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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 2003 second edition were made shortly after the 1972 publication of the first edition, but no publisher was found (xiv-xv); apart from a few references to Hudson’s subsequent books and some quotations from the 2001 third volume of Robert Skidelsky’s biography of John Maynard Keynes, covering the years 1937-1946, there are few recent references.] [Thesis. “The thesis 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” (23-24). — “Economic imperialism has produced some weird and almost incomprehensible results in its history, but never before has a bankrupt nation dared insist that its bankruptcy become the foundation of world economic policy. But U.S. officials [in 1971] insisted that because of their nation’s bankruptcy on international account, all other nations must warp their economies toward transferring its bankruptcy to themselves” (264).] Preface to the second edition [dated 2002]. There has been no change in the U.S. Treasury’s neglect of its balance-ofpayments deficit from 1972 to 2002 (ix). It amounts to a system of taxation the U.S. imposes on the world without its consent (x). “This book aims at providing the background for U.S.-European and U.S.-Asian financial relations by explaining how the U.S. Treasury bill standard came to provide America with a free lunch since gold was demonetized in 1971, and why the IMF and World Bank cannot be expected to help. Published thirty years ago, it was the first to criticize the World Bank and IMF for imposing destructive policies on the world’s debtor economies, and to trace these policies to U.S. diplomatic pressure” (xi). Hudson’s career, 19711977 (xi-xiv). “No serious alternative . . . to the American-centered financial system” is in sight (xvi-xviii). Introduction. “The United States has achieved its global position through novel policies that were not anticipated by economists writing prior to World War I, or indeed prior to the 1970s” (1). U.S. diplomacy reflects a strategic drive for world power, not merely “the profit motives of private investors” (1). This was achieved “from the unprecedented terms on which [the U.S.] government extended armaments and reconstruction loans to its wartime allies” (1).
Anglophile Democrats were in favor of reducing tariffs, Anglophobe Republicans in favor of protectionism; “[i]t was largely to promote protectionist doctrines that state land-grant colleges and business schools were created after the Civil War” (2). The latter philosophy helps explain the backward-looking isolationism of the U.S. between the wars, in which it was a world creditor but was uninterested in making sure debtors could repay, leading to “the breakdown of world payments” (5; 3-6). “The Great Depression and World War II taught governments the folly of this attitude” (6). The view of Jacob Viner of the Univ. of Chicago was that the policy dictates of states, not corporations, led to war; this was the basis for post-WWII laissez-faire policies promoting “the United States as the center of a world system vastly more extensive and centralized, yet also more flexible, less costly and less bureaucratic than Europe’s imperial system had been” (10). Congress’s unwillingness to act to counter payments surplus of the U.S. in the late 1940s led to the use of “an antiCommunist national security program hook on which to drape postwar foreign spending programs,” but “[w]ithin a decade . . . what at first seemed to be a stabilizing economic dynamic because destabilizing” (12, 14; 11-14). “[I]nternational money (viewed as an asset) is simultaneously a debt of the key-currency nation. Growth in keycurrency reserves accumulated by payments-surplus economies implies that the nation issuing the key currency acts in effect, and even in reality, as an international borrower” (15). At first this was hardly noticed, but by 1964 the debt to foreign central banks exceeded the value of the Treasury’s gold stock, leading to a run on gold and in March 1968 a suspension of conversion, breaking the gold-dollar link (16). In August 1971 Nixon made it official, and “[t]he U.S. Treasury bill standard—that is, the dollar-debt standard based on dollar inconvertibility—was inaugurated (17).
Thus “[t]he world’s richest nation was enabled to borrow automatically from foreign central banks simply by running a payments deficit” (17). “America’s Cold War spending thus became a tax on foreigners” (17). Foreign central banks had no real alternative (17). To keep the dollar’s worth high was in the interest of the foreign central banks (lest cheap imports flood their markets), so buying Tbills was seen as in their interest. Thus was the classical balance-of-payments mechanism inverted, and a balance of payments deficit (rather than a higher interest rate) used to supply foreign capital (18-19). It was “one of the economic miracles of modern times” (20). Not at first a deliberate policy, its advantages were soon perceived, and since 1972 it has been “increasingly conscious and deliberately exploitative” (21-23 & 29-31). “The United States thus achieved what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. Government” (23). What resulted was a sort of coercion: the U.S. “dared the rest of the world to call its bluff and plunge the international economy into monetary crisis” (23). “[A]round 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 arrangements’ to specify market shares on a country-by-country basis” (24). “World commerce has been directed by an unprecedented intrusion of government planning” (25). “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” (26). “The result has been a global financial bubble” (27). In the
early post-WWII decades military spending produced the deficit; in the latter decades this shifted to providing consumer goods to the U.S. economy “as it postindustrializes and becomes a bubble economy . . . the role of foreign economies is to sustain America’s stock market and real estate bubble, producing capital gains and asset-price inflation even as the U.S. industrial economy is being hollowed out” (28). “The public domains of debtor countries are passing into the hands of global finance capital” (29). The system created has been “parasitic” because it has devoted resources not to productive enterprises but, instead, to “maintaining an imperial military and bureaucratic superstructure that imposes dependency rather than self-sufficiency on its client countries” (32). The system “cannot last” and the breakdown “is likely to be financial” (3233). Hudson laments that the training of central bankers and diplomats is divorced from these realities and that these tactics are “a secret that U.S. financial diplomats are not interested in broadcasting” (34; 33-34). “The above view of U.S. financial imperialism differs not only from the traditional economic determinist view, but also from the anti-economic, idealistic (or ‘national security’) rationale” (34). “The key to understanding today’s dollar standard is to see that it has become a debt standard based on U.S. Treasury IOUs, not one of assets in the form of gold bullion” (35). I. BIRTH OF THE AMERICAN WORLD ORDER: 1914-46 Chapter 1: Origins of Intergovernmental Debt, 1917-21. World War I changed international lending and investment by creating massive claims by governments on other governments that were unlike earlier investments, which were based on productive assets and backed by collateral (39-40; Keynes disputed the
wisdom for such an arrangement ). The U.S.’s relation to the war was “unique” and “American credits became the war’s distinguishing economic feature” (44). Though the U.S. refused to acknowledge the connection between Inter-Ally debts and German reparations, in fact its insistence that the Allies repay their Inter-Ally debts led them to ‘bleed’ Germany (45-50). No rescheduling of payments was allowed (51-53). This was a “government function”; it was not due to private investment capital; it was “unique in history” and was unforeseen by theoreticians of empire (Hobson, Kautsky, Lenin) (53-54). In 1925 Gerhart von Schulze-Gaevernitz [1865-1943] identified the shift in the world’s center of gravity to America and named the process Überimperialismus, defining it as “that stage of the capitalist epoch in which finance capital mediates political power internationally,” but “missed the point that it was more in the hands of governments than in those of private investors” (55). “[T]his assumption of lending power by a single national government proved as revolutionary as the Bolshevik Revolution” (56). It was due to government policy, not the pursuit of profit by private investment capital: “Without this perception one cannot comprehend the seemingly contradictory and apparently self-defeating policies pursued by the United States toward its World War I allies and during the years that followed. Nor can a foundation be laid for understanding the financialimperial policies of the United States after World War II until one has grasped the power-seeking context within which the United States conducted itself in the interwar period with respect to German reparations and the Inter-Ally debts” (57). Chapter 2: Breakdown of World Balance, 1921-33. “[T]he disenfranchisement of private capital was in large part the result of a war whose motivations stemmed largely from the competition of international finance
capital. However, the consequence of this war was to disenfranchise it, to supplant it by a system overburdened by intergovernmental claims and debts. . . . The results were not what any prewar observers had anticipated” (63). Keynes objected (63-64). The U.S. would not allow Europe to repay by increasing exports, so new borrowing was necessary (64-66). The system began to break down in 1928-29 (66-67). The U.S. had to keep interest rates low to keep it going, fueling a stock market bubble (6769). In June-July 1931, the system fell apart and the pound sterling was devalued, leading to a tariff war (69-71). “World debt had become, and was used as, an instrument of power by the United States against its only serious rival, the British Empire” (73). Faced with crisis, the U.S. refused accommodations (7379). Chapter 3: America Spurns World Leadership. In the Nov. 1932-Mar. 1933 Hoover lame-duck period, Franklin D. Roosevelt spurned attempts to ease debt repayments by Britain and France (8094). He “effectively killed” the London Economic Conference in the spring of 1932, thus rejecting world leadership (94-111). The Great Depression (11115). “World War II erupted . . . because of a world bankruptcy in which intergovernmental financial claims played the major role” (115). World leadership “did not seem to pay” and the idea of a debtor-oriented financial system was inconceivable at the time (116-18). Chapter 4: Lend-Lease and Fracturing of the British Empire, 1941-45. U.S. used Lend-Lease strategically to gain support for post-war power (119-31). Tough U.S. diplomacy led to a situation in which “[a]t a stroke, Britain’s economic power was broken” (133; 131-36). Chapter 5: Bretton Woods: The Triumph of U.S. Government. The
purpose of the creation of the IMF and the World Bank, conceived in the 194145 period, was to avoid the errors of the previous postwar period and “to enable [the U.S.’s] allies and former enemies to maintain their imports of U.S. goods and services in the absence of German reparations” (137; 137-55). Other nations had no real alternative except to agree (155-58). After the war burgeoning U.S. exports were too great, and “U.S. diplomats therefore redesigned the nation’s foreign aid and investment programs in such a way as to repatriate gold to Europe” (158; 158-61). Chapter 6: Isolating the Communist Bloc, 1945-46. It was originally expected that the Soviet Union would be part of the Bretton Woods system (16272). But instead the USSR was excluded because “the United States set out to dominate the postwar world economy” (174; 172-75). II. THE INSTITUTIONS OF THE AMERICAN EMPIRE Chapter 7: American Strategy within the World Bank. The U.S. wanted the IMF and the World Bank in Washington, D.C. (179-80). “[I]n March 1946, at the close of the World Bank-IMF meeting in Savannah, Georgia, former Treasury Secretary Morgenthau explained that ‘Bretton Woods tried to get away from the concept of control of international finance by private financiers who were not accountable to the people’” (180’ 180-84). Bias against agriculture due to “shortcomings of orthodox economic thought . . . warped World Bank project lending after 1952” to the detriment of poor nations and causing the increasing postwar “division of the world into developed and impoverished countries” (187; 185-96). Critique of World Bank policies (196-216). Chapter 8: The Imperialism of Foreign Aid. U.S. foreign aid “started
out as a system of benevolent grants and loans” but has “evolved into a strategy of international client patronage and dependency based on U.S. political and military control over aid recipients” (217). “The United States Government is not a charitable institution” but rather pursues “the national interest of the United States,” as a Senate Foreign Relations Committee report on Technical Assistance declared in 1957 (218). “[T]he system of foreign aid is now implemented callously, coldly and with deliberate intent to enlarge U.S. military and political influence” (219). Loans to help finance exports that are essentially commercial are classed as “aid,” calling the very meaning of the word as it is used today into question; “[s]o-called foreign aid is, indeed, feudatory” (21921). In the post-WWII period, U.S. aid has become increasingly militarized, while positively Orwellian rhetoric has obscured the process (e.g. a large “Food for Peace” program is used to facilitate arms purchases) (221-22). “Taken on balance, all U.S. foreign assistance is ultimately military or paramilitary in purpose, even its ostensibly economic aid” (223). Japan as an example (22526). Poor planning during the escalation of the Vietnam war hurt the American trade position (226-29). The Agricultural Trade Development Act of 1953 (P.L. 480) disguised assistance to U.S. farmers as foreign aid (229-35). In 1961 the Agency for International Development (AID) centralized non-military aid, structuring it to reduced balance of payments deficits (235-38). Beginning in the late 1950s and 1960s, the line between economics and military/security aid became blurred and part of a common geopolitical project; the 1970 Peterson Commission report articulated how foreign countries are required to finance their own military systems to the U.S.’s economic benefit (238-42). Examples of U.S. insistence on its own interest (242-47). “The foreign aid program had come to play a perverse
role in the development of foreign countries” (247). Chapter 9: GATT and the Double Standard. U.S. planners after World War II originally intended “a system of regulated free trade binding upon all signatory countries, including the United States itself,” but the drive for power (especially as expressed by U.S. representatives in Congress, “as sensitive to changes in world trade as barometers are to changes in atmospheric pressure” ) gradually turned the General Agreement on Tariffs and Trade, which even at the outset involved a double standard, into “economic nationalism” that maintained U.S. dominance and supremacy (248-64). Chapter 10: Dollar Domination through the International Monetary Fund, 1945-46. Because they were exhausted by World War II, European nations “voluntarily abrogated what had been more than four centuries of imperial ambitions” (265). Britain led the way to this by capitulating to Inter-Ally debts after World War I, when it could have resisted in the name of “an independent united Europe” (265-66). Speculations about why this “unique” world-historical outcome occurred (267-68). The U.S. subjugated sterling to the dollar by means of a 1946 loan that prevented Britain from devaluing the sterling to rebuild its reserves, thus “ruin[ing]” Great Britain (268-73). Gold at $35 an ounce became “the essence of the IMF’s stable parity system”; this effectively “protected the U.S. gold stock” (275; 273-78). The U.S. possessed veto power over IMF decision-making (280-83). The IMF was not at first a bank that made loans, only a financial intermediary for transferring funds (283-87). III. MONETARY IMPERIALISM AND THE U.S. TREASURY BILL STANDARD
Chapter 11: Financing America’s Wars with Other Nations’ Resources. Since World War I, one nation’s wars have often been financed by other nations (291). In 1964, U.S. war-related deficits as they affected gold stocks could no longer be ignored, though only France actively opposed the Vietnam war (292-99). Faced with this problem, and as the Gold Pool (1961-68) came under growing stress, “U.S. monetary strategists . . . attempted to shift the basis of financial power away from gold toward debt,” the alleged reason being increasing “world liquidity”; but President Lyndon Johnson’s decision early in 1968 not to escalate the Vietnam War despite the Tet offensive meant that “depletion of U.S. gold holdings [had] abruptly altered the country’s military policy” (299, 307; 299-308). Chapter 12: Power through Bankruptcy, 1968-70. The only practical option for the U.S. was “to induce the central banks and Treasuries of foreign countries . . . to accumulate dollar assets in growing amounts” (310). A 1969 U.S.-Canada agreement to relend dollar accumulations to the U.S. Treasury became “a model for subsequent agreements, both formal and informal” (311). “It became possible for a single nation, the United States, to export its inflation by settling its payments deficit with paper instead of gold,” since this paper was still “the world’s reserve currency” (312). The dollar was “at least in legal fiction, a gold equivalent” (312). Special Drawing Rights were created, though these violated the IMF charter; French resistance was overcome and theories constructed (by, for example, Arthur Laffer) that U.S. deficits were only a statistical illusion and that the U.S. economy was merely functioning as a saving bank or savings and loan association; however, the arrangement was really accepted “partly out of sympathy with U.S. war aims . . . and partly to avoid a world political
showdown and monetary collapse” (323; 313-27). Chapter 13: Perfecting Empire through Monetary Crisis, 1970-72. European countries (especially France) and Asian countries (especially Japan), provoked by illegal U.S. textile quotas, led to a 1970-1971 confrontation that ended with total capitulation by Europe and Asia in the fall of 1971 (328-47). Chapter 14: The Monetary Offensive of Spring 1973. Taking the dollar off gold forced Europe “to choose between holding dollars (mainly in the form of Treasury bills) or dumping them and thereby permitting . . . a de facto U.S. devaluation” (349). The U.S. adopted a policy of benign neglect toward its deficits (350-56). An anti-free trade tariff offensive whose aim was to make foreign countries accept obligatory quotas of U.S. goods was won (with the help of grain sales to the USSR) by the U.S. on the pretense that adequate devaluation of the dollar had been impossible (34876). Chapter 15: Monetary Imperialism: The Twenty-first Century. The U.S. achieved a decades-long “free lunch” amounting to “hundreds of billions of dollars annually with no audible protest from the rest of the world” as the U.S. “deficit has been built into the world economic system” (377). It is the first time in world history that a nation has been “able to invert the classical rules of international finance” (377). The world’s reasons for accepting this have shifted from “an early postwar faith in American moral leadership and rhetoric of free markets” to “fear that the United States will plunge the world into crisis if it does not get its way” (378; 377-80). The U.S. has enforced food dependency (381-83). The exploitativeness of the U.S. Treasury bill standard amounted to “monetary imperialism” (383-87). U.S. diplomats use the specter of collapse to maintain
the system (387-89). Retrospective (389-91). No alternative to gold has emerged, and European and Asian nations have not shown sufficient will or astuteness to oppose an alternative to the present system; in addition, the public has no understanding of the system (391-93). Notes. 19 pp. Index. 13 pp. [About the Author. Michael Hudson was born in Chicago in 1939. He earned a 1959 B.A. in philology (minor in history) from the University of Chicago; his 1963 M.A. and his 1968 Ph.D. in economics are from New York University. He is Distinguished Research Professor of Economics at the University of Missouri, Kansas City. He previously taught at The New School in NYC. He has served four countries as an economic advisor (U.S., Canada, Mexico, Latvia) as well as the U.N. Michael Hudson has also worked at Chase Manhattan Bank and Arthur Andersen, and the Hudson Institute. Some credit his April 2006 Harper’s piece with helping defeat the George W. Bush administration’s effort to privatize Social Security. In 2007-2008, Hudson was Chief Economic Policy Adviser for the Kucinich for President campaign. He maintains a web site (michaelhudson.com) where many texts and interviews are available.]
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