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US government. "Running a dollar surplus in their balance of payments
became synonymous with lending (it) to the US Treasury". For its part,
America borrows from other central banks and runs trade deficits. The
larger they get, the greater the amount available to be loaned back, so
today the volume is enormous.

For both sides, the problem is that Washington's guns and butter economy
(including trillions to Wall Street) creates greater deficits and inflated
spending. America's dominance is maintained, and foreign economies are
obliged to finance it. Failure to support the dollar will inflate their
own currencies, give US exporters a competitive edge, and ultimately let
the world monetary system break down.

The "unique ability of the US Government to borrow from foreign central
banks rather than from its own citizens (through taxes) is one of the
economic miracles of modern times. Without it, the war-induced American
prosperity of the 1960s and early 1970s would have ended quickly ..."


How America's Payment Deficit Became a Source of Strength, not Weakness

It let America achieve what no earlier empires did - "a flexible form of
global exploitation that controlled debtor countries by imposing
Washington Consensus (diktats)". It's used the IMF, World Bank and other
international lending agencies for its purposes, while the Treasury-bill
standard "obliged the payments-surplus nations of Europe and East Asia to
extend forced loans to the US Government". If they don't, world economies
face monetary crisis.


Implications for the Theory of Imperialism

Hudson calls it a "new form of imperialism" under which America exploits
other nations "via the central banks (and international lending agencies)
rather than via the activities of private corporations seeking profits".

A "Super Imperialism" model "pressed foreign governments to regulate their
nations' trade and investment to serve US national objectives ...
Washington Consensus (diktats) 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".

US companies thus achieved a competitive advantage, not in the
marketplace, but by Washington Consensus rules and the Bretton Woods
institutions it controls - the IMF, World Bank, et cetera. What's good for
US business benefits America overall and its Super Imperial ambitions.


Today's Source of Financial Instability Compared to the 1920s

The earlier period had a shortage of liquidity. By the early 1970s, it was
in surplus, the result of the enormous volume of dollar inflows in world
economies. The Korean War began shifting America's balance-of-payments
from surplus to deficit. In 1971, Vietnam forced it off gold and "induced
a US debtor-oriented international financial policy (with) the rest of the
world" - something other nations have been trapped by ever since.

US deficits have disrupted world economies, but its character has changed.
Not only does it finance US militarism, but it also "sustain(s) America's
stock market and real estate bubble" while at the same time industrial
America erodes. In addition, pressure is applied to privatize public
enterprises to let this sector pass "into the hands of global finance
capital ... controlled and shaped by the Washington Consensus".

Under a "new state-capitalist form of imperialism", central banks, not
industry, "are the vehicle for balance-of-payments exploitation" with the
dollar as the world's reserve currency. It's Super Imperialism because one
nation alone gets a Free Lunch right to benefit by getting others to
finance its deficits and reckless spending.

The system's unique feature is that other countries may extract their
citizens' wealth, but only America extracts theirs through the sale of its
Treasury securities.


The World's Need for Financial Autonomy from Dollarization

In its relationship with client countries, America's dollarization policy
imposes dependency, not self-sufficiency. It drains "the financial
resources of its Dollar Bloc allies (and retards) the development of
indebted third world raw-materials exporters ..." But its gain isn't put
to productive use. It's used instead for militarism and financialization
at the expense of its former industrial strength.

It's an unsustainable system, but for other countries to break away,
they'll have to renounce Chicago School alchemy, the austerity programs it
imposes, and advantages it gives America in trade and other relations. It
drains other nations' resources by trapping emerging economies in chronic
debt and developed ones into forced buying of US Treasuries.

In return, America gets a Free Lunch. It rules as world debtor, forces
other countries into creditor bondage, and threatens to bring down the
global monetary system if enough of them balk. So far it's worked because
Europe and Asia lack the political will to devise a "New International
Economic Order" so nations producing economic gains can keep them and not
let America use them to reinforce its "new kind of centralized global
planning" - one based on financialization and a US Treasury securities
standard, not industrial mechanisms. In WTO terms, it transfers foreign
trade gains from other economies to the US, drains their resources
overall, promotes dependency, not self-sufficiency, and backs it with
hardline militarism and threats of systemic monetary collapse.

Eventually, exploited countries won't tolerate more "taxation without
representation", a "quid without quo", a Free Lunch from "the world's
payments-surplus nations". The longer America demands it by glutting world
economies with dollars, the more likely disadvantaged nations will object.
Hudson put it this way in his Project Censored award-winning article:

Today, "the only way a nation can block capital movements is to withdraw
from the IMF, the World Bank and the World Trade Organization (WTO). For
the first time since the 1950s, this looks like a real possibility, thanks
to the worldwide awareness" of America's dirty game and how it harms them.


"De-Dollarization and the Ending of America's Financial-Military Empire"

In his June 14 2009 article, Hudson explained that "Chinese President Hu
Jintao, Russian President Dmitry Medvedev and other top officials of the
six-nation Shanghai Cooperation Organization (SCO)" had a two-day June 15
- 16 meeting in Yekaterinburg, Russia, with Brazil attending on the 16th.
SCO countries include Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan,
Uzbekistan with Iran, India, Pakistan and Mongolia having observer status.

The meeting's stated purpose was "to discuss mutual aid", not challenge
America's financial and military empire. Yet it potentially may be pivotal
by doing just that.

On June 5, Medvedev told the Saint Petersburg International Economic Forum
that Russia, China and India have an opportunity to "build an increasingly
multipolar world order" away from America's "artificially maintained
unipolar system (based on) one big centre of consumption, financed by a
growing deficit, and thus growing debts, one formerly strong reserve
currency, and one dominant system of assessing assets and risks".

In other words, America "makes too little and spends too much", especially
with regard to its military. It also gluts the world with dollars that end
up in foreign central banks. Either they recycle them into US Treasuries
or "let the 'free market' force up their currency relative to the dollar -
thereby pricing their exports out of world markets, creating domestic
unemployment and business insolvency".

Given a choice up to now, they've had to choose the least bad alternative.
"Now they want out" as Medvedev explained in Saint Petersburg saying:
"what we need are financial institutions of a completely new type, where
particular political issues and motives, and particular countries will not
dominate". How so is the question, and can it work?

"For starters, the six SCO (and other BRIC) countries intend to trade in
their own currencies" to benefit by what America "until now has
monopolized for itself". China's central bank governor Zhou Xiaochuan
wants a new reserve currency "that is disconnected from individual
nations". It was discussed in Yekaterinburg.

These and other countries see America as "a lawless nation, not only
financially but also militarily". It forces its rules on others but won't
abide by them itself - a practice now intolerable, and there's more.

So much of America's budget is for militarism that the Pentagon faces
overstretch while the nation is so indebted it's effectively a deadbeat
with amounts impossible to repay. For countries like China, the problem is
especially acute given its $2 trillion holdings "denominated in yuan".

A "return to the kind of dual exchange rates common between World Wars One
and Two" may be the solution - "one exchange rate for commodity trade,
another for capital movements and investments".

With or without these controls, "foreign nations are taking steps to avoid
being the unwilling recipients of yet more dollars" that face lower
valuations the more of them America prints. If SCO countries and Brazil
have their way, America "no longer (will) live off the savings of
others ... nor have the money for unlimited military expenditures and
adventures". For these nations and many others, it can't come a moment too
soon.

_____

Stephen Lendman is a Research Associate of the Centre for Research on
Globalization. He lives in Chicago and can be reached at
lendmanstephen at sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The
Global Research News Hour on RepublicBroadcasting.org Monday - Friday at
10 am US Central time for cutting-edge discussions with distinguished
guests on world and national issues. All programs are archived for easy
listening.

http://www.globalresearch.ca/index.php?context=va&aid=14024

http://sjlendman.blogspot.com/2009/07/michael-hudsons-super-imperialism.html

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