60 pages • 2 hours read
Timothy MitchellCarbon Democracy: Political Power in the Age of Oil
Nonfiction | Book | Adult | Published in 2011A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 5-7Chapter Summaries & Analyses
Chapter 5 Summary: “Fuel Economy”
In Chapter 5, Mitchell begins by tracing the building of international financial mechanisms. The desire to create these mechanisms came out of the difficulty posed by governing the movement of money, “an obstacle increasingly connected with the flow of oil” (109). Speculation by private banks is often blamed for the collapse of methods of maintaining the value of money in the interwar period. Speculation here refers to making high-risk financial transactions in expectation of significant gains or returns. This collapse is further used to explain the collapse of democracy in Europe in the 1920s and 1930s and ensuing world war (1939-1945).
During WWII, Britain and the US created the Bretton Woods Agreement. Mitchell notes that “the goal of the Bretton Woods reforms was to eliminate the power of the bankers to speculate” (110). The Bretton Woods agreement created fixed international currency exchange rates. The US dollar became anchored to gold. Participating countries in the agreement agreed that the US dollar would be “the only reserve currency convertible at a fixed rate to gold” (111). The value of other currencies was tied to the dollar. Mitchell notes that oil, priced in US dollars, sustained the value of the US dollar after its circulation outpaced new gold accumulation.
From this agreement, two international institutions emerged: the International Monetary Fund (IMF) and the World Bank, which were “intended to limit the chaos caused by the speculative dealings of international banks” (113). Several economists also proposed the creation of a third international institution, called the International Petroleum Council. This council “was intended to limit the trouble caused by international oil companies – and to pre-empt the oil-producing countries, especially in the Middle East, from taking control of the oil themselves” (113). Unfortunately, the International Petroleum Council was never implemented, partly due to the rivalry between Britain and the US over the control of oil.
Next, Mitchell turns to how the US wanted to ensure its control over the oil industry in the Middle East post-WWII. US government officials attempted to put countries in the Middle East back under another form of imperial control, known as trusteeships. Trusteeships “frame Anglo-US control of the oilfields of the Middle East as a means of making the oil available to every country that needed it, and present this ‘equitable’ management as a principle that disqualified the claims of producer countries” (114). Initially, the US planned for a government agency to play the role of trustee rather than an oil company. In doing so, they hoped to prevent the rise of nationalistic tendencies in the Middle East, which oil companies had failed to control.
Oil companies blocked trusteeships, replacing it with the Cold War framework. Conflict between the US and Soviet Union over oil concessions in Iran created this framework. The US turned this dispute with the Soviet Union into “a global political, cultural, and psychological battle” (122), known as the Cold War. This Cold War framework enabled US officials and oil executives to explain American control of the oil industry in the Middle East as a means of strategic importance during a war-time situation.
For the remainder of the chapter, Mitchell focuses on the creation of the economy as a new political objective in the mid-20th century. English economist John Maynard Keynes was one of the leading contributors to this new idea. Keynes was one of the first to shift the thinking of economists from concern around finite resources to the belief in the infinite circulation of money. Oil, in contrast to coal, seemed like it was an inexhaustible energy source. Keynes believed that the availability of natural resources, like oil, was, thus, no longer a concern. Instead, he believed that the circulation of money was what mattered. To him, “the economy was the sum of all the moments at which money changed hands” (136). The “main feature” of the economy was that it could grow without limit.
Mitchell explains how “the making of the economy provided ways of ordering material life at the level of the nation-state” (10). Keynes defined the economy by a set of geo-political boundaries. Countries began to publish national economic data, later renamed gross national product, which “made it possible to represent the size, structure and growth” (137) of these new national economies. Mitchell argues that economic formation vis-à-vis the nation-state was related to the shifting dynamics of international power. WWII destroyed European and Japanese empires. This destruction, in turn, obliterated the framing of political power in terms of imperial power. Prior to WWII, it did not make sense to talk of the British economy, for example, when the British economic realm included Britain as well as its colonies. The collapse of the empire, however, created a world of separate nation-states. Each nation-state had its own distinct economy.
In the concluding pages of this chapter, Mitchell details how this newfound concept of the economy had its challengers. Proponents of neo-liberalism, who see competition as the main characteristic of human relations, argue for a rival concept. They suggest that the market should organize “knowledge, expertise, and political technology” (141).
Chapter 6 Summary: “Sabotage”
In Chapter 6, Mitchell returns to Iraq and the Middle East, exploring how in the 1950s-60s, domestic political upheaval transformed into a battle with foreign oil companies for control of natural resources. To Mitchell, nationalist forces, known as Arab nationalism, drove the effort by oil-producing states to assert control over their country’s oilfields. As one example, local Iraqis, including Abd al-Karim Qasim who led a group of nationalist army officers in overthrowing the British-backed monarchical government in 1958, understood that the monopolization that foreign oil companies had on this equipment would enable them “to defeat any attempt to nationalise the industry” (147). Oil companies blocked initial attempts by Qasim to construct these technologies, such as a pipeline that connected oilfields in the northern and southern part of the country, as well as create an Iraqi oil industry alongside the foreign one. Even after the murder of Qasim by the CIA and the instatement of a new government, the oil companies still refused to come to a resolution with the Iraqi government. Mitchell illustrates how oil companies would start a crisis and then delay its resolution not just in Iraq, but elsewhere in the Middle East, such as Syria.
The British government tried to encourage the new government of Iraq to settle the dispute with foreign oil companies by offering them weapons in exchange. This practice was eventually adopted other western entities, including by giant military contractors in the US who needed another source of revenue. The US government was no longer purchasing the quantities of arms that it once had. As a result, these large military contractors turned to selling arms to leaders in Middle Eastern countries to generate profits. Members of the ruling families and their political allies generated enormous personal wealth from weapon deals. After the late 1960s, Iran became the main recycling point for the purchase of arms for the US and Britain. Iraq sought arms from France and the Soviet Union, partly because these countries were helping Iraq develop its own national oil industry. The export of weapons became one of the most profitable export industries in the West.
To justify its action, US government officials framed the need to sell weapons as a matter of national security. On a stopover in Guam, President Richard Nixon spoke off-the-record to reporters and provided reassurance that the US would continue to arm its allies in Southeast Asia. These remarks first became known as the Guam Doctrine but were later renamed the Nixon doctrine. Allies in Middle Eastern countries, including Iran, used the Nixon doctrine to convince the US to sell more arms to them. They claimed that these arms helped protect US strategic interests too. The arms sales to Iran did not actually play any role in protecting the Middle East or defending US control over the region’s oil. US oil companies lobbied against further arm sales to Iran. Instead, they believed that the US would create more political stability in the region by allowing for a resolution of the Israeli-Palestinian conflict. This conflict, which began in the mid-20th century and remains ongoing today, is rooted in competing claims by Israelis and Palestinians over land, security, and refugees. Mitchell underscores that the US national security policy was based on maintaining instability and conflict in the Middle East and elsewhere, rather than creating stability.
Mitchell also discusses how Iraq and other oil-producing states in the Middle East “sought to construct the collective capacity to limit production” (162), once they had taken control of their oil by building new oilfields, refineries, and pipelines. Leaders in these countries did this through embargos on oil supplies to the US and other states, demanding money to protect foreign-owned oil pipelines (especially those that were susceptible to being blown-up) and blocking the Suez Canal which was a major carrier of global oil supplies. Mitchell notes that “Libya because the first producer country to use an embargo on supplies to win an increase in the level of taxation of oil production” (166). This embargo broke the ability of foreign oil companies to dictate to oil-producing countries the tax the oil companies would pay on their profits from oil production, something they had done since the 1930s. The Organization of Petroleum Exporting Countries (OPEC) was created in 1960 in part to increase the tax level.
Mitchell closes this chapter by discussing the three changes that enabled “the reorganisation of the mechanisms for pricing oil” (170). The first change was the producer state needed to take over the system of restricting production from international oil companies. This would prevent surplus oil from lowering prices. Second, the international oil companies needed to find more ways to sell oil and to defend their market from alternative energy sources (e.g., natural gas and nuclear power). These companies recognized that driving oil prices up without controlling the prices of other energy sources would result in people switching to an alternative energy source. Finally, the international oil companies needed to open new markets to maintain demand for oil as its prices increased. The largest market was the US, but their access was restricted due in part to the Bretton Woods agreement.
Oil companies were willing to abandon the Bretton Woods agreement if this provided them with “an alternative to the use of oil (and escalating arm sales) to control dollar flows” (171). The US’s support for the value of the dollar collapsed in November 1968. The US tried to transform the international financial system to allow the gold peg to float, but this caused more dollars to be spent abroad rather than flow to the US. Unable to pay European banks requests for their dollars in gold, the “abandonment of the gold standard in August 1971 amounted to a declaration of bankruptcy by the US government” (171). Mitchell uses the crises caused by changes to the control of oil flows and the value of money to illustrate that it was becoming increasingly difficult to govern populations through the economy.
Chapter 7 Summary: “The Crisis That Never Happened”
Mitchell explores the crisis of 1973-74. Scholars often use the label “oil crisis” to describe this crisis. During this crisis, “middle-class citizens faced the unfamiliar experience of a shortage of what had always been plentiful, anxiety over the future availability of an essential commodity, mile-long queues in competition with other consumers and prices that increased almost by the day” (173). Conventional accounts blame the onset of this crisis on oil-producing countries in the Middle East cutting the global supply of oil, causing an increase in fuel costs. The US’s continued obstruction of a settlement to the Israeli-Palestinian conflict is one of the reasons for the oil cuts.
Traditional economic textbooks and lessons use this “oil crisis” as an illustration of “the simple theory of supply and demand” (173-174). Mitchell suggests there are three issues with using the crisis of 1973-1974 as an example of the model of supply and demand. First, it remains difficult to determine whether the cut in oil supplies caused the increase in oil prices during 1973-1974 because we do not know how to what extent the oil supply was cut. Some countries in the Middle East cut oil supplies, whereas others increased production. Second, the oil embargo against the US never happened since the country could purchase oil from other sources. Finally, oil does not actually conform to the model of supply and demand. Rather than people buying less oil when prices go up, they purchase more oil.
Mitchell investigates three issues that emerged and intertwined in the early 1970s. The first is “the problem of energy as an interconnected and vulnerable system, especially as seen from the United States” (176). American political debate did not adopt the term “energy crisis” until 1970. Mitchell notes that “there had been earlier crises in the distribution of fuels, access to and mining of raw materials, and the generation of electric power” (178). For the first time, however, all the issues associated with the production and distribution of power were linked together as a single “energy crisis.” The reasons for this were twofold. The first is that oil companies began to control other forms of energy, especially natural gas. They used similar sabotage methods as they had done for oil. For example, these oil companies would reduce natural gas production and claim there was a shortage, allowing them to raise prices. The second reason is that the Nixon White House pushed to have the different forms of fuel and power transformed “into a single field of ‘energy’” (181). President Nixon wanted to create a Department of Energy and Natural Resources, an idea that Congress repeatedly rejected. Nixon eventually set-up a National Energy Office in the White House, which further pushed “energy” into a single field of study.
The second issue that Mitchell examines is “the production and distribution of oil from the Middle East, as a flow of energy that a single set of actors could coordinate, and even turn into an instrument with which to work towards other political goals – in particular the settlement of the Palestine question” (176). The US refused to support Egypt’s 1971 peace proposal put forward to end the Israeli-Palestinian conflict. Instead, the US provided Israel with additional arms. This arms deal was supposed to remain a secret from allies in Europe and the Middle East. Due to a series of natural and human error, however, these allies found out about the deal. Oil ministers from the Gulf States (e.g., Saudi Arabia, Iraq, Iran, and Kuwait) decided to reduce the oil supply in hopes of pressuring the US to support the peace settlement. Several high-ranking US government officials, including then Secretary of State Henry Kissinger, used this event to their political advantage. They painted a picture to the American public and other government officials that the US energy system was vulnerable to outside forces in an attempt to convince Congress to allow the construction of an oil pipeline in Alaska.
Finally, Mitchell examines how the “emergence of ‘the environment’ [came] to rival ‘the economy’ as a central object of politics, defined not by the limitless expansion of a country’s GDP [gross domestic product] but by physical limits to growth” (176). Oil companies helped trigger this new focus on the environment in two ways. The first is by adopting technology that led to giant oil spills. Environmentalists were then able to rally around these environmental catastrophes. The second is by changing the way oil companies calculated the world’s oil supply. Prior to the 1970s, oil companies argued that the oil supply was inexhaustible (many leading petroleum geologists disagreed with this argument). Beginning in the 1970s, they adjusted their calculations and began to forecast the decline and eventual end of oil.
Mitchell argues that the coming together of these three issues made “it possible to connect the price of oil to that of other forms of fuel and power” (190), in turn, enabling “discussions of the energy system [to] link the price of oil to the new politics of the environment” (190). For this reason, he argues that the crisis of 1973-1974 is misleadingly labeled as an oil crisis. Instead, it involves:
[A] transformation in modes of governing international finance, national economies and flows of energy, placing the weakened carbon democracy of the West into a new relationship with the oil states of the Middle East. The shift in US relations with oil-producing states also allowed political forces on the right, opposed to the management of ‘the economy’ as a democratic mode of governing collective life, to reintroduce and expand the laws of ‘the market’ as an alternative technology of rule, providing a more effective means of placing parts of the common world beyond the reach of democratic contestation. (11)
The crisis of 1973-1974 caught many economists by surprise, leading them to abandon the Keynesian perspective on the economy. Economists turned to the market as a new form of government. According to Mitchell, “market devices were intended as an alternative to democratic methods of governing matters of public concern, by converting them into matters of private regulation by those with the resources to operate as market agents” (196). Economists in favor of this approach did not want the government to regulate economic life or natural resources. As a result, many neoliberal think-tanks, funded by American oil families, created market-based solutions as alternatives to government regulations. Most of these solutions, however, further damaged the environment, increased American’s oil consumption, and increased profits for oil companies.
Chapters 5-7 Analysis
One of Mitchell’s central goals in this section is to explain the Relationship Between Fossil Fuels, the Economy, and Market. In Chapter 5, Mitchell begins by demonstrating how fossil fuels played a role in turning the economy into something that was governable and measurable. He starts off by explaining that material calculation characterized governments during the age of coal. There are three ideas that he uses to support his assertion. The first is that governments “reported, measured, tracked across time and compiled into tables” (130) the coal energy supply. In turn, these statistics enabled people to measure for the first time the rates of growth and depletion of coal resources. As a result, there was growing concern around the exhaustion of coal resources and nature more broadly. Finally, a parallel concern around poverty developed because of the consequences of urban life. Poverty and its relationship to labor was now measurable.
The abundance of oil changed this material calculation. Prominent economic thinkers, such as Keynes, were no longer concerned with the exhaustibility of natural resources. Instead, they placed their concern around the circulation of money. Keynes and his contemporaries had witnessed how the inability to regulate the value and flow of money led to a brutal and long world war. Thus, to them, the circulation of money was what mattered. Oil’s abundance contributed to this new concept of the economy. Like oil, whose supply seemed infinite, economists believed that the economy “could expand without getting physically bigger” (139). The declining oil prices and the ease of shipping oil around the world all seemed to support this new concept of the economy.
Mitchell argues that the concept of the economy is still imperial in nature. Its creation was driven by the desire “to limit and reduce the operation of market competition, through increased management of finance, trade and migration, and above all through the prevention of a global market in labour” (138). In this way, the economy is simply a successor to the imperial order since both focus on limiting market forces through political repression, control of labor, and monopolies. In fact, the multinational oil corporation develops around this time, further supporting Mitchell’s idea.
At this point, Mitchell demonstrates how oil has taken on a much larger significance in our understanding of democracy. Up until this section, oil was seen as weakening the forms of political agency (democracy) that a dependence on coal had created. Democratic politics transformed in the postwar period by not only the switch to reliance on oil but to two new methods for governing democracy. The first was an international financial arrangement which managed the value and flow of money and limited the power of private banks to speculate. This arrangement was accompanied by the creation of the Cold War framework, which laid out how to continue maintaining control in the Middle East (i.e., with a focus on strategic importance during a permanent war). This framework replaced the need for mandates, doctrines of self-development, and trusteeships. The other new method for governing democracy was the creation of the economy. Mitchell underscores that the economy was “an object whose experts began to displace democratic debate and whose mechanisms set limits to egalitarian demands” (143).
As Mitchell demonstrates in Chapters 6 and 7, a series of challenges to the control of the oil industry in the Middle East and the international financial arrangement in the 1960s and 1970s showed that these two new forms of government did not work. Economists turned to the market, or the law of supply and demand, as alternative form of government. Mitchell is critical of the market, largely because he views it as limiting democracy (many proponents of the market perspective argue that this is a good thing). It turns items that should be of public concern, such as environmental destruction, into matters of private concern. Think-tanks, especially those funded by oil money, often control how these matters of private concern are addressed. Thus, the market is simply another way for oil companies and their allies to retain control and limit democracy.
Mitchell also reveals in this section how arms came to play such an important role in the international financial arrangement beginning in the mid-1960s. As oil-producing states in the Middle East began to assert greater control over the oil industry, they took more of the oil profits. The US and Britain needed a new mechanism to ensure that currency flowed back to the West “to maintain the balance of payments and the viability of the international financial systems” (155). Their solution was to sell weapons to autocratic leaders, which proved to be exceedingly lucrative for Western countries. For example, “the real value of US arms export more than doubled between 1967 and 1975, with most of the new market in the Middle East” (187). Mitchell argues that US policy intentionally prolongs and exacerbates local conflicts in this region to maintain the lucrative arms sales. Without this insecurity, leaders in Middle Eastern countries would not need to buy weapons on the scale that they have done since the 1960s. The US is, thus, complicit in the violence seen in this region.
Mitchell also argues in this section that oil companies intentionally created crises. As one example, Mitchell blames the US’s abandonment of the gold standard and subsequent bankruptcy on oil companies. As international oil companies, including those based in the US, lost control of the oilfields in the Middle East, they knew that they needed a way to influence a significant rise in the price of oil. Oil companies recognized that the US market would remain closed to them unless they convinced the US to abandon Bretton Woods. A financial institution closely tied to Standard Oil (today known as Exxon) was the first to promote this idea, which gained traction and culminated in the US moving away from this agreement. Mitchell argues that the oil companies need for higher oil prices was a crisis they manufactured themselves. They could blame the Bretton Woods agreement as one of the reasons why there was this crisis in the first place, rather than taking ownership over the fact that their meddling and refusal to cooperate with oil-producing countries is why they lost control in these places. The abandonment of the Bretton Woods agreement had far-reaching consequences for both the US and the international financial arrangement.
Another example is how US oil companies manufactured natural gas shortages. These companies wanted to increase natural gas prices so that they could continue increasing oil prices. By increasing the prices of both energy sources, they would ensure that consumers could not switch from oil to natural gas. Their proposal was initially rejected by the Federal Power Commission. Producers of natural gas, many of whom were oil companies, suddenly announced a dwindling of natural gas supply. Oil companies used sabotage to make up a crisis that allowed them to get the result they wanted: an increase in prices for natural gas and oil too.
