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How Bananas Brought Regime Change

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Over the weekend, I read Bananas!: How the United Fruit Company Shaped the World by Peter Chapman. The book details the history of the United Fruit Company and specifically its deep involvement in the history of Central America. Part of the book’s focus is on the CIA’s ouster of Guatemalan President Jacobo Arbenz in 1954, an action in which United Fruit played a major role.

After elected president, Arbenz used eminent domain to take an unused portion of United Fruit’s vast real estate holdings in Guatemala and transferred the land to poor peasants for farming. The Arbenz government paid United Fruit for the land based on the value that the company had been declaring for tax purposes for many years.

The taking did not sit well with United Fruit, a huge U.S. corporation that was accustomed to getting its way with Central American regimes. United Fruit sought assistance from its friends in Washington, including several friendly representatives in Congress as well the Dulles brothers, J. Foster and Allen, who were serving in the State Department and the CIA.

In their lobbying efforts, United Fruit emphasized the “communist threat” posed by Arbenz. After all, the company argued, what could be better proof that the Soviet Union was infiltrating the Western Hemisphere than a leftist dictator taking property from the rich in order to give it to the poor?

The irony was that Arbenz’s socialist philosophy was no different, in principle, from that of President Franklin Roosevelt. FDR, you will recall, transformed America’s free market system into one in which the primary function of the federal government is to take money from the rich in order to give it to the poor. In taking unused land belonging to United Fruit and giving it to poor farmers, Arbenz was simply doing what FDR did with his New Deal and what subsequent U.S. administrations have done through the welfare state.

Also ironic is the fact that eminent domain is now employed in the United States to take property from the poor in order to give it to the rich. That’s what the Kelo case was all about. Thus, while Arbenz’s land-redistribution plan was to take from the rich to give to the poor, many land-redistribution plans in the United States take from the poor to give to the rich. But in principle, the idea is the same.

United Fruit’s lobbying efforts came at an opportune time. In the year before Arbenz’s land grab, the CIA, under Allen Dulles, had secretly and surreptitiously ousted the democratically elected prime minister of Iran, Mohammed Mossadegh, from power, replacing him with the brutal and tortuous regime of the shah of Iran.

What was the CIA’s motive for regime change in Iran? As in Guatemala a year later, the CIA’s intervention was motivated by a property grab. Mossadegh had nationalized Iran’s oil industry, which has been monopolized by British oil interests. Britain sought assistance from the CIA, whose intervention succeeded not only in replacing the Mossadegh regime with the brutal and tortuous pro-U.S. regime of the Shah, it also succeeded in restoring partial oil rights to the British. (The CIA’s Iranian intervention also brings to mind the recent granting of exclusive oil rights in Iraq to U.S. oil companies who had lost their oil rights when the Saddam Hussein regime nationalized the Iraqi oil industry.)

Flushed with its “success” in Iran, the CIA proceeded with its regime-change operation in Guatemala. Successfully ousting Arbenz from power, U.S. officials replaced him with a brutal non-elected pro-U.S. military general, who proceeded to restore United Fruit’s land to the company. U.S. investigators failed to find any credible evidence of an attempt by the Soviet Union to establish a communist beachhead in Guatemala.

Ironically, while United Fruit wielded sufficient power and influence in Washington to secure U.S. intervention on its behalf in Central America, it was unable to stop an antitrust prosecution by the U.S. Justice Department. The Justice Department’s position was that United Fruit had just gotten too big and “monopolistic” and thus needed to be reduced in size.

While United Fruit successfully regained the land that Arbenz had taken away, thanks to the CIA’s intervention, the company lost much of its holdings as a result of the Justice Department’s antitrust actions. As United Fruit learned the hard way, sometimes the federal god gives and sometimes he takes away.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.