UFPPC (www.ufppc.org) Digging Deeper LXXVI: March 9, 2009, 7:00 p.m.

Michael Hudson,

Super Imperialism: The Origin and Fundamentals of U.S.World Dominance

(London and Sterling, VA: Pluto Press, [March] 2003.Second edition. First published 1972 by Holt, Rinehart and Winston as

Super Imperialism: The Economic Strategy of American Empire

[

Note:

Most of the revisions in this 2003second edition were made shortly afterthe 1972 publication of the first edition,but no publisher was found (xiv-xv);apart from a few references to Hudson’ssubsequent books and some quotationsfrom the 2001 third volume of RobertSkidelsky’s biography of John MaynardKeynes, covering the years 1937-1946,there are few recent references.][

Thesis.

“The thesis of this book is thatit is not to the corporate sector that onemust look to find the roots of moderninternational economic relations as muchas to U.S. Government pressure oncentral banks and on multilateralorganizations such as the IMF, WorldBank and World Trade Organization.Already in the aftermath of World War I,but especially since the end of World WarII, intergovernmental lending and debtrelationships among the world’s centralbanks have overshadowed the drives of private sector capital. — At the root of this new form of imperialism is theexploitation of governments by a singlegovernment, that of the United States,via the central banks and multilateralcontrol institutions of intergovernmentalcapital rather than via the activities of private corporations seeking profits.What has turned the older forms of imperialism into a super imperialism isthat whereas prior to the 1960s the U.S.Government dominated internationalorganizations

by virtue of its preeminentcreditor status, since that time it hasdone so by virtue of its debtor position”(23-24). — “Economic imperialism hasproduced some weird and almostincomprehensible results in its history,but never before has a bankrupt nationdared insist that its bankruptcy becomethe foundation of world economic policy.But U.S. officials [in 1971] insisted thatbecause of their nation’s bankruptcy oninternational account, all other nationsmust warp their economies towardtransferring its bankruptcy tothemselves” (264).]

Preface to the second edition [dated2002].

There has been no change in theU.S. Treasury’s neglect of its balance-of-payments deficit from 1972 to 2002 (ix).It amounts to a system of taxation theU.S. imposes on the world without itsconsent (x). “This book aims at providingthe background for U.S.-European andU.S.-Asian financial relations byexplaining how the U.S. Treasury billstandard came to provide America with afree lunch since gold was demonetized in1971, and why the IMF and World Bankcannot be expected to help. Publishedthirty years ago, it was the first tocriticize the World Bank and IMF forimposing destructive policies on theworld’s debtor economies, and to tracethese policies to U.S. diplomaticpressure” (xi). Hudson’s career, 1971-1977 (xi-xiv). “No serious alternative . . .to the American-centered financialsystem” is in sight (xvi-xviii).

Introduction.

“The United States hasachieved its global position through novelpolicies that were not anticipated byeconomists writing prior to World War I,or indeed prior to the 1970s” (1). U.S.diplomacy reflects a strategic drive forworld power, not merely “the profitmotives of private investors” (1). Thiswas achieved “from the unprecedentedterms on which [the U.S.] governmentextended armaments and reconstructionloans to its wartime allies” (1).

Anglophile Democrats were in favor of reducing tariffs, Anglophobe Republicansin favor of protectionism; “[i]t was largelyto promote protectionist doctrines thatstate land-grant colleges and businessschools were created after the Civil War”(2). The latter philosophy helps explainthe backward-looking isolationism of theU.S. between the wars, in which it was aworld creditor but was uninterested inmaking sure debtors could repay, leadingto “the breakdown of world payments”(5; 3-6). “The Great Depression andWorld War II taught governments the follyof this attitude” (6). The view of JacobViner of the Univ. of Chicago was that thepolicy dictates of states, notcorporations, led to war; this was thebasis for post-WWII laissez-faire policiespromoting “the United States as thecenter of a world system vastly moreextensive and centralized, yet also moreflexible, less costly and less bureaucraticthan Europe’s imperial system had been”(10). Congress’s unwillingness to act tocounter payments surplus of the U.S. inthe late 1940s led to the use of “an anti-Communist national security programhook on which to drape postwar foreignspending programs,” but “[w]ithin adecade . . . what at first seemed to be astabilizing economic dynamic becausedestabilizing” (12, 14; 11-14).“[I]nternational money (viewed as anasset) is simultaneously a debt of thekey-currency nation. Growth in key-currency reserves accumulated bypayments-surplus economies implies thatthe nation issuing the key currency actsin effect, and even in reality, as aninternational borrower” (15). At first thiswas hardly noticed, but by 1964 the debtto foreign central banks exceeded thevalue of the Treasury’s gold stock,leading to a run on gold and in March1968 a suspension of conversion,breaking the gold-dollar link (16). InAugust 1971 Nixon made it official, and“[t]he U.S. Treasury bill standard—that is,the dollar-debt standard based on dollarinconvertibility—was inaugurated (17). Thus “[t]he world’s richest nation wasenabled to borrow automatically fromforeign central banks simply by running apayments deficit” (17). “America’s ColdWar spending thus became a tax onforeigners” (17). Foreign central bankshad no real alternative (17). To keep thedollar’s worth high was in the interest of the foreign central banks (lest cheapimports flood their markets), so buying T-bills was seen as in their interest. Thuswas the classical balance-of-paymentsmechanism inverted, and a balance of payments deficit (rather than a higherinterest rate) used to supply foreigncapital (18-19). It was “one of theeconomic miracles of modern times”(20). Not at first a deliberate policy, itsadvantages were soon perceived, andsince 1972 it has been “increasinglyconscious and deliberately exploitative”(21-23 & 29-31). “The United States thusachieved what no earlier imperial systemhad put in place: a flexible form of globalexploitation that controlled debtorcountries by imposing the WashingtonConsensus via the IMF and World Bank,while the Treasury bill standard obligedthe payments-surplus nations of Europeand East Asia to extend forced loans tothe U.S. Government” (23). Whatresulted was a sort of coercion: the U.S.“dared the rest of the world to call itsbluff and plunge the internationaleconomy into monetary crisis” (23).“[A]round 1990, the United Statesdropped all pretense of promoting theopen world economy it had insisted oncreating after World War II. Instead itdemanded ‘orderly marketingarrangements’ to specify market shareson a country-by-country basis” (24).“World commerce has been directed byan unprecedented intrusion of government planning” (25). “The U.S.economy thus achieved a comparativeadvantage in capital-intensive productsnot through market competition but bygovernment intrusion into the globalmarketplace” (26). “The result has beena global financial bubble” (27). In the

early post-WWII decades militaryspending produced the deficit; in thelatter decades this shifted to providingconsumer goods to the U.S. economy “asit postindustrializes and becomes abubble economy . . . the role of foreigneconomies is to sustain America’s stockmarket and real estate bubble, producingcapital gains and asset-price inflationeven as the U.S. industrial economy isbeing hollowed out” (28). “The publicdomains of debtor countries are passinginto the hands of global finance capital”(29). The system created has been“parasitic” because it has devotedresources not to productive enterprisesbut, instead, to “maintaining an imperialmilitary and bureaucratic superstructurethat imposes dependency rather thanself-sufficiency on its client countries”(32). The system “cannot last” and thebreakdown “is likely to be financial” (32-33). Hudson laments that the training of central bankers and diplomats is divorcedfrom these realities and that these tacticsare “a secret that U.S. financial diplomatsare not interested in broadcasting” (34;33-34). “The above view of U.S. financialimperialism differs not only from thetraditional economic determinist view,but also from the anti-economic,idealistic (or ‘national security’)rationale” (34). “The key tounderstanding today’s dollar standard isto see that it has become a debtstandard based on U.S. Treasury IOUs,not one of assets in the form of goldbullion” (35).

I. BIRTH OF THE AMERICAN WORLDORDER: 1914-46Chapter 1: Origins of Intergovernmental Debt, 1917-21.

World War I changed internationallending and investment by creatingmassive claims by governments on othergovernments that were unlike earlierinvestments, which were based onproductive assets and backed bycollateral (39-40; Keynes disputed thewisdom for such an arrangement [63]). The U.S.’s relation to the war was“unique” and “American credits becamethe war’s distinguishing economicfeature” (44). Though the U.S. refused toacknowledge the connection betweenInter-Ally debts and German reparations,in fact its insistence that the Allies repaytheir Inter-Ally debts led them to ‘bleed’Germany (45-50). No rescheduling of payments was allowed (51-53). This wasa “government function”; it was not dueto private investment capital; it was“unique in history” and was unforeseenby theoreticians of empire (Hobson,Kautsky, Lenin) (53-54). In 1925 Gerhartvon Schulze-Gaevernitz [1865-1943]identified the shift in the world’s centerof gravity to America and named theprocess

Überimperialismus

, defining it as“that stage of the capitalist epoch inwhich finance capital mediates politicalpower internationally,” but “missed thepoint that it was more in the hands of governments than in those of privateinvestors” (55). “[T]his assumption of lending power by a single nationalgovernment proved as revolutionary asthe Bolshevik Revolution” (56). It wasdue to government policy, not the pursuitof profit by private investment capital:“Without this perception one cannotcomprehend the seemingly contradictoryand apparently self-defeating policiespursued by the United States toward itsWorld War I allies and during the yearsthat followed. Nor can a foundation belaid for understanding the financial-imperial policies of the United Statesafter World War II until one has graspedthe power-seeking context within whichthe United States conducted itself in theinterwar period with respect to Germanreparations and the Inter-Ally debts” (57).

Chapter 2: Breakdown of WorldBalance, 1921-33.

“[T]hedisenfranchisement of private capital wasin large part the result of a war whosemotivations stemmed largely from thecompetition of international finance