by Francis Lee for the Saker blog
‘’You can’t always get what you want.’’
Courtesy of the Rolling Stones
This aptly sums up the Eurozone/East-Asian/US relationship: In short US hegemony. Suffice it to say that – of all people, Leon Trotsky writing in, (War – In the International 1933) – opined … ‘’That prior to WW2 the US was Europe’s debtor but now Europe was relegated to the background. The United States is the principal factory, the principal depot and the Central Bank of the world.’’
US Ascendency in the 20th Century.
This much was self-evident, and true enough, but in any case, America’s hegemony over Europe long pre-dated WW2 and actually later grew larger with the addition of ex Eastern European states which had been formerly part of the Soviet sphere of influence. Western Europe had willy-nilly long since been subordinated to the USA. A while later (1946) the Americans gave the British short shrift reminding them that they would have to adjust to the post-war realities and take the medicine – the American loan, as Michael Hudson explains.
‘’In effect the Sterling Area was to be absorbed into the Dollar Area, which would be extended throughout the world. Britain was to remain in a weak position in which it found itself at the end of WW2, with barely any free monetary reserves and dependent on dollar borrowings to meet its current obligations. The United States would gain access to Britain’s pre-war markets in Latin America, Africa, the Middle East and Far East. This first loan on the post-war agenda – which President Truman announced in forwarding it to Congress would set the course of American and British economic relations for many years to come. Truman was well aware of the change of fortunes for the UK, for the Anglo-American Loan Agreement spelled the end of Britain as a great power.’’(1)
Sometime later and under the changed geopolitical and economic conditions President Richard Nixon and his economist acolytes placed their chief diplomat, Henry Kissinger, in charge of arrangements to put in place a policy to keep the Europeans subordinate and while they were at it to simultaneously endeavor to put a limit on Japanese expansion.
Then came the big game-changer: Gold was officially delinked from the US$ in August 1971. Nixon’s currency reforms – were designed among various other decisions and also generally aimed at European and Japanese interests. It should be noted that Japan did not play any political role at all but simply followed in America’s wake, as she invariably did in economic and even political matters since.
This unilateral decision by the Americans to deprive paper money from convertibility into gold was enough to tip the Europeans into disorder and turbulence. For all their protestations of loyalty in Europe, the leaders of each country feverishly groped for an outcome that answered their own interests. However still licking their wounds, and for all their weakness, the Europeans still constituted a new and serious – although declining – rival for God’s own People, American capitalism-imperialism, which says a lot about how far the former had slid down the slippery-slope.
Nixon conferred the job of curbing his ‘partners’ newly aroused appetites and steering them towards their own backyard to his man (and enforcer) Henry Kissinger. Kissinger was to read the riot act and inform these uppity Euro-elites that it was the US which was taking centre stage whilst the Europeans were just the supporting artists. Kissinger didn’t mince words with his global minions.
‘’The US has global interests and global responsibilities ‘’ the enforcer-strategist declared, ‘’Our allies have regional interests’’. Having thus put the Europeans in their place, Kissinger acknowledged that the US interests diverged ‘’with the new weight and strength of our allies …’’ But he firmly advised these allies: ‘’ That the gradual accumulation of sometimes petty, sometimes major economic disputes must be ended … A new equilibrium must be achieved in trade and monetary relations.’ Then he called upon the leaders of both Europe and Japan to subordinate their economic interests to these political considerations, organized and directed, of course, by the USA. Under the pressure of these scarcely veiled American threats, the Europeans were meant not just to bury the hatchet over a potential trade-war, but were in addition, and above all, expected to share the ballooning costs of global hegemony.’’ (2) In the popular vernacular of the time, Kissinger ‘socked it’ to the Europeans.
Suffice it to say the Europeans and, a fortiori, both the Japanese and South Koreans had since become thoroughly Americanized and house-trained. Most pathetically in the case of Japan’s geographical position which successfully made it into a long-term prisoner of the United States. The success of Japan’s industrial development and export drive so impressive at the time of comparison with competition with Europe and the United States, did not in any way guarantee that it would move into a hegemonic position. Investment in Japan’s trade surplus in the US always struck the reader as being rather overvalued and in a somewhat geopolitical weak position. Japan, economic giant, political pigmy.
Certainly, the East Asian producers and to a lesser degree the EU are still in a position of American dominance, both politically and strategically, to the United States. And most everyone knows this. In point of fact:
‘’The US economy lives like a parasite on its ‘partners’ in the global system, with virtually no national savings of its own. The World produces whilst North America consumes. The advantage of the United States is that of a predator whose deficit is covered by what others agree or are forced to contribute. Washington uses various means to make up for its deficiencies: for example, repeated violations of the principles of liberalism, arms exports, and the hunting down of oil super-profits (which involves the periodic felling of the producers: one of the real motives of the real war in Central Asia and Iraq). But the fact is that the bulk of the American deficit is covered by capital inputs from Europe and Japan, (and even) China and the global South including rich oil-producing countries and comprador classes from all regions, including the poorest, in the Third World – to which should be added the debt-service levy that is imposed on nearly every country in the periphery of the global system. The American super-power depends from day to day on the flow of capital which sustains the parasitism of its economy and society. The vulnerability of the US therefore represents a serious danger to the American project. (3)
It should be understood that the American possession of the US$ can enable them to simply finance their imports by issuing US paper dollars, or US Treasuries – not gold. That job goes to the man at the gold window of the Fed, who will simply give you more ‘paper assets’ -Treasuries and dollar bills – when you trade in your surplus dollars or gold. A neat trick, and very successful. This ‘exorbitant privilege’ as was articulated by the French politician Valery Giscard D’Estaing was a rent-free arrangement between the US and its ‘allies’ (sic).
This ‘long century’ has been a period of a long-term geo-political dominance by the Atlanticist bloc led by the United States and its global institutions – the International Monetary Fund (IMF) and World Bank (WB) which has been a fait accompli. These two institutions were initially set up during the Bretton Woods Conference in 1944, principally by the US but with the UK in tow. These two world economic pillars were to serve as vehicles to open up trade and financial markets to US exporters, and to enable US investors to buy control of natural resources and industry. This set the rules for Europe and other regions to subsequently join these two institutions, leaving no practical alternative means of organizing world trade and investment. The World Bank’s policies included opposing land reform and organizing loans mainly to create infrastructure linked largely to exports, not to create self-sufficiency. The aim was to lock in foreign dependency on US farm exports and other essentials.
The role of the IMF has been to all intents and purposes a financial vehicle – which due to its organizational structure and an inbuilt voting system which guarantees a majority on every occasion – has been a stranglehold of voting power over its allies and also is able to withhold credits from recalcitrant countries. Dollar credit is used as a lever to indebt foreign countries and force them to adopt ‘’free market’’ deregulation and tax policies which serve US interests.
‘’The broadest step in this strategy of underdevelopment is to use IMF pressure to turn public infrastructure into privatized monopolies by forcing their sell-off to raise money to settle trade and balance of payments deficits. (4) This was broadly in step with the classical phase of imperialism (1800-1950) based upon the division between industrialized cores and non-industrialized peripheries and a related tendency to reduce the latter to a colonial or semi-colonial status, and (5) the post-war phase (1950-1980) involved the victory of national liberation movements – China, Vietnam – in south east Asia and the middle-east – still ongoing – enabled the peripheries to impose a revision of the old asymmetrical terms of the global system and to enter into the industrial age. This period of negotiated globalization was exceptional, and it is interesting to note that the world then experienced growth that was the strongest known in history as well as the least uneven in terms of the distribution of what was produced and distributed
But whisper it softly there has occurred a slow geopolitical burn which is now not easily snuffed out and which goes from strength to strength. This emerging bloc of independent Eurasian states led in the main by Russia and China and organized in the BRICS (Brazil-Russia-China-India-SouthAfrica) and Shanghai Corporation Organization (SCO) represent an alternative system to the glaring global level of inequality and stands out like a beacon of light against the parasitism and orthodoxies of laissez-faire extractive capitalism/imperialism.
In more general terms Michael Hudson lays out a precis of a choice between the two alternatives. As follows:
‘’Finance capitalism is de-industrializing the US economy and that of its allied NATO satellites. The Destiny of Civilization explains that the resulting international diplomacy is not a competition for markets (as the Western Economies are already deindustrializing as a byproduct of financialization and capital’s war against wage labour), nor a conflict between democratic freedom and authoritarianism, but rather a conflict of economic systems juxtaposing the rentier economics of debt-deflation and austerity to socialist state-subsidized growth protecting the 99% by keeping the 1% in check.’’ (6)
I would go further into the work of Freidrich Engels in his description of ‘Condition of the Working Class in England 1844’. Where he writes his journey particularly in Manchester in the north of England as well as other cities.
‘’A horde of ragged women and children swarm about here, as filthy as the swine, they thrive upon the garbage heaps and in the puddles. In short, the whole rookery (slum housing) furnishes such a hateful and repulsive spectacle as can hardly be equaled in the worst court of the Irk. The sub-human race that lives in these ruinous cottages, behind broken windows, mended with oilskin, sprung doors, and rotten door posts, or in the dark, wet, cellars, in measureless filth and stench, in this atmosphere penned in as if with a purpose, this race must have nearly reached the lowest stage of humanity … But what must one think when he hears in at each of these pens, containing at most 2 rooms, a garret and perhaps a cellar, where on the average twenty human beings live; that in the whole region for which 120 persons one usually inaccessible privy (toilet); and that in spite of all the preaching’s of the physicians, and also in spite of the wretched conditions into which the cholera epidemic which plunged the sanitary police …
Engels goes on and on until it becomes virtually impossible and painful to read further. Yet this is the condition of those poor wretches in today’s third world who live among the conditions in Bangladesh or the Cameroons or Bolivia or Liberia, or Senegal! Or wherever. The World has a long way to go.
(1) Super-Imperialism – Michael Hudson – Quoted in Gardner Ibid. p.208
(2) The text of Kissinger’s speech on US relations in Europe was published in the New York Times – 24/04/1973
(3) Beyond US Hegemony – 2006 – Samir Amin – p.12
(4) The Destiny of Civilization 2022– Michael Hudson – p.53
(5) Ibid. – Samir Amin 2006 – p.12
(6) The Destiny of Civilization – Michael Hudson – p.283.