Drug War: Covert Money, Power & Policy: Neocolonialism

Coffee prices multiply approximately 3-fold from producer's wholesale to retail. Heroin multiplies approximately 200-fold from its Prohibition-inflated wholesale price to retail. Heroin now retails, by weight, for 10 times the price of gold. That, of course, makes it the basis of military power in Burma.

Military power is built on money, and, thanks to Prohibition, drug trafficking is the most profitable business on the planet. As the State Department itself puts it, in its end-of-year 1996 Enforcement Affairs report, "In terms of weight and availability, there is currently no commodity more lucrative than drugs. They are relatively cheap to produce and offer enormous profit margins that allow the drug trade to generate criminal revenues on a scale without historical precedent."

As anyone who has grown it knows, pot is as cheap and easy to grow as corn or squash, and can be mass-produced for a few dollars a pound. A legal pound of primo pot would retail for about $300. An illegal pound of primo pot now retails for about $3000.

The U.N estimates the global drug trade in the early 1990's to be worth 400 billion untaxed dollars a year. In 1994 Apolinar Biaz-Callejas of the Andean Commission of Jurists put it at $460 billion. That's about one-tenth of all global commerce. The legal value of that trade would be about a tenth of that.

Since military power is built on money, and since governments, or at least relations between governments, are built on military power, the structural effect of the artificial value has been to create, over the decades, an unbreakable symbiosis between drug-dealing and covert military intelligence. Each is the greatest strategic ally of the other. The political effect has been the institutionalization of global industrial fascism, death-squad genocide, wherever campesinos threaten to take control of their own land. I speak of Burma, Guatemala, the Philippines, Argentina, Mexico, Peru, Bolivia, Paraguay, Indonesia, Malaysia, Afghanistan, Pakistan, Uruguay, Congo, Liberia, Nigeria - the list is endless.

According to the U.N. Drug Control Program, the biggest heroin and cocaine trading institutions in the world are the Burmese, Pakistani, Mexican, Peruvian and Colombian militaries - all armed and trained by U.S. military intelligence - in the name of the anti-drug effort, of course. Funny how all that effort never has any strategic effect.

The centers of power controlling the trade in these demanded global commodities are the same centers of power disseminating the artificial hysteria necessary for their continued criminalization. That keeps the retail price a hundred times higher than the legal value and the trade exclusively in the hands of the muscle.

Another name for the muscle is military intelligence. The $500 billion dollar drug trade is run by allies we train and arm. Batista was no more an aberration than Somoza, or Diem, or Ne Win, or Chiang, or the Shah, or Marcos, or Salazar, or Papadopoulos, or Stroessner, or Mobutu, or Amin, or Videla, or Noriega, or Cedras, or Samper, or Salinas, or Suharto, or Fujimori.

The politic Clinton administration, on June 28, 1996, released the report of its Intelligence Oversight Board: “The Army School of the Americas . . . used improper instruction materials . . . certain passages appeared to condone practices such as executions of guerrillas, extortion, physical abuse, coercion, and false imprisonment.” As Clinton’s continued support for the military fascists in Indonesia, Burma, Peru, Colombia, etc. proves, that understatement was just a “partial hangout,” intelligence damage control, not a basic policy shift.

Guatemala is the archetypal CIA-OPS operation, a real pattern-setter. In October of 1944 a popular coup led by liberal young army officers finished the brutal 14-year dictatorship of General Jorge Úbico.

The triumvirate that led the 1944 coup: Major Francisco Arana, Jorge Toriello and Captain Jacobo Arbenz; Rafael Morales

In March, Dr. Juan Arévalo, an idealistic scholar, was elected president with 85% of the vote. Arévalo's political hero was Franklin Roosevelt, whose "four freedoms" - freedom of speech, freedom of religion, freedom from want and freedom from fear - became the basis of his political program.

The 1951 elections saw Arévalo replaced by his Defense Minister, 41 year old Jacobo Arbenz, one of the engineers of the 1944 October Revolution that brought electoral democracy to Guatemala. Arbenz was elected with the votes of 63% of an electorate that now included literate women. The problem with the brilliantly competent Arbenz was that he proceeded to do everything Arévalo had so eloquently promised.

Arbenz nationalized nothing except some unused rural land. He left all businesses in place, but set out to break the most destructive monopolies, what he called "feudalism," by competing with them, creating a "a national and independent capitalism."

He began the construction of a government-run hydroelectric facility to compete with the Fruit-run monopoly and also initiated rural electrification and telephone service. These were, of course, the same infrastructure techniques that had been used to build the United States. Private enterprise built none of our highways, public schools or harbors, and almost all of our seminal railroads and hydroelectric facilities were publicly financed.

Arbenz then challenged United Fruit's rural slave-labor system, which dominated 90% of the country's 3 million people, 60% of them Indians, and most of the rest mestizos, known as ladinos. The 1952 Agrarian Reform Law aimed mostly at plantations larger than 670 acres, although fincas of over 223 acres were vulnerable if more than a third of the land was unused. Arbenz confiscated only unused arable land, distributing 1.5 million acres to 100,000 landless families, in 42 acre plots. Arbenz himself, his extraordinary Salvadoran wife and his Foreign Minister, lost thousands of acres.

Arbenz at his inauguration; Rafael Morales

Practicing sweat-equity free-enterprise, Arbenz immediately put the confiscated land into production by providing government-run support systems, as Roosevelt had done. He instituted no political repression of any kind in a mixed economy that was, for the first time, beginning to grow by leaps and bounds. United Fruit, Ike and the Dulles brothers insisted that this constituted "Communism in the Caribbean" and "a Russian toehold" in the hemisphere.

Guatemala, of course, had virtually no relations at all with Russia. The Communist Party, in fact, had been the only party that remained illegal under the idealistic libertarian Arévalo, who insisted that communism was "contrary to human nature." Arbenz' Revolutionary Action Party legalized the Guatemalan Workers Party in 1951, and it held 4 of 56 seats in Congress.

Arbenz used Arévalo's 1947 Labor Code, which was based on Roosevelt's Wagner Act. It insisted on the right of plantation workers to unionize, strike and bargain collectively. For the first time in Guatemalan history, the campesinos had military protection. Arbenz established rural cooperatives, public schools, public clinics, public buses and local cultural institutions. Everything Arbenz did, in fact, conformed to John Kennedy's 1961 Alliance for Progress model.

One of the designers of the Alliance for Progress, Kennedy's Special Assistant Arthur Schlesinger, wrote in 1946: "All across Latin America the ancient oligarchies - landholders, Church, and Army - are losing their grip. There is a groundswell of inarticulate mass dissatisfaction on the part of peons, Indians, miners, plantation workers, factory hands, classes held down past all endurance and now approaching a state of revolt."

Like Arbenz, Schlesinger understood that the key to political stability was economic, so he looked to the inclusive social democratic parties, which built from the ground up. Kennedy would have given Arbenz all the help he could, in order, as Schlesinger put it, "to check Peronismo and Communism." The Dulles brothers, quite literally, chose Peronismo.

Since Arbenz was serious about land reform, he put committed Marxists, whom he trusted not to sell out, in charge of administering the Agrarian Reform program. But they were bound by the strictures of the law, and the basis of that law was sweat-equity free-enterprise. The market that the campesinos were encouraged to enter was just that, a free market. Arbenz' Agrarian Reform Program was his idea of a rural Small Business Administration. He was succeeding in rendering thousands of campesinos economically independent, creating a genuinely nationalist, capitalist alternative to corporate colonialism. What the U.S. proceeded to do, however, convinced the 25 year-old Argentine doctor Ché Guevara, who was part of this, and quite a few others, that militaristic communism was indeed the only alternative to United Fruit.

Arbenz seized nearly 400,000 of United Fruit's 550,000 acres, all unused, and all originally seized from the Indians. He compensated United Fruit in government bonds based on the company's own radically deflated 1952 book value, which the company had used to lower its already miniscule land taxes. The company was enraged, and the company was led by Sam "the Banana Man" Zemurray, one of the craftiest and most dangerous fighters ever to rise from the streets of New Orleans.

Zemurray's team included not only his Mafia partners on the New Orleans docks, led by the deadly Carlos Marcello, but the Boston Brahmin Thomas Cabot, for a short while a president of United Fruit. Thomas Cabot was the brother of John Moors Cabot, the Assistant Secretary of State for Inter-American Affairs. Another major Fruit stockholder was Senator Henry Cabot Lodge, who violently denounced Arévalo's unionism from the Senate floor in 1949.

Both Secretary of State John Foster Dulles and his brother Allen Dulles, CIA Director since 1953, were major Fruit stockholders. Through their law firm, Sullivan and Cromwell, they had helped arrange, through Schroeder Banking, the 1936 United Fruit takeover of Guatemala's rail system, the International Railways of Central America.

Allen Dulles was a director of the British-based Schroeder Banking Ltd, which he had turned into a key conduit of CIA funds. United Fruit was, therefore, a de facto CIA proprietary. When the Dulles brothers engineered the destruction of the Mossadegh government in Iran in 1953, the largest corporate beneficiary was the de-nationalized Anglo-Iranian Oil Company, largely controlled by Schroeder Banking. Like Arévalo, Mossadegh had in fact refused to legalize the Communist (Tudeh) Party. Mossadegh's threat was economic nationalism, not the communism the Dulles brothers had falsely accused him of. Like Arbenz, Mossadegh was a liberal democrat replaced by a murderous fascist dope peddler. The results, as we have seen, have not been happy.

Peron's Argentina, Stroessner's Paraguay and Papadopoulos' Greece became major drug entrepôts thanks to cooperating German, British, French and American secret services. During the 1947 civil war in Greece between the popular leftist coalition that had defeated the Nazis and the British-backed Royalists, the U.S., using Gehlen's agents, backed IDEA, the Holy Bond of Greek Officers. These were the fascist elements in the professional army that had fought with the Nazis during the war. With enough American matériel for 15,000 men, Colonel Papadopoulos, a Nazi war criminal, was able to take control of Greek intelligence, the KYP, and thereby control the Greek military. In 1967, Papadopoulos took direct control of Greece in a bloody coup that initiated a period of death squad assassinations for which Greek democrats have yet to forgive the U.S.

Aside from the "Peronist" Dulles brothers and the high command in the State Department, Zemurray's United Fruit team included "Tommy the Cork" Corcoran, one of Roosevelt's original brain trusters. Corcoran represented the Teamster insurance company, U. S. Life, Chiang Kai-shek's brother-in-law, and the CIA's proprietary airline, Civil Air Transport, which serviced the Kuomintang opium armies in Burma.

The KMT's main Bangkok connection, General Phao, the commander of the Thai police who coordinated CAT air traffic with the KMT, was also the commander of the Thai government's relationship with the CIA. Explained KMT Gen. Tuan Shi-wen, "To fight you must have an army, and an army must have guns, and to buy guns you must have money. In these mountains, the only money is opium." According to Professor McCoy, to whom Gen. Tuan was speaking, the first snow-white #4 heroin lab was opened by KMT-affiliated Hong Kong chemists on the Thai-Burma border in the late 60's. The KMT are also known, fittingly, as the "White Chinese."

The KMT's lawyer, "Tommy the Cork" Corcoran, was also United Fruit's lawyer. Corcoran was intimate with the entire leadership of the CIA, which he had helped to organize, and which was, in any case, extremely sympathetic to United Fruit. Walter Bedell Smith, Gen. Eisenhower's wartime chief of staff and Truman's CIA director, was now John Foster Dulles' Undersecretary of State. In 1953 he had asked Corcoran for the presidency of United Fruit, and in 1955 was named to its board of directors. Gen. Robert Cutler, chairman of the National Security Council, already sat on the United Fruit board. Robert Hill, ambassador to Costa Rica, got to the UF board in 1960. Hill was connected to Grace Shipping, another CIA friend heavily invested in Guatemala.

Sam "the Banana Man" Zemurray's team also included Edward Bernays, the formidable "father of public relations," who filled the American media with phony reportage about "communism in Guatemala." The right-wing John Clements, a Hearst vice-president with his own major magazines and PR firm, did the same. Once the "demographics" had been taken care of, Eisenhower and the Dulles brothers had the support of every Democrat in Congress. With Nicaragua's Somoza, the Dominican Republic's Trujillo and Cuba's Batista champing at the bit, Operation Success began in early June of 1954.

With control of the air, the sea and all the neighboring countries, Allen Dulles' CIA had no trouble overwhelming Jacobo Arbenz with a military and propaganda campaign coordinated from both inside and outside the country. Aerial bombardment of the presidential palace was combined with a mercenary ground force of about 180 men, led by Guatemalan Col. Castillo Armas, the size and popularity of which was wildly exaggerated by well placed Radio Liberty transmitters.

In 1957 the intrepid Mafia point-man and Batista operative, Johnny Rosselli, made another trip to Guatemala City, as he had done many times throughout 1956. This time the trip was in reaction to Castillo's jailing of his partner, casino operator Ted Lewin. Castillo was promptly gunned down, and Col. Enrique Trinidad Oliva, Johnny Rosselli's gambling and narcotics partner, became the new head of Guatemala's secret police.

Col. Trinidad Oliva was also the key CIA contact in the Guatemalan government, working under his half-brother, the defense minister. Trinidad Oliva coordinated all "foreign aid" coming through the CIA conduit ICA, the International Cooperation Administration, the forerunner of the Agency for International Development, AID.

Rosselli and Trinidad then helped the murderous old Gen. Miguel Ydígoras Fuentes, one of Úbico's assassins with close ties to mob partner Trujillo, to become head of state. Mario Sandoval Alarcón. "the father of Latin America's death squads," organized the right-wing of Castillo's party into the National Liberation Movement  and hired himself out to Trinidad and Rosselli.

The same year that Johnny Rosselli helped the CIA engineer the change in the Guatemalan government, he was asked by his Syndicate associates to put together Giancana in Chicago, Costello in New York, Lansky in Miami, and Marcello in New Orleans for the huge $50 million Tropicana construction project in Las Vegas. According to Fred Black, a political fixer who was close to Rosselli, Bobby Baker and Lyndon Johnson, Rosselli's influence was such that he gave orders to the Dorfmans, who controlled the Teamsters' huge Central States Pension Fund. During the 50's and 60's, it was Johnny Rosselli who "set up protection" in Las Vegas.

Throughout 1956 and 57 Rosselli travelled back and forth from Mexico City, the planning center for all CIA operations in Latin America, and Guatemala City. An experienced ICA operative noted that "John had access to everyone and everything that was going on there. He had an open door at the embassy in Guatemala, and in Costa Rica. He was in there plenty of times. I know because I saw him. He supplied information to the government, and had a hand in a lot of the intrigues that were going on."

This means, operationally, that Johnny Rosselli's interests became the CIA's interests. "Throughout Latin America," notes Frank McNeil, a junior political officer in the Guatemalan Embassy in 1960, "there were two American governments - one intelligence and one official." McNeil's boss, Ambassador John Muccio, learned of the Bay of Pigs invasion force being trained in Guatemala only after the story broke in The New York Times. As John Kennedy found out to his chagrin, Rosselli, his Syndicate and Batistiano allies, had more operational clout than the State Department.