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Crony capitalism: Bush policies on oil and in Iraq

I am starting to become quite cynical about the Bush Administration and crony capitalism. There may be no smoking gun, no e-mail chain to indict conspirators. The Bushies may break no laws. But, it is increasingly obvious that the War in Iraq and Bush policy on oil is very much about crony capitalism.

Yesterday and today, I came across a number of stories suggesting that the Bush administration is rewarding special interests in its policy initiatives, calling into question its policy motives.

Drilling for Oil
The first issue I noted was drilling in Alaska. John McCain has called for an opening of the Arctic National Wildlife Refuge in Alaska to oil drilling. President Bush supports him. The Guardian Newspaper says:

George Bush, responding to public alarm over soaring petrol prices, yesterday proposed overturning decades-old bans on drilling for oil off the U.S. coast and in the pristine Alaskan wilderness. “There’s no excuse for delay,” the president told a White House press conference. America was too dependent on countries abroad, many of them in unstable regions.

“Congress must face a hard reality: unless members are willing to accept gas prices at today’s painful levels, or even higher, our nation must produce more oil. And we must start now,” he said.

Expanding oil extraction off the coast would provide 18bn barrels, enough to supply the U.S. for more than two years. As for Alaska, he said advances in technology meant that oil could be extracted from the Arctic National Wildlife Refuge with “virtually no impact” on the land or wildlife.

His other proposals included extraction of oil from shale in the Green River Basin that lies in Colorado, Utah and Wyoming – a move opposed by environmentalists. Finally, he wants more oil refineries in the US, to reduce imports of refined oil.

The plan has almost no chance of being adopted. Congress, which is controlled by the Democrats, has consistently blocked exploration, for environmental reasons.

-The Guardian, 19 Jun 2008

In a blog entry in April called Drilling for oil I said the environmental concerns probably outweigh the benefits on drilling. Moreover, drilling for oil is not going to be a short-term solution. The oil drilled will not be available for many years and it will only amount to two years’ worth of oil at the most — not a very long-term solution. This is an obvious opportunistic attempt by John McCain and George Bush to use the high price of oil to push for special interests. They are rewarding their supporters in the oil patch.

Iraq and crony capitalism
The second issue is Iraq. In my opinion, the Iraq War was another example of opportunism. In the aftermath of 9/11, The Bush Administration saw an opportunity to go to war with Iraq, a desire many had prior to his taking office. Now that we control the country, American oil companies and defense contractors are cleaning up.

Today, the Financial Times Lex page wrote a scathing criticism of the way contracts for Iraq are handled by this administration:

When Eisenhower cautioned America to guard against the rising power of the military-industrial complex in 1961, spending on defence was greater than the combined net income of all American companies. Corporate earnings are now seven times the defence budget, but the procurement process remains politically charged.

On Wednesday the Government Accountability Office recommended that the U.S. Air Force re-open the bid process for a $38bn contract for tanker jets that provide mid-air refuelling. This follows a good deal of public teeth gnashing, and furious protests from Boeing, over the award of the contract to a consortium that, while led by Northrop Grumman, used a foreign EADS-made plane.

-The Financial Times, 19 Jun 2008

The Europeans are seething at the obvious bias in the Boeing vs. Northrop Grumman/EADS bid. Iraq is turning into a gold mine for U.S. defense contractors, Boeing among them.

And, in Iraq, the oil majors have finally returned after 36 years. One can just hear the cash registering in their tills. Ka-ching, ka-ching.

Conclusion

However, you look at it, the Bush administration has been very crafty at taking advantage of specific situations to push a special interests agenda at the expense of the environment, the American people and foreign competitors. John McCain has been a disappoint, as he has turned hard right in support of nearly all of the Bush administration policies, both domestically and in foreign policy.

This is one reason that the world views the United States with distrust and why come November you should be pulling the lever in the voting booth for the Democrats.

Related articles
Mr. Smith Goes to War With KBR, the New York Times, 19 Jun 2008
The Big Pander to Big Oil, The New York Times, 19 Jun 2008

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.