Super Imperialism. Michael Hudson
of this book is that it is not to the corporate sector that one must look to find the roots of modern international economic relations as much as to U.S. Government pressure on central banks and on multilateral organizations such as the IMF, World Bank and World Trade Organization. Already in the aftermath of World War I, but especially since the end of World War II, intergovernmental lending and debt relationships among the world’s central banks have overshadowed the drives of private sector capital.
At the root of this new form of imperialism is the exploitation of governments by a single government, that of the United States, via the central banks and multilateral control institutions of intergovernmental capital rather than via the activities of private corporations seeking profits. What has turned the older forms of imperialism into a super imperialism is that whereas prior to the 1960s the U.S. Government dominated international organizations by virtue of its preeminent creditor status, since that time it has done so by virtue of its debtor position.
Confronted with this transformation of postwar economic relations, the non-Communist world seemed to have little choice but to move toward a defensive regulation of foreign trade, investment and payments. This objective became the crux of Third World demands for a New International Economic Order in the mid-1970s. But the United States defeated these attempts, in large part by a strengthening of its military power.
By the time the European Community and Japan began to assert their autonomy around 1990, the United States dropped all pretense of promoting the open world economy it had insisted on creating after World War II. Instead it demanded “orderly marketing agreements” to specify market shares on a country-by-country basis for textiles, steel, autos and food, regardless of “free market” developments and economic potential abroad. The European Common Market was told to set aside a fixed historical share of its grain market for U.S. farmers, except in conditions where U.S. shortages might develop, as occurred in summer 1973 when foreign countries were obliged to suffer the consequences of having U.S. export embargoes imposed. This abrogated private-sector contracts, destabilizing foreign economies in order to stabilize that of the United States.
In sum, U.S. diplomats pressed foreign governments to regulate their nations’ trade and investment to serve U.S. national objectives. Foreign economies were to serve as residual markets for U.S. output over and above domestic U.S. needs, but not to impose upon these needs by buying U.S. commodities in times of scarcity. When world food and timber prices exceeded U.S. domestic prices in the early 1970s, American farmers were ordered to sell their output at home rather than export it.
The United States thus imposed export controls to keep down domestic prices while world prices rose. In order that prices retain the semblance of stability in the United States, foreign governments were asked to suffer shortages and inflate their own economies. The result was a divergence between U.S. domestic prices and wages on the one hand, and worldwide prices and incomes on the other. The greatest divergence emerged between the drives of the U.S. Government in its worldwide diplomacy and the objectives of other governments seeking to protect their own economic autonomy. Protectionist pressures abroad were quickly and deftly defeated by U.S. diplomacy as the double standard implicit in the Washington Consensus was put firmly in place.
When the prices of U.S. capital goods and other materials exceeded world prices, for instance, the World Bank was asked (unsuccessfully) to apportion its purchases of capital goods and materials in the United States so as to reflect the 25 per cent subscription share of its stock. Japan was asked to impose “voluntary controls” on its imports of U.S. timber, scrap metal and vegetable oils, while restricting its exports of textiles, iron and steel to the United States. U.S. Government agencies, states and municipalities also followed “buy American” rules.
All this was moving in just the opposite direction from what Jacob Viner, Cordell Hull and other early idealistic postwar planners had anticipated. In retrospect they look like “useful fools” who failed to perceive who actually benefits from ostensibly cosmopolitan liberalism. In this regard today’s laissez-faire and monetarist orthodoxy may be said to play the academic role of useful foolishness as far as U.S. diplomacy has been concerned. Reviewing the 1945 rhetoric about how postwar society would be structured, one finds idealistic claims emanating from the United States with regard to how open world trade would promote economic development. But this has not materialized. Rather than increasing the ability of aid borrowers to earn the revenue to pay off the debts they have incurred, the Washington Consensus has made aid borrowers more dependent on their creditors, worsened their terms of trade by promoting raw materials exports and grain dependency, and forestalled needed social modernization such as land reform and progressive income and property taxation.
Even as U.S. diplomats were insisting that other nations open their doors to U.S. exports and investment after World War II, the government was extending its regulation of the nation’s own markets. Early in the 1950s it tightened its dairy and farm quotas in contravention of GATT principles, providing the same kind of agricultural subsidies which U.S. negotiators subsequently criticized the Common Market for instituting. Today (2002) nearly half of U.S. agricultural income derives from government subsidy.
World commerce has been directed by an unprecedented intrusion of government planning, coordinated by the World Bank, IMF and what has come to be called the Washington Consensus. Its objective is to supply the United States with enough oil, copper and other raw materials to produce a chronic over-supply sufficient to hold down their world price. The exception to this rule is for grain and other agricultural products exported by the United States, in which case relatively high world prices are desired. If foreign countries still are able to run payments surpluses under these conditions, as have the oil-exporting countries, their governments are to use the proceeds to buy U.S. arms or invest in long-term illiquid, preferably non-marketable U.S. Treasury obligations. All economic initiative is to remain with Washington Consensus planners.
Having unhinged Britain’s Sterling Area after World War II, U.S. officials created a Dollar Area more tightly controlled by their government than any prewar economy save for the fascist countries. As noted above, by the mid-1960s the financing of overseas expansion of U.S. companies was directed to be undertaken with foreign rather than U.S. funds, and their dividend remission policies likewise were controlled by U.S. Government regulations overriding the principles of foreign national sovereignty. Overseas affiliates were told to follow U.S. Government regulation of their head offices, not that of governments in the countries in which these affiliates were located and of which they were legal citizens.
The international trade of these affiliates likewise was regulated without regard either for the drives of the world marketplace or the policies of local governments. U.S. subsidiaries were prohibited from trading with Cuba or other countries whose economic philosophy did not follow the Washington Consensus. Protests by the governments of Canada and other countries were overridden by U.S. Government pressure on the head offices of U.S. multinational firms.
Matters were much the same in the financial sphere. Although foreign interest rates often exceeded those in the United States, foreign governments were obliged to invest their surplus dollars in U.S. Treasury securities. The effect was to hold down U.S. interest rates below those of foreign countries, enabling American capital investments to be financed at significantly lower cost (and at higher price/earnings ratios for their stocks) than could be matched by foreign companies.
The U.S. economy thus achieved a comparative advantage in capital-intensive products not through market competition but by government intrusion into the global marketplace, both directly and via the Bretton Woods institutions it controlled. This intrusion often aimed at promoting the interests of U.S. corporations, but the underlying motive was the perception that the regulated activities of these companies promoted U.S. national interests, above all the geopolitical interests of Cold War diplomacy with regard to the balance of payments.
Today’s source of financial instability as compared to that of the 1920s
In the 1920s and 1930s the world suffered from a shortage of liquidity. Nations sought to export goods and services, not import them. The objective was to earn dollars. How different things had become by the early 1970s, when the great problem was how to cope from the surplus of world liquidity resulting from enormous dollar inflows into nearly every economy. The U.S. Government