In Sun Tzu’s military classic from ancient China The Art of War we get an early work of geopolitics. The text is well known for providing insights into commanding a military, maintaining discipline within ranks, and emphasizing the right mind-set for victory but a large part of it is devoted to classifying and evaluating terrain. The relationship an army has with the earth upon which it travels is one of the key aspects that leads it to victory or defeat, perhaps the key. The word geopolitics evokes control of resources, topographical access routes and choke points, and alliance-building amongst nations and states (or lords and chiefdoms) – all of which are discussed in the Art of War, only in the context of war in the ancient world instead of economics. Continue reading “The Art of War and Geopolitics”
Summary of the Article: “Geography determines destiny” without exception – unless stupidity creeps into the decision-maker’s minds.
In all seriousness though, what this good read fails to mention is the strategic need for the US’ apparent stupidity: ensuring the continued demand for dollars around the world. The need for other countries to borrow dollars to buy oil (the “petrodollar recycling system“) and protect their foreign reserve accounts from speculative raids has allowed the US to go into astronomical amounts of debt and not have to pay it off. The US doubled-down on its status as the purported “leader of the free world” in the mid-seventies and their is no going back now that they have run up an amount of debt that could never and will never be payed back.
The irony of the situation is that the US uses debt as its primary way to control other nations aside from military force but does not feel obliged to pay its own. The tragedy of the situation is that the transition away from this system is what will determine a large portion of the how world nations are made up in the coming century (as well as the fate of earth’s biosphere for the next 100,000 years), yet very few people understand it in a country that claims for itself the label ‘democracy’.
Most important for determining destiny is not just geography but the systemic movement of oil and money (be it in cash form or bits in electrical computer networks) on top of the earth. Oil comes from underneath the earth though and nations have their borders to look after, which are determined by oceans, mountains and other geographical barriers, (together of course with competing militaries and unruly subjects). Geopolitics brings international politics to mind and the ‘flows’ of oil and money that course through nations borders deserve to be included.
Someone or some body of people will have to persuade the US to not to unleash its war machine on other nations when the petrodollar system collapses, so that oil can be decoupled from money and renewable forms of energy (including less of it) can abound. Nations will not be able to transition away from fossil fuels when they cannot control their own money supply and have a imperial behemoth breathing down their neck. The chief barrier to the protection of a threatened biosphere is United States global hegemony. Perhaps an internal war machine to the US’ borders will apply the necessary pressure to ease the transition, or perhaps it will come from without. Then again, perhaps it will continue, but as far as I can tell, if the US prevails, you can kiss much of the life on this planet goodbye.
More on geopolitics from Michael Hudson:
Avatar: The last Airbender gives us a stylistic and colorful look at a fictional world of warring nations together with a sharp focus on the planetary and even cosmic elements. The problems and conflicts of nations are interwoven with the quest of a group of teens or pre-teens as they try and right a world that is on the verge of total domination by one nation. These kids have no problem taking on a nation imposing its will on the rest of the planet, primarily using their powers to manipulate the elements but also teaming up with other nations to mass attacks and engage in war. This American cartoon with a decisively Asian stylistic influence, despite its heavy use of spiritual abstractions and flashy battle scenes, highlights some of the most important aspects of global geopolitics for us to learn today.
The imagined planet we begin on is one populated by four different peoples, each representing one element of nature as they were conceived in ancient times: water, earth, fire, and air. The first three nations are locked to a continent, with the air people being monkish nomads inhabiting mountain-top temples and the water nation having territory at both of the planet’s two poles. Keeping these nations each with their disproportionately weighted qualities from invading other territories and assuming power over them is the avatar, a Dali Lama like character that reincarnates upon death and wields enormous power. The avatar alone can learn the power to “bend” the element of each nation, while a select number of people can learn to bend the element from their own nation of origin. It’s an international system that weaves together martial-national ambition with individual spiritual enlightenment into an icon in such a way that nations can be nations, monks can be monks, merchants can be merchants, farmers can be farmers, etc., while a mechanism exists to keep empires from rising. The avatar is like Buddha and Sun-Zu mixed together, as if attaining enlightenment also granted this single great figure a god-like fighting power.
This scenario is an enchanting thought experiment and I’m tempted to ask: “who are the avatars today?” To quickly answer that question, no individual has that power nor should they. But rather than musing on the avatar as inhabiting a middle-place between this fictional world and the real, what I’d like to turn your attention to the way that international politics and forces of the earth work together in Avatar: The Last Airbender. The show is particularly effective in making the personal/emotional trials and tribulations that most everyone faces in their life blend together with the grand scale of nations and the problems afflicting each. The disruptions and excesses of individuals, villages, and nations, felt by each other when they come into conflict with friends, our travelers, and other nations are all indicated at the same level and with similar affects gone astray. The difficulties of keeping the crew together and on task, moving toward their goal and not at each other’s throats, etc. are reflected in the deficiencies of nations in maintaining an international balance of power. For instance, the leadership and resilience that water bender Katara learns in rallying the band is reflected in the qualities that the Water nation lacked in beating back the Fire Nation, but have had traditionally: resilience and adaptability.
Isaac Yuen has already pointed out many of these connections in his ekostory of the show, so I’ll just link you to his great piece here: [http://ekostories.com/2012/09/08/avatar-airbender-forces-change/]. And there’s two more pieces on Avatar lying that way.
Our heroes eventually pick a member of each elemental to form the final version of their team, but thanks to the main protagonist, the new Avatar Aang, and his giant flying bison (that’s right) Appa the group itself operates nomadically in their quest to “restore balance” between the nations and reestablish harmony. The absent peoples of the show is the air tribe – not only has the Fire Nation killed them all but Aang in an act of genocide but of the three seasons (Books) of the show the book of air is the only one missing. Seeing as the crew we follow on their adventure is always moving from place to place and they are led by the only airbender Aang, we can say that they represent the missing element themselves: the nomadic opposition to the ascendant empire.
The fire nation is in the midst of a conquest of the rest of the nations, having pacified the Water nation more slowly by capturing its water benders and is in the process of laying siege to the Earth Nation. In the finale to season 2, we are taken brilliantly through the stages of a coup in the vast capital of the Earth Nation, Ba Sing Se, with the rest of the war to be fought in clandestine fashion with sneak attacks by the cobbled together rebels met in past episodes. They will attempt an invasion of the Fire Nation and all those left willing and able to fight are accepted, regardless of nationality (or age), in this teenage (at best) militant resistance force.
It is the Avatar’s duty to maintain the balance of power between nations, and she/he is not restricted by the nation in which he/she was born. In season 3 we are told of a particularly significant recent Avatar who was born in the Fire Nation and grew up best friends with the Fire Lord (king), who also happened to have started the fire nation’s dream for expansion and conquest. He was born in the Fire nation and trained together with the soon to be Fire Lord in adolescence, remaining friends until a turn of events allowed the Fire Lord to cross him and begin his multi-generation plan to spread the Fire nation influence and control over the rest of the planet. This cultural superiority was justified by the time of unprecedented technologically-infused prosperity that had to be “shared”. No culture is judged here in its entirety. The ambition of a nation is to be expected; it was the avatar’s inability to foresee the danger of his expansionist fiend and his untimely death due to a natural disaster that disabled him from preventing it. Luck and lack of precaution by those with power seem to be the holders of blame for the war rather than the Fire Lord alone, should blame need be assigned.
The real strength of the show lies in its planetary perspective of warring nations and their continental territories. When the Fire Nation attacks, the Earth Nation loses the will to fight (falling to authoritarian propaganda, fear tactics, and class dissension), and the Water Nation gives way to eking out an existence as scattered and relatively disempowered tribes, the cause is attributed to a lack of harmony. The guarantor of harmony in the Avatar was simply absent, and, in his youthful anxiety in the face of his destined the role, he hid himself away in a kind of bad faith. A lopsided spike in the forces of the planet results from a similar imbalance in the psyche of the main character. It’s as if the show is saying that, in a world where the planet is fully charted out and populated with regional powers, the burden for the excesses of an erratic nation falls with personal make-up of certain well-placed individuals. While the idea of the Avatar is a product of fantasy, people with intentions toward global stability could be inspired to maintain a similar balance within themselves in their rise to a position of influence on the geopolitical stage.
As we look for answers to the question of how such historical atrocities were able to happen we are invariably led to the decisions of some politicians who either scheme on the behalf of others and interest groups or are motivated by their own ambitions toward power. Granted, some obvious imbalances of power can be identified as causing such horrifying effects, such as when technologies are developed and manipulated for war sooner than others (Europeans, the Fire Nation) or when a glut of natural resources are discovered in regions that damn them to strife or obedient subjugation (the Middle East), and not the aspirations of individuals. There are always forces beyond our control on one side and those that we can influence on the other. What Avatar is telling us is that for those decisions that we can make for situations within our ability to exert influence over, it would be better off for all those considered to make those decisions in a state where we are not ourselves under the grip of one passion at the expense of another.
It is much more difficult for someone to excuse something like the Fire Nation for an act of genocide against the people of the Air Tribe. This is the case of a planetary extinction decided by an individual (the Fire Lord) in order to eliminate the next Avatar and consolidate his power. The people of the Air Tribe did not have a standing military to withstand the threat of invasion on their temples. They led their lives as concerted monks living to pass on their wisdom detached from “worldly concerns”. This mode of living puts them at an obvious disadvantage as they lacked the affect of anger and a strategic instinct for survival, opting instead for the pursuit of knowledge and practices of self-mastery. This deficiency of the Air Tribe does not doom them but is symbolic of a ripped apart world where hyper-aggression has eradicated that which would be the very thing that would prevent domination and empire – understanding and composure. The self-criticism that the Air Tribe has got in spades doesn’t stop them from being bulldozed by the Fire Nation, but the Fire people are capable of self-criticism too – it was a result of bad luck, a turn of the wind, that the Fire Lord was able to act in the absence of the Avatar.
When such an outside force is felt, one that seeks to destroy merely for the sake of power, expansion, and triumphal cultural superiority, the only way to defeat them is head on with an opposing force. The show understands this and our heroes and heroines use whatever is at their disposal to defeat the Fire Nation. Anger is often the best way to mobilize that force which would fight and topple a domineering force headed your way, but it also can quickly turn into that which it is fighting against, as that other force is using the same affect against you. The self-mastery of such a wide array of affects evidenced in the Avatar’s mastery of all four element bending, so that each one can be drawn on as the situation calls for it, can keep the body (as well as the planet and the nation) from being contaminated by a single force, dominating all of the rest. Although, we are admittedly still within the realm of power and forces with the word “mastery” as in self-mastery and not the tranquility of ascetic contemplation.
Nowhere is this struggle better displayed than in the character of Prince Zukko of the Fire Nation. He begins at the outset of the show with the single goal of finding and killing the avatar to restore his lost honor. His sole goal in life is winning back the favor of his father the Fire Lord. But with some good life coaching from his uncle Iroh (vs. his father) he comes to despise his father for the destruction and fear which he has wrought upon the people of the planet. Due to his transformation and his decision to join the avatar in his quest for peace and “harmony” in season 3, his uncle gives him one last piece of advice: he must disrupt the coronation of his sister Azula and assume the throne to better lead the Fire Nation. It is a change of rule at he highest possible level of political power, with a 180 degree change in policy that is required to seal the transformation and complete the revolution *within* the imperial Fire Nation. Princess Azula took his place as the enemy that the crew fights most often after season 1 and her ruling style is based on fear; she consequently alienated her own friends and servants leading up to her coronation, ending up alone and full of frustrated rage. The Fire Lord himself attempted a jump up from the throne of the Fire Nation to the throne of emperor of the world: the Phoenix King, with new totalitarian symbols and everything.
It is the transformation of Prince Zukko in the later part of the show that demonstrates best the personal/political trajectory of its message. The harmony sought between nations, those great powers set against each other in differing, competing interests is mirrored in the competing emotional drives of the individual and the band of traveling friends. Zukko has a tough time convincing the crew to accept him, being their former enemy number one, but once he does join he helps each of them confront their past demons and clear current barriers. [For the record, Toph didn’t need him. She’s as solid as a rock.]. He is ideally placed to reverse the disastrous policies of three generations of Fire Lords and his internal struggle between the imperial ambition of his father, motivated by aggression, and the advice of his uncle, no slouch in battle himself. Uncle Iroh was once a conquering Fire Nation general himself who turned another leaf after his own son died in battle. The shear force of anger represented by the Fire Nation is an undeniable fact of life; it can be a great ally when unleashed at the right time, but mustn’t be allowed to continue unchecked.
The question of holism in a world of nations fighting geopolitical battles with each other remains. The figurehead of the avatar with its ultimate power to control the elements of the planet/cosmos holds a super-national position with respect to everyone else, and the viewer is led to believe that the avatars are always balanced and harmonious themselves because of their training from the greatest masters of each respective nation. In a world where one elemental people is entirely eradicated, it is hard to see how a balanced avatar could ever arise. The avatar receives not just military training but spiritual training from gurus. They teach them to meditate, that “everything is connected”, and to let go of all worldly desires. After achieving a kind of enlightenment, avatars become “one with the cosmos” or whatever the religious equivalent be in a culture’s spiritual/metaphysical tradition. How could such concepts born of an ascetic eschewing of the material world *also* be the great liberators of military oppression having turned away from such existential commitments? This is not so much a problem within the logic of the show as one for the reality that we face.
The recent actions of Pope Francis could be mentioned when he derides nations and industries for imperiling the life-producing capacities of the planet with carbon emissions resulting in global warming. [http://www.dailykos.com/story/2014/05/21/1300969/-Pope-Francis-Causing-Climate-Change-Is-a-Sin#]
His position as spiritual leader of a large chunk of the believing people around the world puts him in the unique position of letting his voice on such crucial matters. Millennia of entrenched religious practices cultivated from the power of the pastorate have placed someone like this (and other similar religious leaders) in a privileged position to let these global matters be explored by their subjects. The scientific community as well, especially when there is as much consensus as is healthy for an organization of skeptics to have [http://www.skepticalscience.com/global-warming-scientific-consensus.htm], has an authoritative voice that is heard when looking for support for creating policy and action. The religious wisdom of the avatar could also be understood as the very forces of the biosphere itself as it responds to the threat of human activity by vanishing until, many thousands of years later, it is time for the life inducing complex ecosystems to emerge again. But let’s not get too confused.
The avatar is shown in various flashback scenes manipulating the very substance of the planet itself in a bid to alter the consequences of other human’s actions. An avatar uses her powers to create an island and isolate her people from a different conquering Lord generations earlier, killing him in the process, and another avatar limits the damage done to a village by a volcano by controlling the elements around it. These are actions performed *on* the earth by a privileged person in the context of human dramas. Such talk invokes geo-engineering – which may become necessary after, or during the time we pull together and put a *gigantic* dent in carbon emissions. But this must be in conjunction with a major effort to severely limit carbon emissions largely resulting from market actors and their allies in nations.
What Avatar: The Last Airbender can teach us is the importance of keeping oneself on an even keel affectively, with the sentiment it provides being extractable onto nations whose actions have a more direct effect on the planet. The cosmic-spiritual aspect of Avatar does a great deal of good in connecting itself to the planetary elements of earth, air, fire, and water – as dated as those natural elements are claiming the status of ’substances’. This makes Avatar an excellent ecological fantasy – a rare blend of grounded spirituality *and* rough and ready international warfare.
As for the issue of idealistic holisms and realistic political forces, the wonder that springs from holistic contemplation should not be divorced from the planetary and human forces those ideas effect. Avatar does this extremely well. Even when extra-terrestrial phenomena like a solar eclipse and a comet come at key plot points in the narrative, they do so not as transcendent forces from another world but as immanent forces effecting the elemental powers of people on the planet. Planetary-natural and national-political forces intermingle in the narrative seamlessly, as displayed by the threat of Fire nation imperialism and its ecosystem destroying weapons factories. The closest we get to transcendent other-worldly phenomena is when the avatar meditates himself away into the “avatar realm” and there are other problems with having an avatar around. But the avatar is best thought of in relation to one’s own choices, even though a select few people have vastly more power over the masses. There’s no telling what a committed and balanced individual can do, however, especially when taught at an early age with good works of fantasy that they can change the face of the earth.
Not only does the dollar enable the US empire, but also protecting the dollar’s status is a major reason for US imperial wars. American financial and military strength is based upon the fact that the dollar is the world’s reserve and international trade currency, creating a global demand for dollars which allows the US to print as many greenbacks as it likes. It then pumps them into the overbloated finance capital system and uses them to fund its criminal wars…
…Although it has so far been unsuccessful, the idea of rebalancing the world monetary system is extremely threatening to the US, and goes a long way toward explaining recent US wars and warmongering, which may otherwise seem irrational. The line of NATO bases in Eastern Europe and the coup d’etat in Ukraine are attempts to split Europe from Russia, trying to keep a subordinated Europe in the US sphere, prevent a single Eurasian economic area, and isolate and destabilize Russia. The Transatlantic Trade and Investment Partnership has the same goal. Weakening Russia and China (and the BRICS in general) on a military, economic and political level, with a regime change in mind, is a fundamental part of the US strategy for maintaining dollar hegemony. The US therefore has surrounded them with bases and continues to try to destabilize them. The US presence in the Middle East serves not primarily to gain access to its oil and gas (the US has its own, especially since the fracking boom) or even to control access to them (the Chinese are already there), but first and foremost to protect the petrodollar, to ensure that the global fossil fuel markets continue to be denominated in dollars. Iran has been talking about wanting to de-dollarize its oil and gas trade for years – thus, it and the Shia crescent are in the US line of fire…
…This is exactly in the interests of US financial imperialism: to economically undermine any rivals that question dollar hegemony. It is absolutely unacceptable that one country should arrogate to itself the right to set a wildly loose money policy for years and then tighten it at whim, giving the rest of the world a violent thrashing. It is unacceptable that any one country control the world’s reserve currency. As the above quote says, because of the circumstances created by QE and the zero interest rate policy, today if the US economy does well, the global South suffers. It’s a zero-sum equation. This is throwing burning obstacles in front of their process of de-dollarization, and making them suffer. On purpose? Again, it would be difficult to impute too much individual agency behind these effects, but they are predictable, necessary and not unprecedented consequences of the imperial monetary policy waged by the US for years. The question of agency in this case is moot: these policies serve the empire. They go along with and have similar effects to the more obvious forms of financial imperialism such as sanctions. The US should be held accountable for the disasters it sows, and the world should remove its imperial privileges, through the creation of a neutral world reserve currency.
“Neoliberalism is not simply an economic philosophy. It’s interwoven with American foreign policy.” -Hudson.
“To provide ideological backup for Yeltsin’s Chicago Boys, the U.S. Government funded its own transitions experts whose jobs ranged from writing privatization decrees, to launching a New York-style stock exchange, to designing a Russian mutual fund market. In the fall of 1992, USAID awarded a $2.1 million contract to the Harvard Institute for International Development, which sent teams of young lawyers and economists to shadow the Gaidar [the head of Yeltsin’s economic reform team] team. In May 1995, Harvard named [Jefferey] Sachs director of the Harvard Institute for International Development, which meant that he played two roles in Russia’s reform period: he began as a freelance adviser to Yelstin, then moved on to overseeing Harvard’s large Russia outpost, funded by the U.S, government.” (p.281)“Despite the fact that Russia’s Constitutional Court once again ruled Yeltsin’s behavior unconstitutional, Clinton continued to back him, and Congress voted to give Yeltsin $2.5 billion in aid. Emboldened, Yeltsin sent troops to surround the parliament and got the city to cut off power, heat and phone lines to the White House parliament building.” (p.294)
“… several of Yeltsin’s ministers transferred large sums of public money, which should have gone into the national bank or treasury, into private banks that had been hastily incorporated by oligarchies. The state then contracted with the same banks to run the privatization auctions for the oil fields and mines. The banks ran the auctions, but they also bid on them – and sure enough, the oligarch-owned banks decided to make themselves the proud new owners of the previously public assets. …the Russian people fronted the money for the looting of their own country.” (p.294)“…he [Sachs] now sees that there was something else at work: many of Washington’s power brokers were still fighting the Cold War. They saw Russia’s economic collapse as a *geopolitical victory*, the decisive one that ensured U.S. supremacy.” (p.315)
From Storm Clouds Gathering, this video is solid research on what drives American Empire, mainly Oil and the Dollar.
Michael Hudson and Leo Panitch had a spirited debate at the Real News Network recently that brought to light two different views on the strategies for resisting Capitalism. Watch it hear and follow along with the transcript:
The BRICS Development Bank (Brazil, Russia, India, China and South America) was just announced and is an attempt to subvert America’s dollar hegemony or, what Hudson calls, Super Imperialism. They will make loans outside of the dollar system, which coerces/persuades countries that receive loans from the IMF to keep their currencies pegged to the dollar, and issue loans to countries in their own currencies. This, Hudson believes, will be a major geopolitical move by countries extremely frustrated by the Washington Consensus in America and will provide an alternative to the broken philosophy of neoliberalism and its Trojan Horse policy of forcing countries to accept austerity, privatization, and cheap asset sell-offs to private companies when sovereign countries cannot pay back their debts. Rather than write down debts that cannot be repaid, the IMF and World Bank (who accept and champion the dollar standard) demand “developing countries” who cannot keep up with entrenched global corporations on the world market sell away their natural resources, privatize public services and industry (including pensions and health benefits), and generally accept nation-wide austerity when the interest on the loan bloats the bill too high.
A recent case of this comes from Argentina. Argentina was going to write down its debts so that it could repay without crippling its economy until the “Vulture Firms” who bought up some of its debts at very low, distressed prices and demanded they be relayed in full. A New York judge decided that Argentina must make the Vulture Firms whole, with many big Wall Street Banks owning stakes in these vultures. Such is the logic of debt intoxicating countries under financial imperialism, demanding all debts be repaid. Whole peoples wealth and well-being can be sacrificed, but heaven forbid an investor should not get the full amount of capital returned on his investment!
Leo Panitch, however, believes that the significance of the BRICS Development Bank in combating US led neoliberalism is overblown. These five countries all themselves operate as Capitalist economies, forcing their population into low-waged labor and engaging in land purchases around the globe. Oligarchs dominate Russia, ghettos abound in Brazil, Indian farmers have been committing suicide by the thousands, and everyone must submit to the toil of the work day for their livelihood. These aren’t Socialist countries we’re talking about.
Why is the issuing of loans in the currency of a sovereign nation instead of dollars so important for opposing neoliberalism and, eventually, Capitalism itself?
It depends on how much you think American foreign policy and its war machine is bound up with the character and functioning of global economies – whether they could go Socialist or whether they would still choose by themselves to remain fully Capitalist. Does the “room for maneuver” that Panitch says the BRICS alliance is seeking create a whole new place where countries can more democratically reorganize or are they merely jockeying for more of the Capitalist pie?
Hudson emphasizes the Geopolitical where Panitch emphasizes the social forms; I would like to explain why geopolitics (the position of nations on the Earth, the resources they contain, their strategic location for war and trade routes, etc.) is crucial in determining the course of action that a country can take. Countries’ decisions on how their goods and services will be distributed are not merely internal decisions based on voting or their succumbing to the overarching logic of Capitalism. Monetary flows that are unleashed on markets and colonial histories play a major role in shaping the options a country has in taking on the social form it has at any given time. One might call them “external pressures”, but monetary flows and debt levels operate with fluidity and course through countries boundaries according to policies and decisions made at the IMF, World Bank, and Washington DC. If a new development bank would appear that would be more willing to cancel debts and make low interest rate loans, a fundamental shift could occur that would free up a countries’ ability to change its socials forms. The big question, yet to be answered, is whether the BRICS Development Bank will be willing to cancel/write down debt, i.e. whether the credit that is pumped into global markets will be for the purpose of productive works and projects that people need or for making a return at all any “external” cost. Will they be neoliberal financial parasites by another name?
The blight of austerity ravaging the world, of which there seems no end in sight, is largely driven by American Politics: which has been captured by the financial interests of Too-Big-To-Fail Banks and extractive parasites. Their main weapon is debt and interest. The dollar standard ensures that, internationally, sovereign nations must keep their currencies at a fixed rate to the dollar or else leave those currencies open to crippling currency raids and Short Sells. Here is Ellen Brown:
“[After the dollar was taken off of the gold standard] Currencies were now valued merely by their relative exchange rates in the “free” market. Foreign exchange markets became giant casinos, in which the investors were just betting on the relative positions of different currencies. Smaller countries were left at the mercy of the major players – whether other countries, multinational corporations or multinational banks – which could radically devalue national currencies just by selling them short on the international market in large quantities. These currency manipulations could be so devastating that they could be used to strong-arm concessions from target economies. (Web of Debt, p.207)”
Hudson in The Bubble and Beyond writes about the constraining system set up by the dollar standard:
“A double standard has been implicit in the world’s economic rules since the dollar was decoupled from gold in 1971, when the U.S. trade deficit of $10 billion was the equivalent of more than half the U.S. gold stock. But today there is no gold convertibility and hence no major constraint on U.S. spending abroad or at home. The United States has not subjected itself to any of the distressing fiscal conditions that all other countries feel obliged to follow. What makes this asymmetry so ironic is that it was made possible by what seemed to be a financial defeat for the United States. Once America stopped paying gold, there was not much that other central banks could ask for as they found themselves flooded with dollars obtained by private-sector exporters and asset sellers in excess of their need…
…Now that gold had been demonetized, all that foreign central banks can do with their excess dollars is to send them back to the U.S. Government by buying Treasury bonds. If they do not do this, their currencies will surge against the dollar, threatening to price their manufacturers and food exporters out of foreign markets.” (p.368)
The United States of America is an a unique, privileged position in the geopolitical dynamic of forces: it alone gets to run up its debt without limit and maintain a “balance-of-payment” deficit without ever having to pay its debt back. The interest that it must pay for the Treasury bonds it issues are simply added to the debt pile it already has built up. The U.S. Federal Reserve can keep printing dollars and issuing Treasury bonds to match them (the government must borrow in order to create new money), while other countries must use their dollars to buy more Treasury bonds. The Treasury bond nets its buyers money on interest, but that interest paid out by the U.S. comes from printing more money – issuing more T-Bonds.
This “recycling process” fuels U.S. National debt and at the same time ensures that other countries keep using dollars that they obtain from selling their exports to America, foreign company buy-outs, and IMF loans. In international finance, America has become a black hole of debt: other nations receive a glut of dollars must “send them back to the U.S. Government by buying Treasury bonds. If they do not do this, their currencies will surge against the dollar, threatening to price their manufacturers and food exporters out of foreign markets” (Hudson, TBaB p.368). These are currency wars performed almost entirely on computer screens and with the frightening threat of falling to the bottom of a hostile world market when your currency becomes over-valued (relative to the dollar and the value of goods). Suddenly all of the work your country has performed to create products and grow food will be un-tradable because it will cost to much for other countries to convert their own currency into yours for the exchange. This is constraining force burdening the “developing countries” (“developing” because they must export to “developed” countries or else face default or the impending hostile military takeover) to use dollars and continue to finance the U.S. and its war machine.
Michael Hudson is one of the few people to understand this mechanism and has been yelling about it since the early seventies. Few others understand it, but when you do, the importance of not using the dollar – freeing up the room to use one’s own currency for receiving loans and trade with other countries not denominated in dollars – becomes a huge move to open up possibilities for economic activity.
David Graeber writes about this mechanism at the end of his book Debt: The First 5,000 Years:
“Because of the United States trade deficits, huge numbers of dollars circulate outside the country; and one effect of Nixon’s floating of the dollar was that foreign central banks have little they can do with these dollars except use them to buy U.S. Treasury bonds. This is what is meant by the dollar becoming the world’s “reserve currency.”…
…The effect, though, is that American imperial power is based on a debt that will never – can never – be repaid…
…At the same time, U.S. policy was to insist that those countries relying on U.S. Treasury bonds as their reserve currency behave in exactly the opposite way as they did: observing tight money policies and scrupulously repaying their debts.” (p.366-7)
Both realize that this is a special position for the U.S. to be in and reinforces imperial authority in a very efficient, monetary way. Capitalism might have spread throughout the globe, with countries and their ruling classes forcing their people into a reserve of cheap labor and the strict adherence to property rights among other coercions, but the method used for getting new countries to accept this state of affairs is an age old tactic: interest and debt. More from Graeber:
“The new global currency is rooted in military power even more firmly than the old was. Debt peonage continues to be the main principle in of recruiting labor globally: either in the literal sense, in much of East Asia or Latin America, or in the subjective sense, whereby most of those working for wages or even salaries feel that they are doing so primarily to pay off interest-bearing loans.” (p.368)
Getting out of the Capitalist trap will involve financial maneuvering in the national-geopolitical landscape as much as labor struggles because the power of the logic of debt is so great, taking its most global and destructive manifestation to date with American Super Imperialism or Dollar Hegemony. The linking of the influence of debt and military might means that whenever a country attempts to get out of the debt/dollar system, the military steps in to enforce U.S. interests. Saddam Hussein’s Iraq stopped trading in dollars and went for euros in 2000 as well as Iran in 2001. As long as dollars are used in the deal America will win, but if anyone steps out of line and rejects the dollar the hammer comes down. This is why only a large block of high producing nations can legitimately challenge dollar hegemony, unless America’s corporate media is so thoroughly corrupt that it can convince its people a war on China, Russia, Brazil, South Africa and India. It is already demonizing Russia and China the best it can, the two largest players…
Both Hudson and Panitch are anti-Capitalist political-economic thinkers. They both wish to see a Socialist government that can restructure economies to stop apocalyptic climate change and promote prosperity absent the dominance of Capital. Hudson, though, is peering deeper into geopolitics and the forces moving and controlling nations to act in certain predictable ways to find a way out of Imperial U.S. led global Capitalism. A new development bank, though not as uplifting and energizing as a revolutionary uprising, is a glimmer of hope that will change the dominant forces operating all around the Earth if the BRICS countries do it right. All that is left is to see if the BRICS Development Bank will use money and credit solely as a means to serve their Capitalist classes vs the U.S.’s or whether the credit they lend will allow countries the means to invest in national infrastructure that will stop climate change and provide for the public health and food security.