the aftermath of successful monetary stabilization.

Whether it will work remains to be seen. The outcome will be determined, not just the by the reaction of the Iraqi people, but by the response of all of Islam, from Morocco to Djakarta.

The example of India shows that that attitudes towards development can and do sometimes change dramatically in a rather short period of time. Whether this will also be the case with Islam will remain an open question for many years.

But in understanding America, it important to recognize that George W. Bush, his father before him, Donald Rumsfeld and Dick Cheney have been running, not just against the Democrats for 30 years, but against certain tendencies in the Republican party as well.

Their preference for direct intervention should be understood as being in contrast to their distaste for elaborate and deceptive proxy schemes, such as the Iran-Contra ruse and, just possibly, OPEC itself. And on those grounds, at least, seems fair to ask that the cards-on-the-table approach should be admired.