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When Good Intentions Turn Sour

The United States has claimed to be acting for the international greater good yet has
made many decisions that lead to the demise of other countries. The growth of globalization has
been largely attributed to the U.S. and its overbearing power in handling economic and political
situations around the world. From the “Short 20th Century” and beyond, this economic giant has
been the mastermind behind international connection, interfering with struggling states in hopes
of improving the international economy through its assertive power. The United States has
exploited its status as the Hegemon, using its power to assert Western ideology on other
countries and to benefit itself at the expense of the developing world.
During World War I, the United States chose not to intervene until 1917, tipping the war
in favor of the Allies. Recognizing its power, the U.S. became the gamechanger of World War I,
seen as a hero in the eyes of the Allies. President Woodrow Wilson negotiated the Treaty of
Versailles following World War I. Though Congress never ratified the peace treaty, Britain and
France demanded Germany pay for the costs of the war. These reparation payments devastated
Germany’s economy and caused severe hyperinflation. Germany’s depression and worthless
currency led to a political revolution and the rise of Nazism. Fascism grew popular throughout
Europe while Russia adopted communism. The United States entered World War I as a hero yet
left the end of war agreements with Europe in shackles.
John Maynard Keynes was present at the Treaty of Versailles and predicted the political
revolution in Germany. From the start of World War II, the United States adopted Keynes’
economic ideology of embedded liberalism. The United States intervened in World War II and
contributed to the win of Allies, again proving itself as a hero. With embedded liberalism and
lessons taken from the World War I peace treaty, the United States was able to help prevent
another world war. With the United States proving to be the most powerful country in
determining the victors of both world wars, it became overbearing in its power. The United
States began to fight against its American values to contain communism, what it believed to be
the greatest threat to democracy. The Hegemon began to use its power of influence to defeat
communism throughout the world. The United States sent troops to Vietnam in hopes of
overthrowing the communist government, ending in defeat. The United States throughout
history has intervened in Iran, Latin America, Cuba, Korea, Iraq, the Congo and others in
attempts to contain communism. With the image of a hero in mind, the United States asserts its
power in other territories, bringing suffering and war to countries whose people do not buy into
democratic Western values. America’s fear of communism led to the Cold War.
In 1944, the World War II Allied nations held the Bretton Woods Conference in New
Hampshire. The conference used embedded liberalism in its policies, as the ideology was
rampant in America due to its hand in helping the country out of the Great Depression. The
conference met along the idea that trade between nations was important and that this trade is zero
sum, therefore if a country is experiencing a recession it is not necessarily due to the mistakes of
just that country. The Great Depression is an example of this phenomenon because it began due
to conflicts between countries. The Bretton Woods Conference created The World Bank, the
International Monetary Fund (IMF), the General Agreement of Tariffs and Trade (GATT), and
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established the American dollar as the global reserve currency. The World Bank serves to pool
money from member states to help Europe rebuild after World War II. The IMF is created to
ensure stability of financial flows and exchange rates. The Fund is a buffer for the boom and
bust cycle and helps countries with money balance problems avoid collapse. Keynes rallied for
an International Trade Agreement at Bretton Woods, yet the U.S. blocked this approach seeing it
as an attack on sovereignty. The United States holds a great amount of influence hosting Bretton
Woods and spearheading the conference based on its adopted embedded liberalist ideals.
Creating the IMF and the World Bank cements the United States’ status as a hero as it is using its
unique hegemonic status to help rebuild Europe and prevent economy collapse all over the
world. The gold standard being the American dollar declares the United States’ dominance for
years to come. The conference created a bigger inequality of power between the United States
and other countries, especially with the blockage of an International Trade Agreement. The
United States playing the role of the hero distracts from its own selfishness. Keynes stressed the
importance of a trade organization yet the United States saw this as a chance for their role as
negotiator to be seized. The failure to create an International Trade Organization resulted in the
passing of the GATT, an organization focused on lowering tariffs which would allow the United
States to increase trade and income. Tying the US dollar to gold to be the global federal
currency allowed all other countries to have free-floating currencies. The United States could
not fall into too much debt because the dollar was connected to gold. In the 1970s Nixon took
the dollar off the gold standard because the U.S. was mounting debt and had a trade imbalance.
The money did not deflate as it should because the dollar was artificially strong. The U.S. still
has the status as a global currency, yet the gold standard is now defective and the world is on a
free-floating currency. The decision to connect the dollar to gold in the Bretton Woods
Conference still gives the United States the power of having a global currency even when the
U.S. went through economical problems and took itself off the gold standard.
The IMF worked as a short-term lender to prevent crisis. The idea of the IMF and the
World Bank helping countries in economic decline was full of good intentions. The realistic
implementation of these techniques put many of these countries in a worse economic state. With
the acceptance of aid, the new neoliberalism ideology in the United States encouraged the IMF
and World Bank to demand structural readjustments in the country of need. The IMF got
involved with the fall of the USSR. The infrastructure of the USSR was falling in disrepair and
economic and private property problems were growing more relevant. The IMF suggested that
they drop price controls on everything except oil and gas and privatize their companies in order
to create a market economy. The price controls left on oil and gas allowed many people to sell
those commodities to foreign markets and become very wealthy. The interest rates were raised
to the point where there were no opportunities for economic growth. The IMF encouraged shock
therapy – the privatization of businesses and companies overnight. People woke up to find their
life savings completely gone. Everyone was given a voucher to signify their ownership of a
piece of a company. These vouchers were traded, and a few select people collected enough
vouchers to control a large part of the private sector. With the private sector being controlled by
oligarchs, these wealthy people started stripping assets of companies and storing them in banks
overseas. So much wealth was funneling out of Russia that its only source of income were loans.
People were still loaning money to Russia because they knew the IMF would eventually bail
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Russia out and they would get their money back. The U.S. Treasury and the IMF worked with
Russia’s current neoliberals to prevent the communist opposition party from coming into power.
The U.S. backed Yeltsin who instituted “loans-for-shares” to attract the oligarchs’ support. He
won the election and led Russia through its lost decade. The United States worked closely with
the IMF in the collapse of the Soviet Union, exploiting its power by trying to assert Western
ideologies of a market economy and democracy onto a struggling country. The IMF worsened
Russia’s collapse and is proof that the austerity and moral hazards associated with the IMF do
not help a country in crisis. The IMF held onto its beliefs and continued to demand structural
adjustments for a country in a crisis to receive debt bailouts. Other countries helped by the IMF
was Mexico during the Mexican debt crisis, Indonesia in the East Asian crisis, and Argentina in
the Latin America crisis. Consistently, countries who take money from the IMF and follow
austerity are still economically behind countries who pursue its own national economic strategy.
The disadvantages of austerity were dominant in the East Asia crisis when Indonesia accepted
help from the IMF while Malaysia chose to take expansionary measures. Indonesia faced
hyperinflation while Malaysia was able to avoid the devaluation of its currency.
After the creation of GATT, many rounds of Multilateral Trade Negotiations occurred.
The World Trade Organization (WTO) was created in 1994 at the Uruguay Round. During this
round the United States introduced the “single undertaking” principle to end the round. This
meant that the agreement was binding in its entirety and developing countries could not opt out
of any part of the agreement. The U.S. and the EU pressured the developing countries to sign
onto the agreement by threatening trade sanctions and not having access to the markets
established by the agreement. This tactic forced developing countries to sign onto an agreement
that they were completely opposed to. The round was extremely unbalanced because the United
States’ only true competitor at the time was the USSR, which had collapsed. The agreements
made in the Uruguay Round caused a massive transfer of wealth from developing countries to
developed countries. For example, the Agreement on Trade-Related Investment Measures
controlled the restrictions countries were allowed to place on foreign investors. The United
States used its power at the Uruguay Round to benefit itself at the expense of struggling
countries. The U.S. delegitimized their position as Hegemon by exploiting developing nations,
creating a bigger global wealth inequality.
After the Uruguay Round, developing countries began to pay more attention to the WTO
and the agreement, realizing the effect the policies had on the economy. Many believed they had
been cheated by the Uruguay Round and began to plan on how to ensure their voices were heard
in the next round. It was demanded that if the United States wanted to bring the developing
nations to the table again, there needed to be a developing round. The Doha Round in 2001
proved to be a gamechanger for the developing world. India and Brazil were both resentful from
the Uruguay round and banded together to assert their needs at the Doha round. The two
countries gained support from the other developing countries. Brazil and India both wanted the
U.S. to cut back on subsidies. Brazil wanted to export agricultural products in the market and
India wanted to protect its 800 million peasant farmers. The United States had an excess of
agricultural products from the passing of crop insurance and felt threatened by India and Brazil’s
commands. The irony of the two countries’ requests was they were asking for further
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globalization and the United States was stepping away from globalization. The United States
backed away from its own morals in attempts to maintain its power and influence in the WTO.
In attempt to dominate the Doha Round, the United States invited China assuming it will have
similar interests. China is the world’s largest exporter, has the world’s largest GDP and the
second largest market, yet a third of the population lives in poverty. China has a huge debt and a
weak social safety net. In short, China is both a developed and a developing country and
questionably possesses a market economy. The United States expected China to side with it to
overpower the developing countries’ alliance. China sides with India and Brazil instead to have
allies in the masses as opposed to the West. The Doha round exposes the United States as no
longer the hero of the world, but the enemy as it desires to force Western policy on developing
nations and increase the wealth inequality gap.
The World Systems Theory considers the United States as the current Hegemon. With
China’s economic competition trumping the United States’ economy, the U.S. could be losing
this Hegemon status. Intellectual property has become the United States’ most valuable industry,
giving it the edge over China. China has been stealing intellectual property from the United
States and finding other ways of taking the property in attempts to compete for the Hegemon
status. According to the Kondratieff Curve, another country could rise to the Hegemon status as
the current Hegemon’s most popular industry begins to diffuse into the economy. The United
States is constricting the share of intellectual property as much as it can to prevent surplus and
keep its powerful status.
The United States acted as the hero in the world wars and in the rise of globalization
during the “Short 20th Century.” The United States brought Europe out of recession and lead the
Treaty of Versailles, the Bretton Woods Conference, and the WTO, asserting its power in
influencing the global economy. The fatal flaw of the United States is its desire for more power
and to spread its political and economic ideology. The Kondratieff curve suggests the demise of
the United States as it loses power and China steps in as the next Hegemon.