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Amazon.com
Richard Kozul-Wright, an economist at the United Nations Conference on Trade and Development, and Paul Rayment, an economist at the UN's Economic Commission for Europe, have written a useful book opposing what they call the `neo-liberal idolisation of market forces'.Chapter 1 defines market fundamentalism; chapter 2 looks at globalisation in historical perspective, chapter 3 at trade and financial flows, and chapter 4 at corporations. Chapter 5 revisits globalisation, chapter 6 studies national development strategies, chapter 7 criticises market fundamentalism and chapter 8 examines the conditions for a sustainable global order.
The 1980s liberalisers promised that liberalising capital, finance and trade would bring more growth, investment, industry, equality and stability. But instead it brought less of all these.
95 out of the 124 developing countries grew faster in the period 1960-78 than in 1978-98. Yet the capitalist states of the developed world forced the developing countries to pay out more than $700 billion net between 1997 and 2002.
This exploitation and bullying continues today. As the authors note, the EU's trade agreements with developing countries `often contain even more stringent demands than those made by the WTO [World Trade Organization]'. And again, just as in the 1920s, the capitalist states' imposition of welfare cuts, labor market flexibility and monetarism have led to a crash.
The Labor Party has embraced market fundamentalism, and represents only the City of London, whose interests are opposed to the interests of the majority here in Britain and to the interests of the developing countries.
To defeat the slump, every country, Britain included, needs the pro-industry policies that enabled the developed nations to develop their economies originally. Every country needs to produce goods to meet domestic demand, not a `lop-sided reliance on external demand as the basis of sustained growth'.
Especially, every country needs to control capital flows. This is necessary to development and also to democracy. As the authors write,
"In a democracy, these restraints [on property rights] reflect the legitimate preferences of the population, and for an international institution or a developed country to insist that they be altered to reflect another set of preferences is a gross interference in the democratic process."
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June 03, 2011 | Information Clearing House
Finance is a form of warfare. Like military conquest, its aim is to gain control of land, public infrastructure, and to impose tribute. This involves dictating laws to its subjects, and concentrating social as well as economic planning in centralized hands. This is what now is being done by financial means, without the cost to the aggressor of fielding an army. But the economies under attacked may be devastated as deeply by financial stringency as by military attack when it comes to demographic shrinkage, shortened life spans, emigration and capital flight.
This attack is being mounted not by nation states as such, but by a cosmopolitan financial class. Finance always has been cosmopolitan more than nationalistic and always has sought to impose its priorities and lawmaking power over those of parliamentary democracies.
Like any monopoly or vested interest, the financial strategy seeks to block government power to regulate or tax it. From the financial vantage point, the ideal function of government is to enhance and protect finance capital and "the miracle of compound interest" that keeps fortunes multiplying exponentially, faster than the economy can grow, until they eat into the economic substance and do to the economy what predatory creditors and rentiers did to the Roman Empire.
mmckinl
Another brilliant essay by Michael Hudson
Having no recourse in the third world at neoliberalism the banksters have turned on their own territories. The failure of the Doha round of trade talks spells the end of the bankster financial Ponzi Scheme. Third world countries now know well this game of neoliberal conquest.
The "elephant in the room" is peak oil and peak food production. Without these and other resources growing the end game is clear private bank fractional reserve banking will inevitably implode. The banksters are well aware of their fate and will steal, loot and pillage as fast as they can ..
Unfortunately the only path ahead for the banksters is war. This is the only remedy to reshuffle the world economy and financial system to make them viable once more, until of course their Ponzi Scheme inevitable implodes again. The stakes couldn't be higher
The end of economic growth as we know it has eluded Hudson, at least from what I've read of his work. The Hirsch Report circa 2005 spells out in detail the problems associated with peak oil. It was vehemently ignored and removed for a time from the USG website. Just recently Jeremy Grantham produced a report on peak resources
The Hirsch Report
http://www.netl.doe.gov/publications/others/pdf/o...Time to wake up: "Days of abundant resources and falling prices are over forever" by Jeremy Grantham
http://www.energybulletin.net/stories/2011-04-29/...The "end game" is here my friends an "end game" unlike any other in history
Emanon :
Let me state it very simply : "the borrower [debtor] is SERVANT to the lender". The whole point of creating debtors is to gain control of and rule over them. Prof. Hudson's article illustrates this admirably.
kate
The World Central Bank: The Bank for International Settlements
"...The BIS is the most obscure arm of the Bretton-Woods International Financial architecture but its role is central. John Maynard Keynes wanted it closed down as it was used to launder money for the Nazis in World War II.
Run by an inner elite representing the world's major central banks it controls most of the transferable money in the world. It uses that money to draw national governments into debt for the IMF..." http://www.bilderberg.org/bis.htm
Reader
Small wonder today... The usurers' dictatorship started conquering the world decades ago. The entire EU was founded upon their "market" crap once promoted by sick brains like Milton Friedman.
sijepuis
Excellent summary by Hudson. Although I'm becoming increasingly weary of the "we are here" [ie, the antechamber of hell] approach to problems, which leaves out suggestions for concrete action.
If Michael Hudson, William Black, Nomi Prins and Mike Whitney are physicians, they're doing little more than monitoring the patient's failing vital signs: blood pressure, blood count, heart rate, etc, when the vampire that's proceeding to drain their patient dry is right there in front of them.
While clearly pedagogy is very important, in order that as many people as possible grasp what is happening, and why, if there are no accompanying suggestions for practical action, from the likes of Hudson, et co, a sense of helplessness will grow at the rate of the compound interest/ financialization that's killing us.
There are bloggers galore who are actively advocating hunkering down, buying stores of 'survival' goods: preserved food, medicines, toilet paper, tobacco, and the like, which may be a good idea in any case, but this is little more than a stop-gap measure, an admission of defeat. - And while mass strikes and demonstrations may be cathartic, they take a deep bite out of the real economy and ironically become an invitation to the IMF and increased austerity measures! [cf Egypt and Greece].
David Malone, author of the Golem XIV blog who, although not trained as an economist, has been doing a superb job of revealing the sources of European debt, laying bare the treachery of EC/ECB policies and proposing possible solutions.
See this, for example: Ireland was Germany's off-shore tart, wherein Deutsche Bank established subsidiaries in Ireland, in order to benefit from lax financial regulation, which eventually failed. DB has slipped away, leaving the Irish taxpayer with the bill.
In the following, Malone explores the idea of cross cancellation of European debt:How to destroy the web of Debt.
Excerpt: "Among the 'debtor' nations a Debt Jubilee means Ireland reduces its debt load to from 130% of GDP to under 20%! That would virtually wipe out the crippling cuts being forced upon the Irish. While even among the 'Creditor' nations France benefits by nearly eliminating its debt. So the French people too would benefit. Which does beg the question - who is benefiting by enforcing all the debts? I'll give you one guess".
Mutually agreed cancellation of what amounts to incestuous debt, in a first step towards the elimination of the 'vampire'.
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Asia Times
Part 1: Why the emperor has no clothes
By Andre Gunder Frank(Editor's note: This article has been revised with additional material provided by the author.)
Uncle Sam has reneged and defaulted on up to 40% of its trillion-dollar foreign debt, and nobody has said a word except for a line in The Economist. In plain English that means Uncle Sam runs a worldwide confidence racket with his self-made dollar based on the confidence that he has elicited and received from others around the world, and he is a also a deadbeat in that he does not honor and return the money he has received.
How much of our dollar stake we have lost depends on how much we originally paid for it. Uncle Sam let his dollar fall, or rather through his deliberate political economic policies drove it down, by 40%, from 80 cents to the euro to 133 cents. The dollar is down by a similar factor against the yen, yuan and other currencies. And it is still declining, indeed is apt to plummet altogether.
There was also a spate of competitive devaluations in the 1930s, called the "beggar thy neighbor policy" of shifting the costs for the neighbors to bear. True, as the dollar has declined, so has the real value that foreigners pay to service their debt to Uncle Sam. But that works only if they can themselves earn in currencies that have increased in value against the dollar. Otherwise, foreigners earn and pay in the same devalued dollars, and even then with some loss from devaluation between the time they got their dollars and the time they repay them to Uncle Sam. China and other East Asian nations do earn in dollars, to which they have pegged their currencies, so they have already lost a substantial portion of their dollar stake, by far the world's largest.
And they, like all others, will also lose the rest. For Uncle Sam's debt to the rest of the world already amounts to more than a third of his annual domestic production and is still growing. That alone already makes his debt economically and politically never repayable, even if he wanted to, which he does not. Uncle Sam's domestic, eg credit-card, debt is almost 100% of gross domestic product (GDP) and consumption, including that from China. Uncle Sam's federal debt is now US$7.5 trillion, of which all but $1 trillion was built up in the past three decades, the last $2 trillion in the past eight years, and the last $1 trillion in the past two years. Alas, that costs more than $300 billion a year in interest, compared with, for example, the $15 billion spent annually on the National Aeronautics and Space Administration (NASA). But no worries: Congress just raised the debt ceiling to $8.2 trillion. To help us visualize, $1 trillion tightly packed up in $1,000 bills would create a pile 100km high.
But nearly half is owed to foreigners. All Uncle Sam's debt, including private household consumer credit-card, mortgage etc debt of about $10 trillion, plus corporate and financial, with options, derivatives and the like, and state and local government debt comes to an unvisualizable, indeed unimaginable, $37 trillion, which is nearly four times Uncle Sam's GDP. Only some of that can be managed domestically, but with dangerous limitations for Uncle Sam noted below. That is only one reason I want you to meet Uncle Sam, the deadbeat confidence man, who may remind you of the film Meet Joe Black; for as we get to know him better below, we will find that he is also a Shylock, and a corrupt one at that.
The United States is the world's most privileged nation for having the monopoly privilege of printing the world's reserve currency at will and at a cost of nothing but the paper and ink it is printed on. Moreover, by doing so, Uncle Sam can export abroad the inflation he generates by the extra dollars he prints, of which there are already at least three times as many floating around the world as at Uncle Sam's home. Additionally, his is also the only country whose "foreign" debt is mostly denominated in his own world-currency dollars that he can print at will; while most foreigners' debt is also denominated in the same dollar, but they have to buy it from Uncle Sam with their own currency and real goods. So he simply pays the Chinese and others in essence with these dollars that already to begin with have no real worth beyond their paper and ink. So especially poor China gives away for nothing at all to rich Uncle Sam hundreds of billions of dollars' worth of real goods produced at home and consumed by Uncle Sam. Then China turns around and trades these same paper dollar bills in for more of Uncle Sam's paper called Treasury Certificate bonds, which are even more worthless, except that they pay a percent of interest. For as we already noted, they will never be able to be cashed in and redeemed in full or even in part, and anyway have the lost much of their value to Uncle Sam already.
In an earlier essay, I argued that Uncle Sam's power rests on two pillars only, the paper dollar and the Pentagon. Each supports the other, but the vulnerability of each is also an Achilles' heel that threatens the viability of the other. Since then, Iraq, not to mention Afghanistan, has shown confidence in the Pentagon not to be what it was cracked up to be; and with the in-part-consequent decline in the dollar, so has confidence in it and Uncle Sam's ability to use it to finance his Pentagon's foreign adventures (See Coup d'Etat and Paper Tiger in Washington, Fiery Dragon in the Pacific, which also conjures up the productive growth of China). Additionally we must realize that Uncle Sam's numbers above and below are also all literally relative. So far relations with other countries, in particular with China, still favor Uncle Sam, but they also help maintain an image that is deceptive. Consider the following:
A $2 toy leaving a US-owned factory in China is a $3 shipment arriving at San Diego. By the time a US consumer buys it for $10 at Wal-Mart, the US economy registers $10 in final sales, less $3 import cost, for a $7 addition to the US GDP. (Blaming 'undervalued' yuan wins votes, Asia Times Online, February 26, 2004)
Moreover, ever-clever Uncle Sam has arranged matters so as to earn 9% from his economic and financial holdings abroad, while foreigners earn only 3% on theirs, and among them on their Treasury Certificates only 1% real return. Note that this difference of 6 percentage points is already double what Uncle Sam pays out, and his total 9% take is triple the 3% he gives back. Therefore, although foreign holdings and Uncle Sam's are now about equal, Uncle Sam is still the big net interested winner, just like any Shylock, but no other ever did so grand a business.
But Uncle Sam also earns quite well, thank you, from other holdings abroad, eg from service payments by mostly poor foreign debtors. The sums involved are not peanuts or even small potatoes. For from his direct investments in foreign property alone, Uncle Sam's profits now equal 50%, and including his receipts from other holdings abroad now are a full 100% of profits derived from all of his own domestic activities combined. These foreign receipts add more than 4% to Uncle Sam's national domestic product. That helps nicely to compensate for the failure of domestic profits as yet to recover even their 1972 level, because Uncle Sam has failed to boost productivity sufficiently at home.
The productivity hype of president Bill Clinton's "new economy" in the 1990s was limited to computers and information technology (IT), and even that proved to be a sham when the dot-com bubble burst. Also, not only the apparent increase in "profits" but also that of "productivity" were, at the bottom, on the backs of shop-floor, office and sales-floor workers working harder and longer hours and, at the top, the result of innovative accounting shams by Enron and the like. Such factors still compensate for and permit much of Uncle Sam's $600-billion-and-still-rising trade deficit from excess home consumption over what he himself produces. That is what has resulted in the multitrillion-dollar debt. Exactly how large that debt is Uncle Sam is reluctant to reveal, but what is sure is that it is by far the world's largest, even as net debt to foreigners, after their debt to him is deducted.
How has all this come about?
The simple answer is that Uncle Sam, who is increasingly hooked on consumption, not to mention harder drugs, saves no more than 0.2% of his own income. The Federal Reserve's guru and now you see it, now you don't doctor of magic, Alan Greenspan, recently observed that this is so because the richest 20% of Americans, who are the only ones who do save, have reduced their savings to 2%. Yet even these measly savings (other, poorer countries save and even invest 20%, 30%, even 40% of their income) are more than counterbalanced by the 6% deficit spending of the government. That is what brings the average saving rate to 0.2%. To maintain that $400-plus-billion budget deficit (more than 3% of national domestic product), which is really more the $600 billion if we count, as we should, the more than $200 billion Uncle Sam "borrows" from the temporary surplus in his own Federal Social Security fund, which he is also bankrupting. (But never mind, President George W Bush just promised to privatize much of that and let people buy their own old-age "security" in the ever-insecure market).
So with this $600-billion-plus budget deficit and the above-mentioned related $600-billion-plus deficit, rich Uncle Sam, and primarily his highest earners and biggest consumers, as well as of course the Big Uncle himself, live off the fat of the rest of the world's land. Uncle Sam absorbs the savings of others who themselves are often much poorer, particularly when their central banks put many of their reserves in world-currency dollars and hence into the hands of Uncle Sam in Washington, and some also in dollars at home. Their private investors send dollars to or buy dollar assets on Wall Street, all with the confidence that they are putting their wherewithal in the world's safest haven (and that, of course, is part of the above-mentioned confidence racket). From the central banks alone, we are looking at yearly sums of more than $100 billion from Europe, more than $100 billion from poor China, $140 billion from super-saver Japan, and many 10s of billions from many others around the globe, including the Third World. But in addition, Uncle Sam obliges them, through the good offices of their own states, to send their thus literally forced savings to Uncle Sam as well in the form of their "service" of their predominantly dollar debt to him.
His treasury secretary and his International Monetary Fund (IMF) handmaiden blithely continue to strut around the world insisting that the Third - and ex-Second, now also Third - World of course continue to service their foreign debts, especially to him. No matter that with interest rates multiplied several times over by Uncle Sam himself after the Fed's Paul Volcker's coup in October 1979, most have already paid off their original borrowings three to five times over. For to pay at all at interest rates that Volcker boosted to 20%, they had to borrow still more at still higher rates until thereby their outstanding foreign debt doubled and tripled, not to mention their domestic debt from which part of the foreign payments were raised, particularly in Brazil. Privatization is the name of the game there and elsewhere, except for the debt. The debt was socialized after it had been incurred mostly by private business, but only the state had enough power to squeeze the greatest bulk of back payments out of the hides of its poor and middle-class people and transfer them as "invisible service payments" to Uncle Sam.
When Mexicans were told to tighten their belts still further, they answered that they couldn't because they had already had to eat their belts. Only Argentina and for a while Russia declared an effective moratorium on debt "service", and that only after political economic policies had destroyed their societies, thanks to Uncle Sam's advisers and his IMF strong arm. Since then, Uncle Sam himself has been blithely defaulting on his own foreign debt, as he already had several times before in the 19th century.
Speaking of that, it may be well to recall at least two pieces of advice from that time: Lord Cromer, who administered Egypt for then-dominant British imperial interests, said his most important instrument for doing so was Egypt's debts to Britain. These had just multiplied when Egypt was obliged to sell its Suez Canal shares to Britain in order to pay off earlier debts and British prime minister Benjamin Disraeli explained and justified his purchase of the same on the grounds that it would strengthen British imperial interests. Today, that is called "debt-for-equity swaps", which is one of Uncle Sam's latter-day favorite policies to use the debt to acquire profitable and/or strategically important real resources, as of course also was the canal as the way to the jewel of the British Empire, India.
Another piece of practical advice came from the premier military strategist Carl von Clausewitz: make the lands you conquer pay for their own conquest and administration. That is of course exactly what Britain did in and with India through the infamous "Home Charges" remitted to London in payment for Britain administering India, which even the British themselves recognized as "tribute" and responsible for much of "The Drain" from India to Britain. How much more efficient yet to let foreign countries' own states administer themselves but by rules set and imposed by Uncle Sam's IMF and then effect a drain of debt service anyway. Actually, the British therein also set the 19th-century precedent of relying on the "imperialism of free trade" with "independent" states as far and as long as possible, using gunboat diplomacy to make it work (which Uncle Sam had already learned to copy by early in the 20th century); and if that was not enough, simply to invade, and if necessary to occupy - and then rely on the Clausewitz rule.
We shall note several recent instances thereof, and especially the Iraqi one, in the second article in this series.After I wrote the above, I received by e-mail an excerpt from the Democracy Now! website, titled Confessions of an economic hit man: How the US uses globalization to cheat poor countries out of trillions
We speak with John Perkins, a former respected member of the international banking community. In his book Confessions of an Economic Hit Man he describes how as a highly paid professional, he helped the US cheat poor countries around the globe out of trillions of dollars by lending them more money than they could possibly repay and then take over their economies ...
JOHN PERKINS: Basically what we were trained to do and what our job is to do is to build up the American empire. To bring - to create situations where as many resources as possible flow into this country, to our corporations, and our government, and in fact we've been very successful. We've built the largest empire in the history of the world ... primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the economic hit men. I was very much a part of that ... I was initially recruited while I was in business school back in the late '60s by the National Security Agency, the nation's largest and least understood spy organization ... and then [it] send[s] us to work for private consulting companies, engineering firms, construction companies, so that if we were caught, there would be no connection with the government ...
I became its chief economist. I ended up having 50 people working for me. But my real job was deal-making. It was giving loans to other countries, huge loans, much bigger than they could possibly repay. One of the conditions of the loan - let's say a $1 billion to a country like Indonesia or Ecuador - and this country would then have to give 90% of that loan back to a US company, or US companies ... a Halliburton or a Bechtel ... A country today like Ecuador owes over 50% of its national budget just to pay down its debt. And it really can't do it. So we literally have them over a barrel. So when we want more oil, we go to Ecuador and say, "Look, you're not able to repay your debts, therefore give your oil companies your Amazon rain [forests], which are filled with oil." And today we're going in and destroying Amazonian rain forests, forcing Ecuador to give them to us because they've accumulated all this debt ... [We work] very, very closely with the World Bank. The World Bank provides most of the money that's used by economic hit men, it and the IMF.
Last but not least, oil producers also put their savings in Uncle Sam. With the "shock" of oil that restored its real price after the dollar valuation had fallen in 1973, ever-cleverer-by-half Henry Kissinger made a deal with the world's largest oil exporter, Saudi Arabia, that it would continue to price oil in dollars, and these earnings would be deposited with Uncle Sam and partly compensated by military hardware. That deal de facto extended to all of the Organization of Petroleum Exporting Countries (OPEC) and still stands, except that before the war against Iraq that country suddenly opted out by switching to pricing its oil in euros, and Iran threatened do the same. North Korea, the third member of the "axis of evil", has no oil but trades entirely in euros. (Venezuela is a major oil supplier to Uncle Sam and also supplies some at preferential rates as non-dollar trade swaps to poor countries such as Cuba. So Uncle Sam sponsored and financed military commandos from its Plan Colombia next door, promoted an illegal coup and, when that failed, pushed a referendum in his attempt at yet another "regime change"; and now along with Brazil all three are being baptized as yet another "axis of evil").
After writing this, I found that the good (hit) man Mr Perkins was in Saudi Arabia too:
Yes, it was a fascinating time. I remember well ... the Treasury Department hired me and a few other economic hit men. We went to Saudi Arabia ... And we worked out this deal whereby the Royal House of Saud agreed to send most of their petrodollars back to the United States and invest them in US government securities. The Treasury Department would use the interest from these securities to hire US companies to build Saudi Arabia - new cities, new infrastructure - which we've done. And the House of Saud would agree to maintain the price of oil within acceptable limits to us, which they've done all of these years, and we would agree to keep the House of Saud in power as long as they did this, which we've done, which is one of the reasons we went to war with Iraq in the first place. And in Iraq we tried to implement the same policy that was so successful in Saudi Arabia, but Saddam Hussein didn't buy. When the economic hit men fail in this scenario, the next step is what we call the jackals. Jackals are CIA-sanctioned people that come in and try to foment a coup or revolution. If that doesn't work, they perform assassinations. Or try to. In the case of Iraq, they weren't able to get through to Saddam Hussein. He had - his bodyguards were too good. He had doubles. They couldn't get through to him. So the third line of defense, if the economic hit men and the jackals fail, the next line of defense is our young men and women, who are sent in to die and kill, which is what we've obviously done in Iraq.
To return to the main issue and call a spade a huge spade, all of the above is part and parcel of the world's biggest-ever Ponzi-scheme confidence racket. Like all others, its most essential characteristic is that it can only continue to pay off dollars and be maintained at the top as long as it continues to receive new dollars at the bottom, voluntarily through confidence if possible and by force if not. (Of course, the Clausewitz and Cromer formulas result in the poorest paying the most, since they are also the most defenseless: so that the ones sitting on/above them pass much of the cost and pain down to them.)
What if confidence in the dollar runs out?
Things are already getting shakier in the House of Uncle Sam. The declining dollar reduces the necessary dollar inflows, so Greenspan needs to raise interest rates to maintain some attraction for the foreign dollars he needs to fill the trade gap. As a quid pro quo for being reappointed by President George W Bush, he promised to do that only after the election. That time has now arrived, but doing so threatens to collapse the housing bubble that was built on low interest and mortgage - and remortgage - rates.But it is in their house values that most Americans have their savings, if they have any at all. They and this imaginary wealth effect supported over-consumption and the nearly as-high-as-GDP household debt, and a collapse of the housing price bubble with increased interest and mortgage rates would not only drastically undercut house prices, it would thereby have a domino effect on their owners' enormous second and third remortgages and credit-card and other debt, their consumption, corporate debt and profit, and investment. In fact, these factors would be enough to plummet Uncle Sam into a deep recession, if not depression, and another Big Bear deflation on stock and de facto on other prices, rendering debt service even more onerous. (If the dollar declines, even domestic price inflation is de facto deflationary against other currencies, which Russians and Latin Americans discovered to their peril, and which we observe below.)
Still lower real US investment would reduce its industrial productivity and competitiveness even more - probably to a degree lower than can compensated for by further devaluing the dollar and making US exports cheaper, as is the confident hope of many, probably including the good Doctor. Until now, the apparent inflation of prices abroad in rubles and pesos and their consequent devaluations have been a de facto deflation in terms of the dollar world currency. Uncle Sam then printed dollars to buy up at bargain-basement fire-sale prices natural resources in Russia (whose economy was then run on $100 bills), and companies and even banks, as in South Korea. True, now Greenspan and Uncle Sam are trying again to get other central banks to raise their own interest rates and otherwise plunge their own people into even deeper depression.
But even if he can, thereby also canceling out the relative attractiveness of his own interest-rate hike, how could that save Uncle Sam? What remains the great unknown and perhaps still unknowable is how a more wounded, Ponzi-less Uncle Sam would react with more "Patriotic" acts at home and abroad with the weapons - including the now almost ready "small" nukes - he would still have, even if his foreign victims no longer paid for new ones. So, to compensate for less bread and civil rights at home, an even more patriotic, nay chauvinist, circus at the cost of others abroad is the real danger of the current policies to "defend freedom and civilization".
So, far beyond Osama bin Laden, al-Qaeda and all the terrorists put together, the greatest real-world threat to Uncle Sam is that the inflow of dollars dries up. For instance, foreign central banks and private investors (it is said that "overseas Chinese" have a tidy trillion dollars) could any day decide to place more of their money elsewhere than in the declining dollar and abandon poor ol' Uncle Sam to his destiny. China could double its per capita income very quickly if it made real investments at home instead of financial ones with Uncle Sam. Central banks, European and others, can now put their reserves in (rising!) euros or even soon-to-be-revalued Chinese yuan. Not so far down the road, there may be an East Asian currency, eg a basket first of ASEAN + 3 (China, Japan, South Korea) - and then + 4 (India). While India's total exports in the past five years rose by 73%, those to the Association of Southeast Asian Nations (ASEAN) rose at double that rate and sixfold to China. India has become an ASEAN summit partner, and its ambitions stretch still further to an economic zone stretching from India to Japan. Not for nothing, in the 1997 East Asian currency and then full economic crisis, Uncle Sam strong-armed Japan not to start a proposed East Asian currency fund that would have prevented at least the worst of the crisis. Uncle Sam then benefited from it by buying devalued East Asian currencies and using them to buy up East Asian real resources, and in South Korea also banks, at bargain-basement reduced-price fire sales. But now, China is already taking steps toward such an arrangement, only on a much grander financial and now also economic scale.
A day after writing the above, I read in The Economist (December 11-17, 2004) a report on the previous week's summit meeting of ASEAN + 3 in Malaysia. That country's prime minister announced that this summit should lay the groundwork for an East Asian Community (EAC) that "should build a free-trade area, cooperate on finance, and sign a security pact ... that would transform East Asia into a cohesive economic block ... In fact, some of these schemes are already in motion ... China, as the region's pre-eminent economic and military power, will doubtless dominate ... and host the second East Asia Summit." The report went on to recall that in 1990, Uncle Sam shot down a similar initiative for fear of losing influence in the region. Now it is a case of "Yankee Stay Home".
Or what if, long before that comes to pass, exporters of oil simply cease to price it in ever-devaluing dollars, and instead make a mint by switching to the rising euro and/or a basket of East Asian currencies? That would at one stroke vastly diminish the world demand for and price of dollars by obliging anyone who wants to buy oil to purchase and increase the demand price of the euro or yen/yuan instead of the dollar. That would crash the dollar and tumble Uncle Sam in one fell swoop, as foreign - and even domestic - owners of dollars would sell off as many of them as fast as they could, and other countries' central banks would switch their reserves out of dollars and away from Uncle Sam's no-longer-safe haven. That would drive the dollar down even more, and of course halt any more dollar inflow to Uncle Sam from the foreigners who have been financing his consumption spree. Since selling oil for falling dollars instead of rising euros is evidently bad business, the world's largest oil exporters in Russia and OPEC have been considering doing just that. In the meantime, they have only raised the dollar price of oil, so that in euro terms it has remained approximately stable since 2000. So far, many oil exporters and others still place their increased amount of dollars with Uncle Sam, even though he now offers an ever less attractive and less safe haven, but Russia is now buying more euros with some of its dollars.
So also many countries' central banks have begun to put ever more of their reserves into the euro and currencies other than Uncle Sam's dollar. Now even the Central Bank of China, the greatest friend of Uncle Sam in need, has begun to buy some euros. China itself has also begun to use some of its dollars - as long as they are still accepted by them - to buy real goods from other Asians and thousands of tons of iron ore and steel from Brazil, etc. (Brazil's president recently took a huge business delegation to China, and a Chinese one just went to Argentina. They are going after South African minerals too.)
So what will happen to the rich on top of Uncle Sam's Ponzi scheme when the confidence of poorer central banks and oil exporters in the middle runs out, and the more destitute around the world, confident or not, can no longer make their in-payments at the bottom? The Uncle Sam Ponzi Scheme Confidence Racket would - or will? - come crashing down, like all other such schemes before, only this time with a worldwide bang. It would cut the present US consumer demand down to realistic size and hurt many exporters and producers elsewhere in the world. In fact, it may involve a wholesale fundamental reorganization of the world political economy now run by Uncle Sam.
NEXT: The center of the doughnut
THE NAKED HEGEMON
PART 2: The center of the doughnut
By Andre Gunder Frank(PART 1: Why the emperor has no clothes )
All Ponzi schemes build a financial pyramid. Many who pay into them also live in a financial world themselves, but others need to derive their in-payment through earnings from production in the real world. In today's world of financial transactions that every day are a hundredfold more than all payments for real goods and services put together, the financial ones put the real ones into the shadow behind their brilliance.
Moreover, to oversimplify a very complex matter into more intelligible layperson's language, options, derivatives, swaps and other recent financial instruments have been ever much further compounding already compounded interest on the real properties in which their stake and debts are based, which has contributed to the spectacular growth of this financial world. Nonetheless, the financial pyramid that we see in all its splendor and brilliance, especially in its center at Uncle Sam's home, still sits on top of a real-world producer-merchant-consumer base, even if the financial one also provides credit for these real-world transactions.
Now, what if we look at the world as a doughnut, analogous to so many cities in the US rust belt. The center is derelict and hollowed out as production and consumption have moved to the surrounding suburbs (in automobile capital Detroit, the windows of the principal department store Hudson's have been boarded up for years, even as the city has built an expensive "Renaissance Center" to re-gentrify the center, a process that has "succeeded" in some other cities). General Motors' derelict Flint, Michigan, gave us Michael Moore, who featured it in Roger and Me (a reference to GM chief executive officer Roger Smith). We might look at the entire world in doughnut terms, with the whole of Uncle Sam in the empty hole in the middle that produces almost nothing it can sell abroad. The main exceptions are agricultural goods and military hardware that are heavily subsidized by the US government from its taxpayers and its dollar-printing press, and even so Uncle Sam runs a US$600-billion-plus budget deficit.
Should the dollar crash ...
The big difference in this US doughnut is that both the budget deficit and the $600-billion-plus trade deficit are financed by foreigners, as we have seen. Uncle Sam would exclude most of them as persons, but gladly receives the real goods they produce. As world consumer of last resort, as already suggested, Uncle Sam performs this important function in the present global political economic division of labor: everybody else produces and needs to export, and Uncle Sam consumes and needs to import. The crash of the dollar would (will?) crumble this entire world-embracing and -organizing political economic doughnut and throw hundreds of millions of people, not to mention zillions of dollars and their owners, into turmoil, with unforeseen and perhaps unforeseeable consequences.Many people, high and low on the world totem pole, have a big stake in avoiding that, even if it requires continuing to blow an empty Uncle Sam up like a balloon. Or to refer to a well-know metaphor, to continue to pretend that the emperor with no clothes is dressed up. That still includes China, for which a financial showdown with Uncle Sam would be a blessing in disguise: it would oblige China to change its political economic course, and instead of giving its goods away for free to Uncle Sam, to turn production and consumption inward to its poor interior and outward to its neighbors in East Asia, all of which it could and should be doing already. (The latter China has recently begun to do, but not yet the former.)
Of course, crashing the dollar would finally also in one fell swoop wipe out, that is default, Uncle Sam's debt altogether. Thereby, it would simultaneously also make all foreigners and rich Americans lose the whole of their dollar-asset shirt, of which they are still desperately trying to save as much as possible by not so doing. In fact, this historically necessary transition out from under the US-run doughnut world could bring the entire world into the deepest depression ever - and in all of them the poorest suffer the most. Only East Asia could save itself with greatest ease, but also after paying a high cost for this transition - toward itself! Thus, the Uncle Sam Ponzi Scheme poses the world's biggest and craziest Catch-22 since MAD (mutually assured destruction).
However, even this would not be historically new. Recall how much the transition to Uncle Sam cost: another 30 Years' War from 1914 to 1945 with the intervening second Great Depression in a century that cost 100 million lives lost to war, more than in all of previous world history, not to mention the millions who suffered and died from unnecessary starvation and disease. Or the previous transition to Britain cost the Napoleonic Wars, the Great Depression of 1873-95, colonialism and semi-colonialism, to name a few, and their human costs, especially combined with the most pronounced El Nino climatic changes in two centuries, which ravaged Indians, Chinese and many others with famines. But these were in turn magnified by the imperial colonial powers and used in their own interests, eg increased export of wheat from India especially during years of famine.
The parallels with today, including even again taking advantage a century later of renewed stronger El Ninos, are too horrifying and guilt-generating for hardly anybody to make with Uncle Sam's International Monetary Fund-imposed "structural adjustment" that obliges Mexican peasants to have already eaten the belt that the IMF wants them to tighten still further. And that is not to mention 3 million dead in Rwanda and Burundi, and then some in neighboring Congo, first after IMF-imposed strictures and the cancellation primarily by Uncle Sam of the Coffee Agreement that had sustained its price for these producers. And then we get the scramble for and production and sale there of gold for Uncle Sam's Fort Knox, titanium so we can communicate by mobile telephone, diamonds forever, and so on.
Yet there are also others in the world who do not (yet) feel all caught in this trap. Just before the 2004 US election, one of them said so out loud in a video broadcast to the world. It seems to have been least publicly noted by its principal addressee, Uncle Sam, who should have been the most interested party, for it was none other than Osama bin Laden himself who announced that he was "going to bankrupt the Uncle Sam". In view of Uncle Sam's deliberate blindness to the shakiness of his real-world foundation abroad, so massive a collapse may not be more difficult to arrange than it was to topple its Twin Towers symbol.
How Uncle Sam spends your dollars
Meanwhile, back at the ranch, as the saying goes in Texas, what does Uncle Sam himself blithely do with the world's hard-earned savings and money? His consumers still over-consume it without 99.9% of them knowing what they are doing, since hardly anyone tells them. And Uncle Sam's government uses much if not all of its increased hundreds of billions of dollars for the Pentagon. It does not, however, spend it to pay its poor professional soldiers, who come mostly from small-town rural America and took the only job they could get, and even less to its hapless reservists. No, better increasingly to privatize war in Iraq as well as at home. The military-industrial complex against which General Dwight Eisenhower warned in his 1958 parting presidential address is alive and kicking, more than ever under the stewardship of Vice President Richard Cheney and Defense Secretary Donald Rumsfeld (with their jobs disastrously well done, both are being kept on for a second term. So is Douglas Feith, with Paul "Wolfowitz of Arabia" one of the duo at the Pentagon who went to Israel and who the commander of the Iraq invasion, Tommy Franks, has been quoted as calling "the greatest total idiot that there is on God's Earth, with whom I have to battle almost every day").
Between 1994 and mid-2003, Uncle Sam's Pentagon made more than 3,000 contracts valued at more than $300 billion with 12 US private military companies (PMCs) out of the 35 estimated by the New York Times, others of which are small and offer mercenary services. But more than 2,700 of those contracts were given to only two companies: Kellogg Brown & Root (KBR), a subsidiary of Cheney-connected Halliburton, and Booz Allen Hamilton, according to the Center for Public Integrity's International Consortium of Investigative Journalists. In Iraq these PMCs now have as many mercenaries as US and UK troops combined. But of course that is still "small" potatoes, since the bulk of Pentagon money is used to buy expensive weapons systems from only four major US "defense" contractors and the likes of Halliburton.
Uncle Sam then uses these arms unilaterally to twist others' arms by blackmail, to lord it over and invade the world that provided the money in the first place. After all, Uncle Sam has to do what it must to keep it coming. US unilateralism is not so much, as often mistakenly supposed, just going it alone. Yes, it is to proclaim fighting for "freedom" (whose, we may ask?) and "saving civilization", as President George W Bush and his even more eloquent British mouthpiece Tony Blair proclaim every day. The simplest way to "save" civilization was by simply abolishing in a day its most precious gift of the whole body of international law to keep the peace, which the West had taken centuries to develop, admittedly also in its own imperial interests. Still, it was the best and only international law we had, and at the very least better than nothing at all. Now the only "Law of the West" that remains is indeed "the law of the west": The spaghetti-western vigilante law of posses that, with or without a conniving judge, take the "law" into their own hands to form a lynch party and go after whomever and where and when they please, alas now on a much grander scale than any spaghetti western ever imagined.
That also means disemboweling and paralyzing the institution of the United Nations that was established to guard the peace, except when Uncle Sam after its own wars always recycles the UN to pick up the pieces he shattered in Yugoslavia, Afghanistan and now Iraq. But in so doing, it also means to dupe, threaten, cajole and blackmail all others - friends and foes alike - to do his bidding on every issue, big and small. He has trained a whole civilian army of officials to do that. That way, Uncle Sam can "unilaterally" always throw around his still-apparent weight in all other international institutions that deal with endeavors from agriculture and aviation to zoology. But Uncle Sam extorts real unilateral favors for himself even more through his bilateral relations. That is why the World Trade Organization was dead on arrival. Indeed, Uncle Sam now prefers to use bilateral relations unilaterally, as he increasingly isolates himself internationally. Thus he can exercise even more military, political and economic bargaining power over his bilateral "partners" than he could over all or even many in international institutions.
And when bargaining is not enough, or even if it could be, Uncle Sam simply attacks when he feels like it, invading little Grenada (population all of 300,000), Nicaragua (with the help of arch-enemy Iran), Panama (7,000 civilians killed in one night to capture one man only, Daddy Bush's onetime friend and ally Manuel Noriega - there is an all-smiles photo of them shaking hands), Iraq (that was even a money-making venture as Uncle Sam extorted more dollars from his allies to pay for the war than it actually cost him), Somalia, and Yugoslavia, which was attacked in part to make an example out of what can happen when one is weak and yet in abject defiance of Uncle Sam and his IMF, maintaining some state ownership of important means of production and social-welfare state protection of the population, like Belarus today, where Uncle Sam also tried to get "regime change", but military action is more difficult on the border of Russia, unless it is an accord as against Afghanistan or bought off. Moreover, Yugoslavia gave up only when Russia withdrew support after Uncle Sam successfully blackmailed political economically and partly bought it off in Berlin. Then there is Afghanistan (again with the help of Iran and Russia), and now again Iraq. Who's next, Iran? Syria? Not Libya, it is now obediently making oil deals with Uncle Sam; and not North Korea, which made nukes to protect itself against precisely that.
Simple inspection of the facts on the ground reveals that, except for little Grenada, not a single one of these or any other US wars was ever won by military force, unless it be the Pacific one against Japan (World War II was won in Europe at Stalingrad in 1943 by Russian troops who would have reached Berlin even if Uncle Sam had not arrived later). Nonetheless, Uncle Sam has now already built 800 military bases around the world. Apart from that Bush has a new "Plan for the Middle East", which now stretches from Morocco beyond Pakistan - to Muslim Indonesia? Just what this plan involves is not yet clear, other than that Israel is to remain Uncle Sam's political and military stalking horse in the region as it has always been. Only now it's assigned its own reach and may also expand further. Bush himself went to Africa, especially West Africa, to look at its oil. In the Americas, his Plan Colombia (it has oil too) has been extended to the whole Andean region (Ecuador also exports oil), he has yet another plan for the Amazon (maybe some is to be found there and in the meantime he built a huge base there, allegedly for NASA, which is not unknown also to engage in military ventures), a plan to "take care of" with World Bank help the world's largest underground deposit of sweet water under Iguazu Falls, where Brazil, Argentina and Paraguay meet, and is already again training 40,000 Latin American military personnel at a time on US bases.
All this is a giant global military-political economic foundation on which to maintain Uncle Sam's financial Ponzi Scheme Confidence Racket, and cheap at twice the price for those that end up with the dollars and as long as he can pay for it all with the self-made paper dollars that so far also maintains the global Ponzi business. Well, to be honest, it's not only for the dollars. After all, they are only useful if you can actually buy something with them, especially the oil that keeps the foundation running.
All about oil
Not only does Uncle Sam have to buy ever more oil, today with self-printed dollars, but perhaps tomorrow with euros or yuan, he also has to try to make sure to have his hand on every spigot so he can control who else can, and especially who cannot, buy it. So that is why we now find him attempting political and financial control of the oil spigots, wherever he still can, and going in also for military presence as in Central Asia, or using military power to go in, as Iraq. That is both to use it as a lever of control and/or to warn its neighbors what may happen to them if they fail to continue to play along with Uncle Sam. Fortunately for him, most of East Asia and especially China also seem to be obliged to buy foreign oil, even if tomorrow perhaps no longer with dollars but with yuan/yen. On the other hand, sad but true, the world's biggest seller of oil is Russia, whose spigots remain beyond Uncle Sam's control. But how could Uncle Sam continue to pay for and maintain all these bold ventures in defense of freedom with those self-made paper dollars if nobody accepts them anymore?
The December 10 Financial Times (FT) offered some additional tip-of-the-iceberg examples of Uncle Sam's Defense of Freedom in Iraq. Though poor Iraq sits on top of the world's largest still-unexploited pool of ever-more-precious oil, it remains in the background or only at the bottom of this story that barely mentions it and, like the present essay, focuses instead on dollars. In two different reports, it relates how three helicopters flew 14 tons of $100 bills in to the Kurds. The money, much of the $1.8 billion US payoff to the Kurds, was part of Iraq's earnings under the UN "oil for food" program. Initially, of course, the bills simply were the product of the self-same US printing press, for which Iraq had exported real oil. It did not come from the $18 billion that Uncle Sam's Congress appropriated for "reconstruction" of Iraq. As an FT graph graphically shows, no more than $388 million - or 2.15% - of that US money had yet been spent, and only $5 billion of it having even been budgeted by Uncle Sam in Iraq by the time US proconsul L Paul Bremer went home from a job well done. No, instead in his wisdom the Good Uncle had thought it best to spend $13 billion of the $20 billion of Iraqi funds. That was 65% of the Iraqi money compared with the still only 2% of the nearly equivalent amount of original US money.
By the time the new Iraqi government took over some tasks from Uncle Sam, it discovered that a full $20 billion of their funds had been spent, $11 billion from sales of oil, according to the International Herald Tribune. Why? Simple, is the answer of the "responsible" finance officer, Admiral David Oliver, "I know we spent some money from [the Iraqi] fund. It was purely the matter that we'd run out of US money" - of which there was only another $17.5 billion-plus unspent. We might wonder whether the good admiral was schooled in Clausewitz and happened also to discover his good advice about making the conquered victim pay for his own military occupation, in this case by Uncle Sam.
The Iraqi representative on the funding disbursement and oversight committee attended all of one out of its 43 meetings; but then why bother with more, when most expenditures were authorized without any meeting at all. So although US funds were budgeted for all sorts of projects, they were nonetheless paid out of Iraqi funds. Of these, many disbursements were even made without any contract whatsoever, in one case a mere $1.4 billion. Most others occurred without any multiple competitive, nor even any previously vetted or subsequently evaluated, bids. The US funds, on the other hand, remained virtually unspent in Iraq. Maybe Admiral Oliver had "run out of US money" in Iraq because it remained at home in Washington; and if disbursed at all, it simply changed hands and bank accounts right there. After all, that is much more efficient than it would have been to send it back and forth, and a bit of it might not even get back. After all, it has long since been standard practice for the bulk of the dollars that Uncle Sam lends or even "gives" to Third World countries to stay at home, where it belongs and would return to anyway. No matter; Congress has already appropriated another $30 billion to "prepare for transition to elections" in Iraq this month.
All that being the case, it would of course be altogether undesirable for Iraqi, let alone Uncle Sam's, funds to be squandered on any Iraqi service of old foreign debt to others. So it was only logical to strong-arm "allies" who can't help already losing US debt to them also to forgive the Iraqi debt. This, as we may recall from above, while Uncle Sam still insists that the rest of the Third World must continue servicing their debts to him. For God forbid that any repayment of Iraqi debt should go instead to those ungodly Russians, traitorous Frenchmen or even to the Chinese best friend indeed, who most invested in Iraq, a dastardly thing to do in the first place, when Uncle Sam has much more worthy causes for the Iraqi money.
And what were and still are these grander, worthy causes? The largest single payment of $1.4 billion was to whom else but the self-same Vice President Cheney's Halliburton. Yet we now know that at the same time it was also cheating even its generous benefactor Uncle Sam out of hundreds of millions more dollars on the side, buying petrol for $X in Kuwait and selling it in Iraq for $5-10X and other shenanigans. Altogether, Halliburton got Iraq contracts for a cool $10 billion plus change, according to the IHT.
Without the shadow of a doubt, most of the other Iraqi and US dollars went to other crony US - and some crumbs off the table for the UK - corporations and even to private and military individuals who have their fingers in the till. But alas, we will never know who they all are, since as per Uncle Sam's inspector general, "I was, candidly, not interested in having army auditors because I thought we had to slide into the Iraqi system as quickly as possible."
Rewards of conquest
Frankly, being both non- and anti-military, I have not myself read Clausewitz. So I do not know what, if any, good advice he gives about relying on corruption as the first principle in cutting and dividing up the conquered pie.
All of the above speculation was written before the UN International Advisory and Monitoring Board for Development in Iraq (IAMBDI) issued a report on its findings about US stewardship. Before we get to the report, we should keep in mind that the FT observes diplomatically that "the UN has been reluctant to take the US to task publicly over its spending of Iraqi funds". The FT quotes directly from the report: "There were control weaknesses ... inadequate accounting systems, uneven application of agreed-upon contracting procedures and inadequate record keeping." The IHT also makes its own summary of the same report: "There had been widespread irregularities, including financial mismanagement, a failure to cut smuggling [outward of oil and other Iraqi physical property; nobody knows at what price and to whose benefit] and over-dependence on no-bid contracts." The FT, for its part, offers a few more specifics from the report: "Of particular concern ... were contracts with sometimes billions of dollars that were awarded to US companies such as Halliburton from Iraqi funds without competitive tender."
Last month Bush gave Uncle Sam's highest civilian award, the Medal of Freedom, to L Paul Bremer III, the US civilian proconsul who oversaw it all, and to General Tommy Franks, who led the invasion that made it all possible in the first place. George Tenet, the director of the Central Intelligence Agency (CIA) that provided all the bogus information to "legitimate" the whole enterprise to begin with and has since been discredited and forced to resign was not forgotten either and received the third award. The IHT published a ceremonial photograph of the three, all smiles with George W, who was smiling too. We may rest pretty well assured that of the recipients of their beneficence and service to "freedom" (for whom and what, we may ask?), 99.99% were among the ones at whom the US Federal Reserve's Alan Greenspan had already pointed his finger as the most privileged over-consumers who are totally responsible for US under-saving and whom he labeled simply as the upper 20% of US income earners. It is also they, he said, who are the most responsible also for the growing trade deficit about which the Doctor recently complained in Berlin. If we examine US income distribution, we may well learn also that among these 20%, the lion's share of this money, like most of that from the Pentagon, ended up in the pockets or accounts of the upper 2% most super-privileged, so they can over-consume yet still more of the fat of the whole Earth. Who would deny that this is a worthy cause?
But as Bush himself told the world, it is only right that "we" exclude other countries from the trough and till in Iraq. After all, he explained, when the Iraqis accepted his invitation, it was "our boys who put their lives on the line". Alas, the personification of Uncle Sam neglected also to explain for what and for whom.
(Copyright 2005 Andre Gunder Frank. All rights reserved.)
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June 18, 2012 | The Nation
For the American political and media establishment, US-Russian relations always begin yesterday-without the pre-history of the relationship and thus without its essential political context. Of this we now have a new and increasingly dangerous example.
About the Author Stephen F. Cohen Stephen F. Cohen is a professor emeritus of politics and Russian studies at Princeton University and New York...
As Washington and Moscow sink deeper into another familiar cold warlike conflict, this time over Syria, American policy-makers and commentators, Democrats and Republicans alike, declare that President Obama's "reset" of relations with Moscow has failed. With equal unanimity, they blame only Moscow, in particular President Vladimir Putin, while entirely deleting Washington's longstanding role in the deteriorating relationship, as they have done for more than a decade.
But as I pointed out in this Nation article a year ago, Obama's reset was all but doomed from inception because it was based on the same bipartisan, winner-take-all triumphalism that had guided US policy toward post-Soviet Russia since the 1990s. As before, Obama's "new" policy meant "selective cooperation"-that is, concessions from Moscow without US reciprocity.
Until the US-Russian conflict over Syria erupted this year, the Obama White House wanted three major concessions from the Kremlin as part of the reset:
- support in the US confrontation with Iran (new negotiations are under way in Moscow this week);
- assistance in supplying NATO forces in Afghanistan;
- and then withholding Russia's veto of a UN Security Council resolution for a "no-fly zone" over Libya.
The Obama administration got all three concessions. In return, Moscow wanted a compromise on the administration's plan to place missile defense installations near Russia's borders; an end to NATO expansion in the direction of Ukraine and Georgia; and a curtailment of US interference, known as "democracy promotion," in Russia's internal politics. The Kremlin got none of these.
In short, another chance for expansive cooperation in US-Russian relations, even the partnership possible after the Soviet Union ended in 1991, has again been squandered in Washington, not in Moscow.
That the historical and political analyses set out in my 2011 article, as well as the concerns expressed there, have been amply justified by events gives me no satisfaction. Nor to add that a year later, things have only gotten worse. The three US policies to which Moscow reasonably objected before the reset have become more aggressive, and indeed, in the Kremlin's view, have been supplemented by Washington's policy of selective military "regime change" in the Middle East. In response, as I also warned, anti-American forces in Russian politics have continued to grow, along with the possibility of "another escalation of the arms race," about which both Putin and former Russian president Dmitri Medvedev, on whom Obama unwisely based the reset, warned.
Meanwhile, Obama's challenger for the presidency, Mitt Romney, has declared that Russia is again America's "number-one geopolitical foe," thereby confirming my worst concern-that we are on the verge of, or already in, a new cold war
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Economist's View
This is from Lιonce Ndikumana:
Africa Specializing in Capital Exodus?, by Lιonce Ndikumana: Even as Africa faces severe shortages of skilled labor at home, it experiences large and increasing outflows of highly-skilled labor migration to industrialized economies in search of better job opportunities. The investments made in the training of these professionals are losses to African countries but translate into hefty gains for receiving countries. Thus resource-starved African nations are subsidizing developed countries' industries and social services. ...Parallel to this exodus of human capital is the illicit export of financial capital from African countries or capital flight. This is not a new phenomenon, and it shows no signs of abating.Over the past four decades, sub-Saharan Africa has lost a staggering $700 billion due to capital flight. In addition to trade misinvoicing, smuggling, and embezzlement of revenues from natural resource exports, a substantial part of the capital flight was financed by external borrowing. We estimate that every year 40 to 60 cents of each borrowed dollar spins out of the revolving door as capital flight, often returning to the same banks that issued the loans. On net basis, Africa is transferring more money to the rest of the world than it is receiving in terms of borrowing and aid. Once again, Africa is net financier to the rest of the world rather than the other way around as commonly perceived. And unlike in the case of human capital exodus, financial capital flight generates absolutely no flows in the reverse direction; it is an unmitigated loss to the continent.Capital flight, and the burden of servicing the debts that financed it, are partly to blame for the conditions that create the other economic problems faced by the continent... Illicit financial flows drain scarce public resources that could have been used to finance public services including education and health. It partly explains why there are not enough schools, clinics, and medical equipment; it also explains the poor working conditions for doctors, teachers, and other professionals that force them to seek greener pastures abroad.Stemming capital flight could substantially bridge the financing gaps faced by African countries. ...It is clear that Africa's development pathways, characterized by exodus of human and financial capital, are not sustainable in the long run. Obviously African countries have the primary responsibility to devise and implement strategies to keep capital onshore. But the international community also has an equally important responsibility to root out the perverse incentives and opacity in the financial system that enable and perpetuate the financial hemorrhage faced by the continent. This would enhance the efficiency of donors' support to Africa's efforts to boost investments in education, stimulate private sector development, employment creation, and generally improve domestic living and working conditions that are necessary for optimal utilization of skilled human capital on the continent.
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Independent News
The reason that I emphatically disagree with this historical assertion is not because I do not find these acts to be imperialistic. They are. Instead, I see no reason not to brand the subjugation of the entire middle band of North America AS "Imperialism."
This is one of my central points, and it is hard to overstate the importance of it: it is easy to take America for granted, but it is an extremely large country.
Let us remember that white people come from Europe. Great Britain wound up creating four large overseas territories dominated by whites: The United States, Canada, New Zealand, and Australia.
Each of these places was once inhabited by a totally different group of people, whose culture and livelihoods were destroyed.
We can agree the America was part of the British Empire prior to its independence, but many may not understand why I believe the subjugation of the American continent to be a matter of Empire.
The power of The United States can be summed up as follows: European technology and knowledge combined with large amounts of land, natural resources, and relatively little internal strife.
The US is an historically unique country, because it is the largest and most developed empire to come into existence after the industrial revolution.
Remember that Europe suffered two major destructive episodes with 20th Century technology, while America has not had to fight on its own continental territory since its Civil War, which ended in 1865.
America's population is 300 million and its area is 3.79 million square miles. Is there any surprise that it took over the mantle of most powerful empire from Britain, which currently has only 130,395 square miles and 62 million people to work with?
We can easily see the advantages over Europe: one language and one government (after the Civil War, the states cannot really be said to be sovereign), with no history of disputed borders among whites.
Conquering the area of the continental US, holding it, and developing it was quite an accomplishment, and is deserving of the title of "imperialism."
We do not call the United States an Empire because it is formally a republic, but remember that those whose consent is required for its government are white, and that the land's original inhabitants were brown.
The states do not dispute their borders, and very few serious politicians believe the federal government to be illegitimate.
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Logos
Human rights and political realism offer two very different ways of approaching international affairs.[1] Here is not the place for an extended philosophical disquisition on the relationship between them, let alone their connection with the history of American foreign policy. Human rights and political realism have their unique traditions that are usually seen as starkly opposed to one another. But the interplay between them has become ever more apparent in an increasingly global society. This new blending of human rights with political realism penetrates the basic questions that citizens should be asking in judging American foreign policy in a meaningful way - now and in the future.Human rights gripped the popular imagination in the aftermath of World War II. It seemed to offer a response to the cynical political realism of totalitarian leaders as well as the barbarism associated with what Daniel Rousset termed "the concentration camp universe" exemplified by Auschwitz and the Gulag.
With the liberation of the formerly colonized world, and the passing of socialism as a mobilizing ideology, the idea of human rights provides new hope for a more civilized world. Human rights have their roots in the Bible, natural law, and classical humanist notions concerning the "dignity of man." But the modern idea of humanity derives from the Enlightenment and the republican revolutions that extended roughly from 1688-1789. This was the era of the rising bourgeoisie whose vision of national self-determination was tied to the liberal republic and a universal understanding of rights.
Each nation, in principle, was seen as having the right to determine its own destiny and the exercise of that right was seen as requiring a liberal state in which individuals enjoyed the benefit of civil liberties.[2] As for political realism, its beginnings can be found in the "Melian Dialogues" from Thucydides' History of the Peloponnesian War (410 BC) and, even further back, in The Art of War by Sun Tzu (610 BC). Works such as these anticipated Machiavelli's The Prince (1532) what might be termed the Bible of political realism - and Thomas Hobbes' Leviathan (1651).
Reflecting the rise of the modern absolutist state, these classics evince a fear of democracy, chaos, privilege, authority and stability. They introduce the ideas of raison d'etat and balance of power, sovereignty and leadership, national interest and geopolitical advantage, as well as a modern understanding of the claim that "might makes right." The perspective now associated with human rights, by contrast, were always employed to mitigate the exercise of arbitrary power on the part of states guided by little more than political realism. Thus, human rights and political realism have traditionally been seen as political opposites.
Human rights are predicated on universal assumptions like the liberal rule of law and political realism on national interests. Ethical ends associated with law and liberty fuel human rights while the short-term means for securing power animates political realism. Human rights always privilege the freedom of the individual against the state while political realism champions the exigencies of raison d'etat. Leaving things at that, however, works to the detriment of both human rights and the prudent exercise of political power. If the pursuit of human rights is undertaken without reference to political interests then the policy will prove blind to existing realities. Political realists have noted how often the road to hell has been paved with good intentions. Leading representatives of the realist tradition like George Kennan and Hans Morgenthau always insisted that recognizing the crass reality of power is the necessary condition for both defending and furthering freedom. But it is not sufficient. Simply trumpeting interest and power is just as dangerous. It breeds distrust (especially for a superpower like the United States in a multi-polar world) as well as a moral climate in which all means are legitimate for all participants in the struggle for power. These implications are worth considering with regard to the use of terrorist tactics including those that brought about the tragedy of 9/11. Bluster about the dangers of "moral equivalency," indeed, it is relevant only for those who have already been convinced. Using human rights cynically in order to further narrow forms of national interest is ultimately self-defeating. Noam Chomsky has been relentless in chastising those policymakers interested in nothing more than the short-term calculus. Any politics predicated purely on immediate and instrumental interest generates precisely the kind of instability and potential for "blowback"[3] that genuine realism should supposedly inhibit. Making judgments with regard to its effectiveness, however, involves asking certain basic questions that are still too rarely asked.
What is the strategic goal? The United States has a defense budget of more than $700 billion, a military of 1 million members, and 750 bases throughout the world. It is already present everywhere and political realists seek to strengthen that presence especially in "hot spots." What this means, however, is not self-evident. "Mission creep" is becoming a defining characteristic of American foreign policy in the Middle East. It can apply to both a supposedly unconscious expansion of practical aims by decision-makers in the pursuit of a policy but also to the shifting justifications required to garner support from the citizenry for that policy. American intervention in Afghanistan in the aftermath of 9/11 was initially predicated on capturing Osama bin Laden. But that undertaking soon turned into a bombing assault on the Taliban, regime change, and nation-building with the support of the corrupt Karzai government that lacked both competence and legitimacy. As for Iraq, though conservative policymakers had been planning to unseat Saddam Hussein since 1991, the regime change they planned was more difficult than they anticipated. There was the anger directed against American "liberators," the subterranean ethnic and religious conflicts always ready to explode into outright civil war, and the new state without legitimacy or a monopoly over the means of coercion. Mission creep has permeated many contemporary conflicts. It has fostered an image of the United States as self-interested, imperialist, and completely arbitrary in its goals and tactics and that impression is not always erroneous.
Is there an ethical purpose? Ethical confusion in terms of justifying American policy in the Middle East has mirrored the practical confusion in carrying it out. Human rights fell by the wayside as the Bush Administration began substituting and then mixing one faulty ideological justification for another in Iraq. Identified with the "axis of evil," which called forth a "war on terror," Iraq was then castigated as a threat to Israel and, with its control of oil, the American national interest. But this argument stood at odds with the weakness of the Iraq military and the fact that Iraq's secular Baathist regime was never a major supporter of terrorism in general or Islamic fundamentalist movements like al Qaeda in particular. False accusations concerning the existence of "weapons of mass destruction" were then introduced along with wild claims that Saddam Hussein was intent upon launching them against Israel and the United States. Once it became apparent that this, too, was not the case, hyper-realists began talking about human rights and spreading democracy to the Middle East.[4] All of this was reinforced by the belief that the Iraqi citizenry enthusiastically supported American intervention and that there existed a groundswell of unified national support for a new democratic order. The same jumbled set off justifications became apparent in Afghanistan. American self-righteousness has only been exacerbated by such miscalculations and misperceptions. Plagued by a confused ethical purpose, compromised by suspect allies and without an exit strategy, the United States has consistently found itself entangled in a murderous and, occasionally, even genocidal set of foreign policy actions that serve neither human rights nor the American national interests.
Where is the support? Support for a policy (especially a dangerous policy) rests on a number of contingent factors. Yet, increasingly, basic conflicts of interest over foreign policy have appeared between the political establishment and the citizenry. Political realists have always considered foreign policy the prerogative of the sovereign or, better, the state that incarnates sovereignty. It is the state (or better its officials and their advisors) that supposedly determines the national interest and, by extension, whether intervention in the name of human rights is warranted in any particular instance. Since the time of Machiavelli, political realists have justified the insular formation of foreign policy on a number of grounds: superior expertise (that apparently was lacking in Afghanistan and Iraq); the importance of decisive action (that has, too often, been indecisive and misguided) and the need to preserve national security (whose self-righteous invocation has produced the last refuge of the modern political scoundrel). Traditional political realists leave little room for democratic input in official decision-making. Demands for democratic input surfaced during the 1960s with the rise of "new social movements." Calls for expanding democracy and social welfare at home generated demands for ethical accountability and transparency for policies undertaken abroad. Political realism thus encountered human rights. What is known as the "Vietnam syndrome," indeed, involves less the loss of a war than the lingering distrust of interventionist undertakings by much of the citizenry. Such skepticism proved warranted given the fabrication of evidence, the collusion, the sloganeering and the outright lying to justify the invasion of Iraq by so many in the Bush administration. Memories of Vietnam, fear of dissent, and fear of full disclosure contributed to the rise of a national security state along with the constriction of civil liberties beginning with the "patriot act." Attempts to artificially fabricate consent over the long haul for any policy let alone one that justifies itself in terms of moral claims or human rights can only prove self-defeating in the world of Wiki-leaks and an age of global media.
Who benefits? Calculating costs is a normal and necessary element in determining whether to engage in any particular foreign policy. Costs are an ineradicable element in determining what is possible in any given situation and their underestimation will surely erode whatever original consensus existed for the policy in question: the Iraq conflict at its height cost the United States over $380 million per day, the American policy in Afghanistan stands at $300 million per day, and that the costs for involvement in the Libyan conflict are $55 million per day and rising. But the issue is not merely the costs undertaken by the United States. Too often, political realists fail to take into account the costs paid by the nations supposedly reaping the benefit of American policy. Lenin liked to say that you cannot make an omelette without breaking eggs: but sometimes breaking eggs results only in a mess. Costs always amount to more than dollars and cents. The United States has suffered a loss of moral capital through use of rendition, torture, and cynical talk about collateral damage. Its officials and its citizens, however, are amazed when the supposed beneficiaries of such policies appear ungrateful. They forget that others pay the often much steeper price for their decisions. Even should a democratic state emerge in Iraq, it will have come at virtually genocidal cost: A study conducted by Johns Hopkins University in 2006 estimated 600-800,000 dead in a country of 27 million; between five and ten times that number wounded; thousands in exile; ecological damage, and more a cost paid by Iraqis not Americans. Calculating the gains and losses of a political policy is not merely a mathematical but a normative endeavor. Both at home and abroad there is a growing and quite legitimate belief that the justifications for American foreign policy in terms of human rights are merely a cover for "oil" and other powerful lobbies (Bechtel, Halliburton, XE) or various geo-political interests. Costs and benefits cannot simply be calculated from the perspective of the United States or in relation to its policy aims. Little wonder that American expressions of concern over human rights abuses are greeted with such skepticism especially by those who should benefit.
Is there a double standard? American foreign policy in the aftermath of 9/11 has increasingly been associated with the use of a double standard by much of the world. The United States employed the doctrine of the "pre-emptive strike," which would allow an assault upon any nation deemed a threat to national security by the American government, to justify the invasion of Iraq in 2003. It has also been bandied about in order to legitimate bombing Iran's nuclear facility at Nantanz and elsewhere. But the right to engage in pre-emptive strikes and support violent regimes and movements is denied to others. American political realists consider self-evident that their country should sponsor authoritarian regimes in Saudi Arabia and Pakistan, brand others like Iran as "rogue" states, and appear to the world as the unblemished beacon of democracy. Given this attitude, once again, their often exaggerated moral outrage to attacks and criticisms can only seem hypocritical and self-serving to disinterested or non-committed parties. Finally, in a particularly perverse example of the double standard, the United States the only nation ever to employ the atomic bomb (not just once, but twice) finds it can provide nuclear arms for India and other countries of its liking and simultaneously threaten Iran with military action for building a nuclear facility that might produce a nuclear device in about ten years. There are policymakers who never encountered a crisis for which American intervention wasn't a remedy: Richard Barnett called them "white collar militarists." But, then, hundreds of wars, thousands of human rights abuses are taking place as these words are being read. It is always legitimate to ask how egregious is this particular breach of human rights? Why is this particular nation the target? How does this crisis affect the national interest and the world community? One size does not fit all when it comes to foreign policy and the pursuit of human rights. This only makes the justification for any particular action in any particular instance more important. Indeed, what matters is less the inability to intervene everywhere than the ability to fashion a particular foreign policy intervention that is prudent and works to the benefit of the peoples involved.
The Arrogance of Power: Arguments that the end justifies the means have always been tautological - since it is only the means that produce the end. It always remains to be asked: what justifies the end other than the means used to bring it about. Liberal hawks like the journalist Paul Berman or the scholar and policy analyst,[5] Samantha Power,[6] or Ambassador to the United Nations Susan Rice have consistently endorsed interventionist policies on moral grounds. Emphasizing universal standards of behavior, (though not quite so vociferously when it the culprit is the United States), they stand for human rights wherever they are abused: and, usually, they come up with the same list of proscriptions on a sliding scale whether for Iraq, Afghanistan, Sudan, Pakistan, Libya, Somalia or Iran. Sensationalist publicity campaigns begin the process that usually leads to demands for sanctions, "strategic" bombings and - ultimately - regime change brought about my military intervention. These idealists simply assume that because the end is pure, even if the policy itself is somewhat vague, support can be mobilized. The costs are secondary because "the people" the beneficiaries of their largesse are always awaiting American intervention with baited breath. A dose of political realism wouldn't hurt these idealists seeking to carry the banner of democracy on their bayonets. Effective foreign policy today rests on recognizing the interplay between human rights and political realism. Principles are not neatly divorced from interests[7] - and advocates of political realism should take heed. The United States has paid dearly for its contraventions of human rights its support for President Hosni Mubarak of Egypt and (without even mentioning Israel) other questionable allies in the region like Saudi Arabia. Traditional cynicism about human rights and long-standing support dictatorial regimes clearly created blindness in anticipating and hesitancy in embracing the new movements associated with the Arab Spring.[8] There is an old saying that bears repeating: "Tell me who your friends are and I will tell you who you are." It doesn't help for political realists to insist (with frustration) that the world is a "dangerous place:" not only the victims, but the more disinterested parties, will challenge what the late Senator J.W. Fulbright termed "the arrogance of power."
Credibility is, today, a fundamental tenet of any successful foreign policy endeavor and this presupposes recognition of the need for transparency and respect for the basic traditions of a democratic polity. Corrupt tactics and the cynical choice of allies have undermined the credibility of America's ethical commitments, the legitimacy of its national interests, and the ability to garner genuine support for American policy in the Middle East. Any intelligent person could see that the successful destruction of the Iraqi state would leave two other powers in the region, Syria and Iran, and that logic dictated a future assault on them in the name of spreading democracy. Circumstances intervened, however, and this kind of policy has (both pragmatically and ideologically) become a bit more difficult to pursue. Rousseau was surely correct in The Social Contract (1762) when he noted that "the strongest is never strong enough to be always the master, unless he transforms strength into right, and obedience into duty." Perhaps the connection between human rights and political realism (or between ends and means) can never prove absolute: such a demand is probably utopian. But it is legitimate to ask of policymakers that they offer a plausible if not absolute-connection between principles and interests in the policies they propose. That requires vigorous debate and questioning of the usually phony insistence upon national security in the deliberation process. When it comes to human rights and American foreign policy, indeed, there is no finessing the implications of political realism: democracy is what democracy does.
Notes
- [1] This text is based on a speech originally given at a conference, "The Changing Middle East: Implications for US-Iran Relations," that was sponsored by the American-Iranian Council and Georgetown University on June 7, 2011.
- [2]Note the extended discussion in Stephen Eric Bronner, Reclaiming the Enlightenment: Toward a Politics of Radical Engagement (New York: Columbia University Press, 2005).
- [3] Note the extended discussion of the unintended future consequences of short term instrumental decisions a simple example is the support originally extended by the United States to the Muhjadeen in Afghanistan against the Russians - in Chalmers Johnson, Blowback: The Costs and Consequences of American Empire (New York: Holt, 2004).
- [4] Note the chronology in The Iraq Papers edited by John Ehrenberg, Patrice McSherry, Jose R. Sanchez, and Caroleen Sayej (New York: Oxford University Press, 2010).
- [5] See the essay on liberal supporters of the Iraqi war that I co-authored with John Kurt Jacobsen, "Dubya's Fellow Travellers: Left Intellectuals and Mr. Bush's War" in Stephen Eric Bronner, Blood in the Sand: Imperial Fantasies, Right-Wing Ambitions, and the Erosion of American Democracy (Lexington: University of Kentucky Press, 2005), pgs. 102ff.
- [6] Samantha Power, A Problem from Hell: America and the Age of Genocide (New York: Harper, 2007).
- [8]Note the hapless discussions over "What Just Happened?" and "Why No One Saw It Coming?" with respect to "The New Arab Revolt" in Foreign Affairs (May/June 2011) and F. Gregory Gause III, "Why Middle East Studies Missed the Arab Spring" in Foreign Affairs (July/August 2011). For an alternative approach, see Stephen Eric Bronner, "Rosa in Cairo" in Reader Supported New (February 8, 2011); www.rsnorg.org
Stephen Eric Bronner is Distinguished Professor (PII) of Political Science and Director of Civic Diplomacy and Human Rights at the Institute for World Challenges: Rutgers University. Author of more than a dozen books, he is the Senior Editor of Logos: A Journal of Modern Society and Culture.
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Imperialism has been the most powerful force in world history over the last four or five centuries, carving up whole continents while oppressing indigenous peoples and obliterating entire civilizations. Yet, it is seldom accorded any serious attention by our academics, media commentators, and political leaders. When not ignored outright, the subject of imperialism has been sanitized, so that empires become "commonwealths," and colonies become "territories" or "dominions" (or, as in the case of Puerto Rico, "commonwealths" too). Imperialist military interventions become matters of "national defense," "national security," and maintaining "stability" in one or another region. In this book I want to look at imperialism for what it really is.Across the Entire Globe
By "imperialism" I mean the process whereby the dominant politico-economic interests of one nation expropriate for their own enrichment the land, labor, raw materials, and markets of another people.The earliest victims of Western European imperialism were other Europeans. Some 800 years ago, Ireland became the first colony of what later became known as the British empire. A part of Ireland still remains under British occupation. Other early Caucasian victims included the Eastern Europeans. The people Charlemagne worked to death in his mines in the early part of the ninth century were Slavs. So frequent and prolonged was the enslavement of Eastern Europeans that "Slav" became synonymous with servitude. Indeed, the word "slave" derives from "Slav." Eastern Europe was an early source of capital accumulation, having become wholly dependent upon Western manufactures by the seventeenth century.
A particularly pernicious example of intra-European imperialism was the Nazi aggression during World War II, which gave the German business cartels and the Nazi state an opportunity to plunder the resources and exploit the labor of occupied Europe, including the slave labor of concentration camps.
The preponderant thrust of the European, North American, and Japanese imperial powers has been directed against Africa, Asia, and Latin America. By the nineteenth century, they saw the Third World as not only a source of raw materials and slaves but a market for manufactured goods. By the twentieth century, the industrial nations were exporting not only goods but capital, in the form of machinery, technology, investments, and loans. To say that we have entered the stage of capital export and investment is not to imply that the plunder of natural resources has ceased. If anything, the despoliation has accelerated.
Of the various notions about imperialism circulating today in the United States, the dominant view is that it does not exist. Imperialism is not recognized as a legitimate concept, certainly not in regard to the United States. One may speak of "Soviet imperialism" or "nineteenth-century British imperialism" but not of U.S. imperialism. A graduate student in political science at most universities in this country would not be granted the opportunity to research U.S. imperialism, on the grounds that such an undertaking would not be scholarly. While many people throughout the world charge the United States with being an imperialist power, in this country persons who talk of U.S. imperialism are usually judged to be mouthing ideological blather.
The Dynamic of Capital Expansion
Imperialism is older than capitalism. The Persian, Macedonian, Roman, and Mongol empires all existed centuries before the Rothschilds and Rockefellers. Emperors and conquistadors were interested mostly in plunder and tribute, gold and glory. Capitalist imperialism differs from these earlier forms in the way it systematically accumulates capital through the organized exploitation of labor and the penetration of overseas markets. Capitalist imperialism invests in other countries, transforming and dominating their economies, cultures, and political life, integrating their financial and productive structures into an international system of capital accumulation.A central imperative of capitalism is expansion. Investors will not put their money into business ventures unless they can extract more than they invest. Increased earnings come only with a growth in the enterprise. The capitalist ceaselessly searches for ways of making more money in order to make still more money. One must always invest to realize profits, gathering as much strength as possible in the face of competing forces and unpredictable markets.
Given its expansionist nature, capitalism has little inclination to stay home. Almost 150 years ago, Marx and Engels described a bourgeoisie that "chases over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere. . . . It creates a world after its own image." The expansionists destroy whole societies. Self-sufficient peoples are forcibly transformed into disfranchised wage workers. Indigenous communities and folk cultures are replaced by mass-market, mass-media, consumer societies. Cooperative lands are supplanted by agribusiness factory farms, villages by desolate shanty towns, autonomous regions by centralized autocracies.
Consider one of a thousand such instances. A few years ago the Los Angeles Times carried a special report on the rainforests of Borneo in the South Pacific. By their own testimony, the people there lived contented lives. They hunted, fished, and raised food in their jungle orchards and groves. But their entire way of life was ruthlessly wiped out by a few giant companies that destroyed the rainforest in order to harvest the hardwood for quick profits. Their lands were turned into ecological disaster areas and they themselves were transformed into disfranchised shantytown dwellers, forced to work for subsistence wages-when fortunate enough to find employment.
North American and European corporations have acquired control of more than three-fourths of the known mineral resources of Asia, Africa, and Latin America. But the pursuit of natural resources is not the only reason for capitalist overseas expansion. There is the additional need to cut production costs and maximize profits by investing in countries with cheaper labor markets. U.S. corporate foreign investment grew 84 percent from 1985 to 1990, the most dramatic increase being in cheap-labor countries like South Korea, Taiwan, Spain, and Singapore.
Because of low wages, low taxes, nonexistent work benefits, weak labor unions, and nonexistent occupational and environmental protections, U.S. corporate profit rates in the Third World are 50 percent greater than in developed countries. Citibank, one of the largest U.S. firms, earns about 75 percent of its profits from overseas operations. While profit margins at home sometimes have had a sluggish growth, earnings abroad have continued to rise dramatically, fostering the development of what has become known as the multinational or transnational corporation. Today some four hundred transnational companies control about 80 percent of the capital assets of the global free market and are extending their grasp into the ex-communist countries of Eastern Europe.
Transnationals have developed a global production line. General Motors has factories that produce cars, trucks and a wide range of auto components in Canada, Brazil, Venezuela, Spain, Belgium, Yugoslavia, Nigeria, Singapore, Philippines, South Africa, South Korea and a dozen other countries. Such "multiple sourcing" enables GM to ride out strikes in one country by stepping up production in another, playing workers of various nations against each other in order to discourage wage and benefit demands and undermine labor union strategies.
Not Necessary, Just Compelling
Some writers question whether imperialism is a necessary condition for capitalism, pointing out that most Western capital is invested in Western nations, not in the Third World. If corporations lost all their Third World investments, they argue, many of them could still survive on their European and North American markets. In response, one should note that capitalism might be able to survive without imperialism-but it shows no inclination to do so. It manifests no desire to discard its enormously profitable Third World enterprises. Imperialism may not be a necessary condition for investor survival but it seems to be an inherent tendency and a natural outgrowth of advanced capitalism. Imperial relations may not be the only way to pursue profits, but they are the most lucrative way.Whether imperialism is necessary for capitalism is really not the question. Many things that are not absolutely necessary are still highly desirable, therefore strongly preferred and vigorously pursued. Overseas investors find the Third World's cheap labor, vital natural resources, and various other highly profitable conditions to be compellingly attractive. Superprofits may not be necessary for capitalism's survival but survival is not all that capitalists are interested in. Superprofits are strongly preferred to more modest earnings. That there may be no necessity between capitalism and imperialism does not mean there is no compelling linkage.
The same is true of other social dynamics. For instance, wealth does not necessarily have to lead to luxurious living. A higher portion of an owning class's riches could be used for investment rather personal consumption. The very wealthy could survive on more modest sums but that is not how most of them prefer to live. Throughout history, wealthy classes generally have shown a preference for getting the best of everything. After all, the whole purpose of getting rich off other people's labor is to live well, avoiding all forms of thankless toil and drudgery, enjoying superior opportunities for lavish life-styles, medical care, education, travel, recreation, security, leisure, and opportunities for power and prestige. While none of these things are really "necessary," they are fervently clung to by those who possess them-as witnessed by the violent measures endorsed by advantaged classes whenever they feel the threat of an equalizing or leveling democratic force.
Myths of Underdevelopment
The impoverished lands of Asia, Africa, and Latin America are known to us as the "Third World," to distinguish them from the "First World" of industrialized Europe and North America and the now largely defunct "Second World" of communist states. Third World poverty, called "underdevelopment," is treated by most Western observers as an original historic condition. We are asked to believe that it always existed, that poor countries are poor because their lands have always been infertile or their people unproductive.In fact, the lands of Asia, Africa, and Latin America have long produced great treasures of foods, minerals and other natural resources. That is why the Europeans went through all the trouble to steal and plunder them. One does not go to poor places for self-enrichment. The Third World is rich. Only its people are poor-and it is because of the pillage they have endured.
The process of expropriating the natural resources of the Third World began centuries ago and continues to this day. First, the colonizers extracted gold, silver, furs, silks, and spices, then flax, hemp, timber, molasses, sugar, rum, rubber, tobacco, calico, cocoa, coffee, cotton, copper, coal, palm oil, tin, iron, ivory, ebony, and later on, oil, zinc, manganese, mercury, platinum, cobalt, bauxite, aluminum, and uranium. Not to be overlooked is that most hellish of all expropriations: the abduction of millions of human beings into slave labor.
Through the centuries of colonization, many self-serving imperialist theories have been spun. I was taught in school that people in tropical lands are slothful and do not work as hard as we denizens of the temperate zone. In fact, the inhabitants of warm climates have performed remarkably productive feats, building magnificent civilizations well before Europe emerged from the Dark Ages. And today they often work long, hard hours for meager sums. Yet the early stereotype of the "lazy native" is still with us. In every capitalist society, the poor-both domestic and overseas-regularly are blamed for their own condition.
We hear that Third World peoples are culturally retarded in their attitudes, customs, and technical abilities. It is a convenient notion embraced by those who want to depict Western investments as a rescue operation designed to help backward peoples help themselves. This myth of "cultural backwardness" goes back to ancient times, when conquerors used it to justify enslaving indigenous peoples. It was used by European colonizers over the last five centuries for the same purpose.
What cultural supremacy could by claimed by the Europeans of yore? From the fifteenth to nineteenth centuries Europe was "ahead" in a variety of things, such as the number of hangings, murders, and other violent crimes; instances of venereal disease, smallpox, typhoid, tuberculosis, plagues, and other bodily afflictions; social inequality and poverty (both urban and rural); mistreatment of women and children; and frequency of famines, slavery, prostitution, piracy, religious massacres, and inquisitional torture. Those who claim the West has been the most advanced civilization should keep such "achievements" in mind.
More seriously, we might note that Europe enjoyed a telling advantage in navigation and armaments. Muskets and cannon, Gatling guns and gunboats, and today missiles, helicopter gunships, and fighter bombers have been the deciding factors when West meets East and North meets South. Superior firepower, not superior culture, has brought the Europeans and Euro-North Americans to positions of supremacy that today are still maintained by force, though not by force alone.
It was said that colonized peoples were biologically backward and less evolved than their colonizers. Their "savagery" and "lower" level of cultural evolution were emblematic of their inferior genetic evolution. But were they culturally inferior? In many parts of what is now considered the Third World, people developed impressive skills in architecture, horticulture, crafts, hunting, fishing, midwifery, medicine, and other such things. Their social customs were often far more gracious and humane and less autocratic and repressive than anything found in Europe at that time. Of course we must not romanticize these indigenous societies, some of which had a number of cruel and unusual practices of their own. But generally, their peoples enjoyed healthier, happier lives, with more leisure time, than did most of Europe's inhabitants.
Other theories enjoy wide currency. We hear that Third World poverty is due to overpopulation, too many people having too many children to feed. Actually, over the last several centuries, many Third World lands have been less densely populated than certain parts of Europe. India has fewer people per acre-but more poverty-than Holland, Wales, England, Japan, Italy, and a few other industrial countries. Furthermore, it is the industrialized nations of the First World, not the poor ones of the Third, that devour some 80 percent of the world's resources and pose the greatest threat to the planet's ecology.
This is not to deny that overpopulation is a real problem for the planet's ecosphere. Limiting population growth in all nations would help the global environment but it would not solve the problems of the poor-because overpopulation in itself is not the cause of poverty but one of its effects. The poor tend to have large families because children are a source of family labor and income and a support during old age.
Frances Moore Lappe and Rachel Schurman found that of seventy Third World countries, there were six-China, Sri Lanka, Colombia, Chile, Burma, and Cuba-and the state of Kerala in India that had managed to lower their birth rates by one third. They enjoyed neither dramatic industrial expansion nor high per capita incomes nor extensive family planning programs. The factors they had in common were public education and health care, a reduction of economic inequality, improvements in women's rights, food subsidies, and in some cases land reform. In other words, fertility rates were lowered not by capitalist investments and economic growth as such but by socio-economic betterment, even of a modest scale, accompanied by the emergence of women's rights.
Artificially Converted to Poverty
What is called "underdevelopment" is a set of social relations that has been forcefully imposed on countries. With the advent of the Western colonizers, the peoples of the Third World were actually set back in their development sometimes for centuries. British imperialism in India provides an instructive example. In 1810, India was exporting more textiles to England than England was exporting to India. By 1830, the trade flow was reversed. The British had put up prohibitive tariff barriers to shut out Indian finished goods and were dumping their commodities in India, a practice backed by British gunboats and military force. Within a matter of years, the great textile centers of Dacca and Madras were turned into ghost towns. The Indians were sent back to the land to raise the cotton used in British textile factories. In effect, India was reduced to being a cow milked by British financiers.By 1850, India's debt had grown to 53 million pounds. From 1850 to 1900, its per capita income dropped by almost two-thirds. The value of the raw materials and commodities the Indians were obliged to send to Britain during most of the nineteenth century amounted yearly to more than the total income of the sixty million Indian agricultural and industrial workers. The massive poverty we associate with India was not that country's original historical condition. British imperialism did two things: first, it ended India's development, then it forcibly underdeveloped that country.
Similar bleeding processes occurred throughout the Third World. The enormous wealth extracted should remind us that there originally were few really poor nations. Countries like Brazil, Indonesia, Chile, Bolivia, Zaire, Mexico, Malaysia, and the Philippines were and sometimes still are rich in resources. Some lands have been so thoroughly plundered as to be desolate in all respects. However, most of the Third World is not "underdeveloped" but overexploited. Western colonization and investments have created a lower rather than a higher living standard.
Referring to what the English colonizers did to the Irish, Frederick Engels wrote in 1856: "How often have the Irish started out to achieve something, and every time they have been crushed politically and industrially. By consistent oppression they have been artificially converted into an utterly impoverished nation." So with most of the Third World. The Mayan Indians in Guatemala had a more nutritious and varied diet and better conditions of health in the early 16th century before the Europeans arrived than they have today. They had more craftspeople, architects, artisans, and horticulturists than today. What is called underdevelopment is not an original historical condition but a product of imperialism's superexploitation. Underdevelopment is itself a development.
Imperialism has created what I have termed "maldevelopment": modern office buildings and luxury hotels in the capital city instead of housing for the poor, cosmetic surgery clinics for the affluent instead of hospitals for workers, cash export crops for agribusiness instead of food for local markets, highways that go from the mines and latifundios to the refineries and ports instead of roads in the back country for those who might hope to see a doctor or a teacher.
Wealth is transferred from Third World peoples to the economic elites of Europe and North America (and more recently Japan) by direct plunder, by the expropriation of natural resources, the imposition of ruinous taxes and land rents, the payment of poverty wages, and the forced importation of finished goods at highly inflated prices. The colonized country is denied the freedom of trade and the opportunity to develop its own natural resources, markets, and industrial capacity. Self-sustenance and self-employment gives way to wage labor. From 1970 to 1980, the number of wage workers in the Third World grew from 72 million to 120 million, and the rate is accelerating.
Hundreds of millions of Third World peoples now live in destitution in remote villages and congested urban slums, suffering hunger, disease, and illiteracy, often because the land they once tilled is now controlled by agribusiness firms who use it for mining or for commercial export crops such as coffee, sugar, and beef, instead of growing beans, rice, and corn for home consumption. A study of twenty of the poorest countries, compiled from official statistics, found that the number of people living in what is called "absolute poverty" or rockbottom destitution, the poorest of the poor, is rising 70,000 a day and should reach 1.5 billion by the year 2000 (San Francisco Examiner, June 8, 1994).
Imperialism forces millions of children around the world to live nightmarish lives, their mental and physical health severely damaged by endless exploitation. A documentary film on the Discovery Channel (April 24, 1994) reported that in countries like Russia, Thailand, and the Philippines, large numbers of minors are sold into prostitution to help their desperate families survive. In countries like Mexico, India, Colombia, and Egypt, children are dragooned into health-shattering, dawn-to-dusk labor on farms and in factories and mines for pennies an hour, with no opportunity for play, schooling, or medical care.
In India, 55 million children are pressed into the work force. Tens of thousands labor in glass factories in temperatures as high as 100 degrees. In one plant, four-year-olds toil from 5 o'clock in the morning until the dead of night, inhaling fumes and contracting emphysema, tuberculosis, and other respiratory diseases. In the Philippines and Malaysia corporations have lobbied to drop age restrictions for labor recruitment. The pursuit of profit becomes a pursuit of evil.
Development Theory
When we say a country is "underdeveloped," we are implying that it is backward and retarded in some way, that its people have shown little capacity to achieve and evolve. The negative connotations of "underdeveloped" has caused the United Nations, the Wall Street Journal, and parties of various political persuasion to refer to Third World countries as "developing" nations, a term somewhat less insulting than "underdeveloped" but equally misleading. I prefer to use "Third World" because "developing" seems to be just a euphemistic way of saying "underdeveloped but belatedly starting to do something about it." It still implies that poverty was an original historic condition and not something imposed by the imperialists. It also falsely suggests that these countries are developing when actually their economic conditions are usually worsening.The dominant theory of the last half century, enunciated repeatedly by writers like Barbara Ward and W. W. Rostow and afforded wide currency in the United States and other parts of the Western world, maintains that it is up to the rich nations of the North to help uplift the "backward" nations of the South, bringing them technology and teaching them proper work habits. This is an updated version of "the White man's burden," a favorite imperialist fantasy.
According to the development scenario, with the introduction of Western investments, the backward economic sectors of the poor nations will release their workers, who then will find more productive employment in the modern sector at higher wages. As capital accumulates, business will reinvest its profits, thus creating still more products, jobs, buying power, and markets. Eventually a more prosperous economy evolves.
This "development theory" or "modernization theory," as it is sometimes called, bears little relation to reality. What has emerged in the Third World is an intensely exploitive form of dependent capitalism. Economic conditions have worsened drastically with the growth of transnational corporate investment. The problem is not poor lands or unproductive populations but foreign exploitation and class inequality. Investors go into a country not to uplift it but to enrich themselves.
People in these countries do not need to be taught how to farm. They need the land and the implements to farm. They do not need to be taught how to fish. They need the boats and the nets and access to shore frontage, bays, and oceans. They need industrial plants to cease dumping toxic effusions into the waters. They do not need to be convinced that they should use hygienic standards. They do not need a Peace Corps Volunteer to tell them to boil their water, especially when they cannot afford fuel or have no access to firewood. They need the conditions that will allow them to have clean drinking water and clean clothes and homes. They do not need advice about balanced diets from North Americans. They usually know what foods best serve their nutritional requirements. They need to be given back their land and labor so that they might work for themselves and grow food for their own consumption.
The legacy of imperial domination is not only misery and strife, but an economic structure dominated by a network of international corporations which themselves are beholden to parent companies based in North America, Europe and Japan. If there is any harmonization or integration, it occurs among the global investor classes, not among the indigenous economies of these countries. Third World economies remain fragmented and unintegrated both between each other and within themselves, both in the flow of capital and goods and in technology and organization. In sum, what we have is a world economy that has little to do with the economic needs of the world's people.
Neoimperialism: Skimming the Cream
Sometimes imperial domination is explained as arising from an innate desire for domination and expansion, a "territorial imperative." In fact, territorial imperialism is no longer the prevailing mode. Compared to the nineteenth and early twentieth centuries, when the European powers carved up the world among themselves, today there is almost no colonial dominion left. Colonel Blimp is dead and buried, replaced by men in business suits. Rather than being directly colonized by the imperial power, the weaker countries have been granted the trappings of sovereignty-while Western finance capital retains control of the lion's share of their profitable resources. This relationship has gone under various names: "informal empire," "colonialism without colonies," "neocolonialism," and "neoimperialism."U.S. political and business leaders were among the earliest practitioners of this new kind of empire, most notably in Cuba at the beginning of the twentieth century. Having forcibly wrested the island from Spain in the war of 1898, they eventually gave Cuba its formal independence. The Cubans now had their own government, constitution, flag, currency, and security force. But major foreign policy decisions remained in U.S. hands as did the island's wealth, including its sugar, tobacco, and tourist industries, and major imports and exports.
Historically U.S. capitalist interests have been less interested in acquiring more colonies than in acquiring more wealth, preferring to make off with the treasure of other nations without bothering to own and administer the nations themselves. Under neoimperialism, the flag stays home, while the dollar goes everywhere-frequently assisted by the sword.
After World War II, European powers like Britain and France adopted a strategy of neoimperialism. Left financially depleted by years of warfare, and facing intensified popular resistance from within the Third World itself, they reluctantly decided that indirect economic hegemony was less costly and politically more expedient than outright colonial rule. They discovered that the removal of a conspicuously intrusive colonial rule made it more difficult for nationalist elements within the previously colonized countries to mobilize anti-imperialist sentiments.
Though the newly established government might be far from completely independent, it usually enjoyed more legitimacy in the eyes of its populace than a colonial administration controlled by the imperial power. Furthermore, under neoimperialism the native government takes up the costs of administering the country while the imperialist interests are free to concentrate on accumulating capital-which is all they really want to do.
After years of colonialism, the Third World country finds it extremely difficult to extricate itself from the unequal relationship with its former colonizer and impossible to depart from the global capitalist sphere. Those countries that try to make a break are subjected to punishing economic and military treatment by one or another major power, nowadays usually the United States.
The leaders of the new nations may voice revolutionary slogans, yet they find themselves locked into the global capitalist orbit, cooperating perforce with the First World nations for investment, trade, and aid. So we witnessed the curious phenomenon of leaders of newly independent Third World nations denouncing imperialism as the source of their countries' ills, while dissidents in these countries denounced these same leaders as collaborators of imperialism.
In many instances a comprador class emerged or was installed as a first condition for independence. A comprador class is one that cooperates in turning its own country into a client state for foreign interests. A client state is one that is open to investments on terms that are decidedly favorable to the foreign investors. In a client state, corporate investors enjoy direct subsidies and land grants, access to raw materials and cheap labor, light or nonexistent taxes, few effective labor unions, no minimum wage or child labor or occupational safety laws, and no consumer or environmental protections to speak of. The protective laws that do exist go largely unenforced.
In all, the Third World is something of a capitalist paradise, offering life as it was in Europe and the United States during the nineteenth century, with a rate of profit vastly higher than what might be earned today in a country with strong economic regulations. The comprador class is well recompensed for its cooperation. Its leaders enjoy opportunities to line their pockets with the foreign aid sent by the U.S. government. Stability is assured with the establishment of security forces, armed and trained by the United States in the latest technologies of terror and repression. Still, neoimperialism carries risks. The achievement of de jure independence eventually fosters expectations of de facto independence. The forms of self rule incite a desire for the fruits of self rule. Sometimes a national leader emerges who is a patriot and reformer rather than a comprador collaborator. Therefore, the changeover from colonialism to neocolonialism is not without risks for the imperialists and represents a net gain for popular forces in the world.
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August 21, 2010
John Plender in his comment at the Financial Times, "Great dangers attend the rise and fall of great powers," does a fine job given the space constraints of discussing the fraught process of changes in global economic and political leadership.
I thought it would be useful to quote Plender at length, with some additional observations, in the hope of eliciting reader input and reactions. From the Financial Times:
It is a discomfiting historical fact that great power shifts in the global economy are dangerous. They have tended to coincide with extreme financial dislocation, currency turbulence and trade friction. This is because the aspiring new boy on the block is usually a protectionist-inclined creditor country that is reluctant to shoulder international responsibility commensurate with its economic strength.
Consider the transition from British to US hegemony after the first world war. From 1918 the US rejected the Versailles treaty, opted out of the League of Nations and had nothing to do with German reparations, although it collected war debts from the allies. Britain's liberal attitude to trade allowed the US to run a big trade surplus. Meantime, the young and inexperienced Federal Reserve pursued lax monetary policies in the Roaring Twenties while unwisely trying to prop up the ailing pound.
Yves here. There are a number of different ways to frame this change, both as to when it took place and what its triggers were. World War I forced the end not merely of British ascendancy, but the powerful hold of monarchies and landed aristocracy on political power through much of Europe. No one saw this sea change coming; the summer of 1914 was gay, and while many saw war in the offing, it was expected to be a short affair.
Similarly, I'm not certain whether greater US engagement could have shifted the tide sufficiently after World War I to have prevented many of the woes that followed. The US was a late entrant and thus would have no basis for playing a leading role in crafting a post-war order. Many stakes were put in the ground with the Treaty of Versailles. Moreover, the US appears not to have been up to the task of international stewardship, even if it had aspired to that position. Keynes' Economic Consequences of the Peace depicts the US representatives as skillfully manipulated and marginalized. Back to the Financial Times:
When the Fed belatedly pricked the resulting bubble in 1929, the Jazz Age came to an abrupt end, banks collapsed and the depression ensued. As the US exported its problem of deficient demand to the rest of the world, it failed to provide leadership to prevent an outbreak of disastrous competitive devaluations and was unwilling to act as a global lender of last resort to collapsing banks.
Yves here. The US was having enough trouble attempting to right its own economy, particularly since initial enthusiasm for Roosevelt by quite a few businessmen and financiers quickly soured. The idea that the US could act as a lender to foreign banks seems quite implausible. And I'm not certain this supports Plender's argument, that the US should have done more. As we've noted before, there are tradeoffs among international integration, national sovereignty, and democracy. Plender is arguing (basically) for the US running roughshod over national sovereignty and democracy to salvage an international financial order. There are very few windows where the stars align for that strategy to be both politically viable and economically sound. One was in the wake of World War II devastation, when the US, with 50% or world GDP, was unquestionably dominant, and the Axis nations were prostrate politically. Back to Plender:
The next case in point is postwar Japan. Japanese economic growth was export-led, fuelled by an undervalued yen and subsidies for exporters. It was a model that worked as long as Japan was not a significant economic power. Yet by the late 1960s Japan was the second largest economy in the world. It was also running a huge trade surplus with the US.
International efforts to address imbalances and stabilise an overvalued dollar in the Reagan era had unintended consequences not least that Japanese intervention in the yen-dollar rate had the same bubble-inducing outcome as the Fed's efforts to prop up sterling in 1927. The pricking of the bubble led to 20 years of economic stagnation.
Yves here. There's an implication that Japan should have sought a dominant role, but first, Japan was and is a military protectorship of the US, and second, Japanese would really rather not deal with foreigners. Moreover, Plender suggests Japan's real estate and stock market bubbles were an accident. In fact, the authorities were in favor of them, because they thought the wealth effects of higher asset values would spur more domestic consumption, which would in turn offset the dampening effects of the fall in exports caused by the rise of the yen. The authorities raised rates because the bubbles were producing income and wealth disparities and undermining Japan's highly valued social cohesion.
Back to Plender:
China's challenge to the US is similarly export-led and its current account surplus is the biggest contributor to the Eurasian savings glut that led to the credit bubble and the global imbalances behind the financial crisis. Yet despite its success, China's economic model generates wasteful over-investment and under-delivers to ordinary people, who have the lowest share of private consumption in GDP in Asia. In a country that enjoys double-digit growth rates, employment growth has been running at a paltry 1 per cent a year, while real returns on savings are negative. As with Japan at its peak, the economy delivers a poorer quality of life than the per capita income figures suggest, with pollution, adulterated food and bad employment conditions posing threats to health
What is needed globally is for both debtor and creditor countries to rebalance their economies. The debtors need to tidy their balance sheets, while the creditors need to bump up domestic consumption, let currencies float and reduce export dependence. This would also be in China's own interest because its economy is in disequilibrium. It cannot, among other things, prevent inflation and asset-price bubbles while running an artificially low exchange rate. Yet the obstacles to change are formidable. The key to rebalancing towards consumption, says Mr [Charles] Dumas [of Lombard Street Research], may be relaxation of government control over its citizens, which is unlikely to happen. There are also powerful lobbies against change, not least the inefficient producers who have been featherbedded by a cheap currency and whose economic survival depends on continuing undervaluation.
There is, then, a Chinese policy impasse. How does the world escape from its dire potential economic consequences? One scenario might be muddle-through: the US responds to an impending economic slowdown with looser fiscal and monetary policy, at the cost of racking up more debt and a crunch later on. Another would see US fiscal conservatives prevent budgetary loosening, while monetary policy remains lax. This would cause the US current account deficit to shrink sooner rather than later.
Either way, the risks of a protectionist backlash against China would rise. Under either scenario, the world's creditor countries would ultimately see their chief market dry up. The main difference is in the timing. When, you might well ask, will the creditors wake up?
Yves here. Notice how Plender sees the political obstacles in China put the onus on the US to force changes. Most policymakers are wedded to the idea of free trade, but with a high unemployment rate and slack resources, the US would come out ahead by implementing protectionist measures (although corporate CEOs might not fare as well). As unemployment continues to be high and foreclosures continue to exact a toll, pushing back against mercantilists like China will look more and more attractive.
nathan tankusanonymousi suggest michael hudson's superimperialism on this point. the u.s actually was very involved in international politics and was actively belligerent on many things including the crucial intergovernmental debt between u.s and the allied powers.it's interesting the contrast between u.s creditor policy in the 30's compared to u.s debter policy in the post war period.
anonymousThe question is: protectionist measures look more attractive to whom, precisely? Again, I'll wade into waters well over my head because protectionism is precisely what I see as the only way of increasing domestic production and domestic consumption. The US can't correct the trade deficit Yves referred to in a post several days ago by going toe to toe with nations in the free market with nations like China.
China is playing hardball demanding technology transfers for the right to sell inside China. And that's just the part of the story that's getting aired publicly.
We haven't seen populism fused to protectionism, but add a little xenophobia to the unemployment crisis and that could change.
Another bungled edit, apologies, but I think you get the point: protectionism will appeal to the unemployed, but not to the rich fat cats that fund the current administration. Or am I wrong?nathan tankusdearieme"It would be false to say that the United States provoked World War II out of malice or
out of knowledge of the results of insisting on repayment of its war debts by a world utterly
unable to repay them. It is true, however, that no act contributed more to the genesis of
World War II than the intolerable burdens that the United States imposed on its allies of
World War I and, through them, on Germany. Every U.S. administration from 1917 through
the Roosevelt era employed the strategy of compelling repayment of these war debts, above
all by Britain. The effect was to splinter Europe so that the continent was laid open politically
as a possible province of the United States."-michael hudson, superimperialism, pg 100Ishmael"The US was a late entrant and thus would have no basis for playing a leading role in crafting a post-war order." I have always assumed that the whole point of US entry was to gain itself the position to let Wilson play "a leading role in crafting a post-war order". No?
Yves Smithdearieme I believe you are correct. People like Wilson wanted to play with the big boys and got the US involved in the conflicts of Europe despite the warnings of the founding fathers. If we are going to look back, the worse thing that ever happened to the world is Wilson getting the US involved in WW1. Other wise those countries would have fought themselves to exhaustion. A more equal treaty would have been drafted and accordingly no Hitler which would have meant no holocast or WW2 or no Pacific conflict. Probably not even a depression.
The United States would have marched along more agarian and no military industrial complex.
The world would have been far better off. Accordingly, all the problems stem from a small group of people (think the Council of Foreign Relations) wanting to play like a bunch of big boys have lead the rest of us to disaster.
IshmaelI think my drafting was unclear. Fair point to question the post as written (as to what is meant by "leading role"). Plender is talking about the role of a hegemon (I hate that word, but it fits). I don't think it was realistic to believe the US could have taken the baton quickly and cleanly from England in the interwar period.
Wilson did hope to gain influence, but even with throwing its weight in in 1916, the fact that England and France has suffered such large human casualties (both lost a huge swathe of their young men, and ironically, their aristocratic young men, since the Allied Powers had expected the war to be a cakewalk, and many signed up not just out of a sense of duty, but of adventure) that even if the US had been more deft in negotiations and institution-building, it could not have been a DOMINANT voice, but have an equal seat at the table with perhaps more influence on specific issues arguably of greater importance to the US. This is a marked contrast to England's historical role and the one the US assumed post World War II.
Ishmael, that's an interesting counterfactual, that the US entry into the war had far more perverse effects than recognized. But how long could the war have continued? If both sides had fought to exhaustion, you'd see Germany holding large areas of what is now France, and controlling much of Europe's coal producing areas. You are assuming throwing in the towel would have led to a stable post war outcome. I'm not certain (although it would be hard to imagine anything worse than World War II, but I'm suggesting "less bad" might not be all that good either).
IshmaelYvesBoth sides were already close to the point of exhaustion. The US entering the war caused Germany to take one last gamble and launch its last offensive prior to the full strength of US forces arriving. The offensive was brought to an end at the Battle of Belleau Wood by US Marines. When the French wanted to retreat one Marine shouted "Retreat Hell We Just Got Here."
There is one other thing which was causing the war to wind down quicly. The Spanish Influenza was starting to take hold. If the combat had not ended the war the Influenza would have. It was already starting to have a great impact. Here is a quote from Wikipedia on the subject:
While World War I did not cause the flu, the close troop quarters and massive troop movements hastened the pandemic and probably increased transmission, augmented mutation and may have increased the lethality of the virus. Some speculate that the soldiers' immune systems were weakened by malnourishment as well as the stresses of combat and chemical attacks, increasing their susceptibility.[11] Andrew Price-Smith has made the controversial argument that the virus helped tip the balance of power in the latter days of the war towards the Allied cause. He provides data that the viral waves hit the Central Powers before they hit the Allied powers, and that both morbidity and mortality in Germany and Austria were considerably higher than in Britain and France.
rjsBy the way, let us look at Europe now. Please tell me what two world wars accomplished. Basically Germany controls Europe. All the conflicts have been for nothing. Germany has practically everything it was after in the beginning. Also, Germany had already kicked France's ass in the Franco Prussian war and the aftermath of that conflict was not that terrible.
Various political elities in the US (mainly out of the Northeast) who wanted to play with the big boys have in the end destroyed this country. The cure is to stop being the policeman of the world, pull back to our borders, get rid of the military industrial complex and several other industries who want to control the world and focus on improving the lives of the average American. The average US citizen has been cannon fodder (either on battlefields or having their manufacturing jobs destoyed) for the elities of this country one way or another for the last 100 years and maybe all the way back to the War Between the States.
prosfor whatever its worth, here's my extrapolation from the trends already in motion:
doomLook, Yves, we live in a one-party state controlled by a financial-military elite.
Democracy?
gone.
All branches of government are subservient to the American Empire Project.It has come to pass exactly as Eisenhower laid it out in his farewell speech .roughly paraphrased:
"We now have a large standing army for the first time in American history this military-industrial complex poses the greatest threat to freedom."
koshem BosThere, there, what you need is a bit of subversion
Tom CrowlCrystallization of political/economic theory out of a single historical event or even two as Plender attempts is questionable. What is clear at this stage is the steep deterioration of the American economy (the so call information based economy is a real joke) and the rise of the Chinese and Indian economies. China has become a major international player in Africa and South America and it fails to meet Plender's model.
Although many of the details Plender provides are correct, I hesitate to accept his wider ranging views.
IshmaelI believe the only solutions will require some sort of 'social disontinuity' at best.
There are all the ugly versions you know collapse, riots, purges and guillotines.
But the less drastic versions will require abandoning some shibboleths.
Two possible radical solutions (but less radical than the guillotines)
Direct cash infusions to the bottom of the economy but with heavy biases for spending on domestic goods and services (even if it takes tariffs, boycotts or specialized taxes)
Or a massive re-distribution of wealth downwards via a one-time wealth levy (a la 'monopoly) and high progressivity going forward at least for some period of time.
Neither of these seems too likely. Maybe I'm wrong. It's an attempt to look solutions that might derive from a social energy* perspective.
*social energy: a civilization or any social organism is quite literally is a product of countless Decisions (Decision = an Idea + an Action) by individuals and groups operating within limits of physical reality. We then can see culture as an expression of net social energy. But unlike the other forms of energy we're familiar with social energy requires agreement on a whole collection of underlying values and assumptions to operate efficiently for the benefit of the organism as a whole.
Credit Creation and the Building of Sustainable Economic Ecologies
http://culturalengineer.blogspot.com/2010/02/credit-creation-and-buildin...
Whether these ideas have any merit or not (even theoretically) we don't have a chance if we don't do something about our political and economic decision systems.
Political Fundraising: Act Blue, Facebook and the Missing Network Imperative
http://culturalengineer.blogspot.com/2010/08/political-fundraising-act-b
Tom CrowlOh, and the communists coming trotting out with their redistribution of wealth fixing everything. And why do you think that will work!
What really needs to happen is Americans need to get back to the hot dirty jobs they use to do and start making things to build wealth. They need to get off their butts, stop wasting their money and start saving. There are no free lunches or people to wipe your butts for you.
It is the so called savior state that has lead us to this point and you want it to continue and grow bigger.
The problem with liberals is sooner or later they run out of other people's money to give away.
I do not embrace the Republican party and most of them make me ill to my stomach, but the communists really make me want to blow big chunks.
Tom CrowlJust to clear it up I'm not a liberal I am a Progressive I'm a believer in the fundamentals of Adam Smith.
As for wealth re-distribution
The current financial system is NOT acting in a way that encourages the sorts of things I suspect we both advocate
Further the advent of high technology in finance as well as behavioral factors operating in a debt-based, and lending driven economy lead to rapid and erratic pools of wealth having jack diddly to do with hard work.
We need a productive economy that produces the things we need and relies on its own capabilities to the extent possible.
I do support a jobs program. I do not support general welfare except for the disabled.
P.S. I've worked in canneries, as a janitor, washing dishes and a furniture mover I've also had times of wealth.
Currently I'm very poor trying to do something worthwhile which, btw, should be worth a dollar or two. The bank (Wells Fargo) took my house on Monday. I could tell you the story and probably will at some point but I'm no high-liver and well, I'm just too pissed to go on right now.
If you want to do ad hominem attacks at least know what you're talking about.
IshmaelAnd I've just got to add when I hear the dogmatists talking about 'wealth distribution'
It's like if a thief robs you blind
And then comes to you afterward and says
"Okay, well clearly there are some problems in my character I'll attend to them."
And I say,
"That's fine, Bozo but give me back my shit first!"
IshmaelTom I am truly sorry to hear about your situation, but let us separate two things. First there are people who have obtained their wealth through various bankster operations. As far as I am concerned I would strip any and all banksters who have acquired their wealth from banking over the last 10 to 15 years. This would go double for politicians, lobbyists etc.
Then there people who have worked 80 hours a week saved their money and lived with in their means. I put myself in this group. The money we have made is because I have several times put everything we own on the line to make something happen. More than once I have had to come home and tell my significant other I had lost a quarter of our net worth. Fighting and scratching we have built a comfortable nest egg. I can assure you I have lived and worked in some the least hospitable places in this world. I have had machine guns pointed at me as well as some bacterial infection in my lungs from a third world country which took me 6 months to get over (thank god I got well - I thought it was going to kill me). Have there been set backs. You are damn right and it was usually because someone reneged on their promises once I performed my part. I have been screwed multiple times until I am one of the meanest and least trusting SOB's you have ever met. So why should I give up what I have so that somebody who sits around all weekend drinking soda pop, eating french fries and watching NASCAR should be given some (I am not putting you in that category). I am in my mid 50's and when the phone rings I could be on the plane the next day. My bags are usually half packed. How is that going to get this country moving forward.
Recently I listened to Illiad on tapes while traveling (read it years ago) and the narrator said the Greeks were taught Homer early on for two lessons - (1) to learn that life was not fair and (2) be prepared for poor leadership.
Richard KlineBy the way Tom, I would avoid the "Progressive" label. In this world of PR savy people, everyone is well aware of rebranding. In my mind Progressive, Liberal, Social Justice, Socialist are all just rebranding of the old word - Communist.
Charles Smith has a far better essay on this at http://www.oftwominds.com/blog.html
Where he says in a far more articulate manner than I can (note there is far more to his essay than I am putting here and I hope I am not breaking any rules here by referencing another web site).
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Why Is Income Disparity Widening?
August 21, 2010
That income disparity is increasing is not in doubt, but the causesand thus the solutionsare not easily parsed.
The statistics are unequivocal: The Gap Between the Top 5% and the Bottom 95% Is Widening in America. Is this the result of "natural" forces, or of government favoritism?In a nutshell, the potential causes of the widening gap can be divided into two camps: "natural forces" of capitalism and Central State intervention.
Causal factors in the first camp include:
The differences in education, motivation and skills in people; the hardest working, most ambitious and most highly skilled people will naturally end up making more money than those with less skills and drive.
The differences in humans' propensity to save/invest or consume/gamble. The Pareto Principle suggests that 80% of the property and wealth ends up in 20% of the populace's hands, regardless of the initial state (in other words, even if income is evenly distributed to start with).
The globalization of trade and manufacture has introduced an extremely competitive wage arbitrage in which American workers are often competing with workers not just in different states but in different countries.
In general, this camp is discounted by "progressives" to whom innate differences between people are verboten for ideological reasons; the "liberal" ideology often confuses equal rights and opportunities with equal ability and drive.
The "progressive" agenda is thus set on equalizing not just rights and opportunities but skillsets, education, etc.everything which is perceived to be a sociological wellspring of unequal skills and motivation, and thus of future income. Government intervention is thus essential to keep the society from diverging into financial nobility and serfs.
i on the ball patriotI personally find most of the scholarly (and from that popular) discussion on great powers and balance of powers thinly evidenced at best, and regardless wildly ad hoc in its reasoning. The thesis of Plender's here - change in dominant power is always messy - is, depending how one qualifies 'dominant' refuted by the change of leadership from the Dutch to the British in the 18th century, a relatively non-dispruptive shift.
The instance of change from UK to US is _not_ one can use as a basis of comparison since multiple imperial domains collapsed simultaneously attendant upon or concurrent with WW I: Turkey, China, Russia, Germany. Much of the disruptions of the time in the political economy operational then were not driven by the industrial economic balance shift between Europe and the US. The French, British, and Dutch Empires didn't even collapse after WW I: they expanded hypertrophicly.
The reason that great power arguments seem to be advanced, in so far as I can tell reading most of this literature that counts, is as a propagandistic justification for a particular nation-state grabbing all the marbles and clinging to them. 'What's good for us is good for stability,' more or less. And that seems very much the tenors of Plender's cantor-call. 'China is a threat; the US is a promise; let's not rock the boat [while I'm getting paid], shall we.' Not the stuff of thought that carries much weight with me.
We really don't have enough instances of great power change in the Modern Era to form a basis for comparison. 'Nother couple o' millennia and then we can start a real debate . . . .
Yves Smith"Yves here. There are a number of different ways to frame this change, both as to when it took place and what its triggers were. World War I forced the end not merely of British ascendancy, but the powerful hold of monarchies and landed aristocracy on political power through much of Europe. No one saw this sea change coming; the summer of 1914 was gay, and while many saw war in the offing, it was expected to be a short affair."
The present day unseen sea change
There has been a very unique unseen sea change going on in the past forty plus years. Just as the British, the monarchies, and the landed aristocracy lost much of their political power in 1914 so too have ALL nation state governments now lost their power over the past forty years or so. Nation state governments, and their militaries and media, have been co-opted by a global wealthy ruling elite through their central banks and corporations. They now manipulate the citizens within the nation states at will, playing them one against the other. Control of credit, very centralized globally, is now the primary control of resource consumption or no resource consumption planet wide.
Just as the artificial constructs of 'racism' (and many other hateforprofitism schemes are used to divide and conquer), the now co-opted artificial constructs of nation states, are pitted one against the other as easily as sports teams as their populations are being culturally reprogrammed for hate and divisiveness.
Mr. 'Market' is now ruled by Mr. Global Propaganda.
This is the greatest deception ever perpetrated on planet earth. The most important aspect of this new sea change is the policy change being implemented by the wealthy ruling elite. The old fashioned Vanilla Greed for profit has been replaced by the more Pernicious Greed for control. The goal is a global herd thinning and reduction of global resource consumption. The end game is a two tier ruler and ruled world with the ruled in an intentionally created perpetual conflict.
John Plender is just another shit talking, sell out global propaganda tool, as is the Financial Times. They are the real "great danger".
Deception is the strongest political force on the planet.
craazymanYou are correct re the not sufficiently recognized role of a global elite. Jamie Galbraith talks about it in The Predator State in some detail.
purpleball the moving parts work like this.
even before the spanish came for gold the aztecs would rip the hearts out of prisoners at the tops of pyramids with obsidian knives, this was done by high priests who were quite pious individuals no doubt, with their big head gear plumes of feathers. I wonder what happened if the head gear blew off in the wind when they were up there on the pyramid. probably everyone gasped.
the society did this because they thought it was necessary to sacrifice life spirit in ritual atonement to keep the larger life spirit of the world going. that's the truth. they thought if they didn't do this, nature would collapse and the world would die.
why they believed this is complicated and deeply pyschotic, probably due to some atavistic brain stem energy backflow into the fish consciousness. but today, we have the same thing going on, in metaphor. the high priests of the elite money-blood run the banks and rip the money heart out of the peasants and the Fed presides over this ritual sacrifice like Montezuma, with grim determination to propitiate the gods of the money blood.
And if somehow the whole thing stopped, they all believe that the world would die. And the ritual death of the peasants is a ritual sacrifice, the life energy that flies to the gods of the volcano-dollar feeds the greater life energy of the world, so they piously believe. this is a bit of an exxageration, for metaphorical illustration
How the protean archetypes mutate like kaliedescopes (sp?) I would say there has been some progress from Aztec times, but not nearly as much as the high priests of the elite would believe. And as for the other elite. Most are drug addicts, alchololics, sex addicts, party animals, medicated like veal cows with medicine chests full of drugs, running from party to party to meeting to meeting, running, flying, running. I'm not sure they have enough of their act together to really control anything. They can't control themselves even. But they know they've got the life-money-blood runnning in their bank-veins and that's all they need to know walking down the street, that and where's a good bar for 4 or 5 martinis where they can find a lonely bimbo who worships money. there we go. I don't think it's quite as much a conspiracy as it is a conspiracy of lost DNA radios blaring the insane show through the brain night and day, broadcasat from somne pyramid somewhere in hell. :)
says:Mark G.The China 2010 / US 1930 comparison isn't to accurate and I'm not sure why it has gained credibility.
Compare per caita income; the US was the world leader in free labor wages for decades while China is more or less on the level of Uganda per cap wise. China is an authoritarian state one-party state, as well.
China will probably never be able to impose global leadership due to its internal poverty.
What we are seeing is more the breakdown of an international order rather than the emergence of a new one.
kievite"What we are seeing is more the breakdown of an international order rather than the emergence of a new one."
Very good
Jim the SkepticChina faces huge political problems as communist ideology is now discredited and Communist Party will have difficulties to command the leadership role based on the pure force of repressive power of the state in the age of Internet.
This problem of "society with collapsed ideology" makes is actually very similar to the USA. Republican Party in the USA is a kind of Communist Party of China (extremes meet ;-)
Bates"This is because the aspiring new boy on the block is usually a protectionist-inclined creditor country that is reluctant to shoulder international responsibility commensurate with its economic strength."
If we expect our friends or our foes to forego acting in their own best interests, we are bound to be disappointed. This applies to banks, their walkaway customers, or countries which trade with us. We can whine about it but we are not going to change it.
"As the US exported its problem of deficient demand to the rest of the world, it failed to provide leadership to prevent an outbreak of disastrous competitive devaluations "
There was no societal norm which required us to limit our efforts at economic recovery even if those efforts hurt countries which traded with us. We can whine about it but only a sucker bails out others in hopes that they will return the favor. They will act in their own interests most of the time or there will be a change in government.
We can criticize the Japanese for their actions leading up to WWII because they used armed force. But their peaceful actions after WWII were intended to improve the lot of their population. Peaceful actions by the Chinese to improve the lot of their population were also to be expected. Neither Japan nor China should be criticized for those efforts even if they have harmed us. We should have expected nothing less.
In the 1980s we forced the Japanese to move part of their production to the United States. That was against their interests but they could not resist. They could not risk our imposing tariffs on their products. Their economy paid a price as a result. (Competition from the rest of southeast Asia also took a toll.)
"The debtors need to tidy their balance sheets, while the creditors need to bump up domestic consumption, let currencies float and reduce export dependence. "
The Chinese are acting in their own interests. They have a huge poor population. They are not going to bail us out. And I predict they will really really float their currency when we apply the same pressures that we put on Japan! AND it will make little or no difference in our trade balances. Because if they float their currency their products will be more expensive then their southeast Asian competitors. The consumers of the United States will then spend less on Chinese goods and more on their competitors. Net new American jobs equal about zero. And I predict the Chinese will restrict their exports in some meaningful way just after hell freezes over.
The rest of the world has not bought into our idealistic theories. Political correctness has run amok in this country or we would reject those idealistic theories too. (Oh no wouldn't want to be labeled a xenophobe!)
Ming@ i on the ball patriot excellent post. You're one of the few posters that has a grip on what is happening. Of course, that so few see what is going on is not unusual, for it's always difficult to see what is happening during times of crisis or change with so much baloney being thrown around by so many 'experts'.
Plinder: "Meantime, the young and inexperienced Federal Reserve pursued lax monetary policies in the Roaring Twenties while unwisely trying to prop up the ailing pound."
Why would anyone suppose that the Fed did not realize what they were doing in the 1920s? Or, for that matter in the serial bubbles that they have blown over their reign as the US Central Bank? If the Fed did not know what it was doing in the 1920s, and Bernanke is a student of the Great Depression, one would reasonably conclude that the Fed would have seen the outcome of a 30 year credit expansion leading to the current world wide credit crisis, no?
Plinder: "Consider the transition from British to US hegemony after the first world war. From 1918 the US rejected the Versailles treaty, opted out of the League of Nations and had nothing to do with German reparations, although it collected war debts from the allies."
Plinder's wording of this is very deceptive. The US rejected the Versailles treaty because Wilson and his staff considered the terms too ornerous and that the outcome would be another conflict which it was WW2. The League of Nations was Wilson's idea! A major contributor to Wilson's death was his tireless campaign to get American capitalists, government, people, and press, to accept the league. More revisionist history by Plinder here even though I am not a fan of Wilson.
Yves: "Similarly, I'm not certain whether greater US engagement could have shifted the tide sufficiently after World War I to have prevented many of the woes that followed. The US was a late entrant and thus would have no basis for playing a leading role in crafting a post-war order."
WW1 was a battle of attrition of man power and resources. Brutal trench warfare with lots of artillery and mass charges into the newly invented machine guns dominated the action. The only way an earlier US entrance into WW2 would have mattered is if the US could have brought modern tanks onto the battle field to break the stalemate of the trenches But, the US had no more modern tanks than any of the other combatants. Iirc, the US sent 250,000 'expeditionary' troops along with Gen Pershing at a time when 50,000 men were being lost per day by the combatants. Pershing and many of the US contingent had been chasing Pancho Villa around the US Southwest and Mexico with no success. Villa was guilty of stealing US cattle and robbing US banks, occupations reserved for US bandits. US entry into the war did affect thinking in Germany because they were running out of men, guns, bullets, and money. The US entry was a psychological hit to Germany more than anything else. Germany realized that it could not win with US manufacturing and finance thrown into the mix.
Plinder: "The pricking of the [Japanese] bubble led to 20 years of economic stagnation."
Failure to let the zombie banks of Japan led to 20 years of economic stagnation just as will happne in the US if the friends of the Fed are not allowed to fail.
"Yves here. Notice how Plender sees the political obstacles in China put the onus on the US to force changes. Most policymakers are wedded to the idea of free trade, but with a high unemployment rate and slack resources, the US would come out ahead by implementing protectionist measures (although corporate CEOs might not fare as well). As unemployment continues to be high and foreclosures continue to exact a toll, pushing back against mercantilists like China will look more and more attractive."
Speculation about the future
Yves: Question How do you see a 'push back' against 'Chinese mercantilists' unfolding?
Yves SmithExcellent post Mr. Bates, very good that you corrected some of plinder's revisionism .especially about President Woodrow Wilson.
Bates mentions this:
"Plinder: "The pricking of the [Japanese] bubble led to 20 years of economic stagnation."Failure to let the zombie banks of Japan led to 20 years of economic stagnation just as will happne in the US if the friends of the Fed are not allowed to fail."
I wonder how much of Japan's stagnation occurred because of outsourcing of production to countries such as China, US, and other parts of Asia. The loss of stability and decent job prospects, would have resulted into an increasing stratification of income as
owners of capitol and fnanciers enjoy greater income due to cost savngs,
and Japanese workers being relegated to much lower paying jobs. Certainly it has affected the younger generation A rapidly declining birthrate and adult children who refuse to leave home.larkTo your question re China, more of what we have started doing, WTO cases and countervailing tariffs in markets where China can be argued to have behaved badly. The Chinese so far squeal like stuck pigs but only engage in tit for tat (as in acting against an equally narrow export market to China) but they don't escalate.
The bigger cudgel, in theory, is branding China a currency manipulator. China is plenty worried about that, it gets utterly hysterical every time Treasury saber rattles. It announced its largely empty reforms on the verge of Treasury's last window to deter action. I don't see Team Obama having the guts to take action, but if the economy continues to stink prior to the 2012 presidential elections, self-preservation instincts might overcome their native extreme caution.
But I don't see a pretty outcome for China even if the US sits on its hands. It has the biggest FX surplus relative to GDP, ever, worse than the US pre the Great Depression and Japan's pre its bust. Consumption has fallen as a % of GDP since 2000. Growth is increasingly dependent on investment, nearly 50% of GDP, an utterly unheard of level even for a developing economy, and the evidence is that many of these investments are unproductive. They may look like infrastructure and productive capacity investment, but it terms of their true future utility, Keynesian digging and refilling ditches arguably would be more useful, you now have structures that occupy land that will need to be razed and replaced and you wouldn't be diverting demand creation into the commodity and energy purchases needed to create what will ultimately be white elephants.
IshmaelWe need tariffs. With high enough tariffs, the jobs will come back.
The global trading system: Break it, then mend it.
The brutal truth is that profits are up, even as the American people spiral down into the toilet.
Who cares about Marx, or Reagan. Just break globalization.
Anonymous JonesWhat the US needs is fair trade not free trade. If we do not believe in slavery in this country why should we believe in importing products which are practically built or raised in slave labor conditions. Same for workers compensation, social security and etc. Would we knowingly have imported products made in Nazi slave labor camps. The failure to comprehend this really amazes me. All to line the pockets of a select few in this country. Ever wonder how Bill Clinton (the person who gave MFN status to China) went from being bankrupt to being worth $100 million.
KSAgreed re fair trade (I will forget most of the rest).
Fair trade is both a national and international concern and should be focused on the internalization of externalities so that supplier prices represent the forces of competitive supply and demand based on true costs (borne both by the supplier and the society at large). It always surprises me that this is controversial in theory. It is a hell of a mess in practice, but in theory, I haven't seen too many counterarguments that hold any sway.
DownSouth says:I would modify one of the basic premises of the article as follows: it takes the aspiring new boy on the block and the rest of the kids about 2 decades to recognize the economic strength and the power it gives. Then it lasts for some 7 to 10 decades. The "new boy" abuses the power and it takes another 2 decades for all "boys" to recognize it. As a consequence comes disruption. In the case of the British, the abuse was breathtaking! I think I heard Freeman Dyson in a talk say that
Re: "Former Spy With Agenda Operates a Private C.I.A." New York Times
This is great stuff.
What we have here is the clash between the once dominant Machiavellian school, symbolized by Henry Kissinger, and the now dominant neoconservative school, symbolized by Dick Cheney and Donald Rumsfeld and thrust into dominance by George W. Bush (Bush II) and Barak Obama.
I actually find the old Machiavelli school preferable. We didn't have to endure the insufferable hypocrisy of how we are fighting in Iraq and Afghanistan to "spread democracy." Instead, according to the Machiavellian school from which Clarridge hails, we are there to promote and protect our interests.
"We are going to protect ourselves, and we are going to go on protecting ourselves because we end up protecting all of you," Clarridge forcefully asserts in the interview cited by the NY Times. "And let's not forget that. We will intervene when we decide it's in our national security interests [read economic interests] to intervene, and if you don't like it, lump it."
This is a reiteration of Colonel Nathan R. Jessep's speech from the movie A Few Good Men. In comparison to Jack Nicholson, Clarridge is of course lacking in his delivery, but the message is the same.
Several assumptions must be true in order for Clarridge's and Jessep's assertions to hold up:
- Neo-imperialism pays dividends.
- Those dividends are distributed amongst all denizens of the empire.
- The denizens of the empire enjoy greater freedom due to the neo-imperial enterprise.
My personal reading is that Clarridge has fallen victim to the "modern" focus on the universal, the general, and the timeless. If we search our history books, we can indeed find instances where all three of the above conditions have been met under imperial regimes. Perhaps the most striking example is when Augustus ended "democracy" in ancient Rome in 27 B.C. and restored monarchy. What followed was a huge geographical expansion of the Roman Empire (see map on Augustus link). As Will and Ariel Durant put it in The Lessons of History, "Augustus organized, under what in effect was monarchical rule, the greatest achievement in the history of statesmanship--that Pax Romana which maintained peace from 30 B.C. to A.D. 180 throughout an empire ranging from the Atlantic to the Euphrates and from Scotland to the Black Sea." "If," said Gibbon, "a man were called upon to fix the period during which the condition of the human race was most happy and prosperous, he would without hesitation name that which elapsed from the accession of Nerva to the death of Marcus Aurelius. Their united reigns are possibly the only period of history in which the happiness of a great people was the sole object of government."
Of course Gibbons completely ignores the plight of subject races like the Jews. But this is of no relevance to Machiavellian theorists who concern themselves, as Gibbon put it, solely with "the happiness of a great people."
But is the example provided by the Pax Romana general, universal and timeless? Does empire always work to maximize "the happiness of a great people," as Gibbons puts it?
I believe history provides numerous examples of where it does not. Imperial Spain beginning in the second half of the 16th century is a prime example. The imperial ambitions of the Hapsburgs were frustrated on both fronts: the war against the Muslims in northern Africa and the war against the Protestant Heretics in northern Europe. Meanwhile, the Dutch and the English, along with the demographic disaster in the Mexico due to overwork and starvation of the Indians, were driving the nails into the coffin of Spain's immensely profitable imperial enterprise in the New World. Spain, despite the fact it was by far the wealthiest and most powerful nation in the world, could not sustain the unbridled imperial ambitions of the Hapsburgs. As Carlos Fuentes put it, it became "a poor empire, debt-ridden, incapable of solving its internal problems while insistent on playing an imperial role overseas, but begging alms from other, surplus-wealthy nations in order to finance its expensive role as a world policeman."
Individual freedoms of the Spanish also suffered immensely. As Christian Duverger wrote in Agua y Fuego:
King Phillip II, son of Carlos V, imposed in America a hard colonial line: economic dependence, Hispanicization, massive supervision. The 25th of January, 1569 the Spanish monarch signed an order instituting the Inquisition in Lima and in Mexico. All those who up until then had managed to flee the intolerance oo post-Isabellan Castile are persecuted to the end of the earth and captured.
So, does the United States now find itself in the position of Rome in 27 B.C., or Spain in 1575?
Persons like Clarridge can answer this question with certainty. Their doctrine, which transforms the particular, the timely and the local (the Pax Romana) into the general, the universal and the timeless, leaves no doubt: the United States is the next Pax Romana.
hegemonies last about 15 decades.
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