Two views of neo-liberalism

Submitted by AWL on 21 July, 2005 - 12:17

There is sharp disagreement about the nature and meaning of imperialism on the left, with two broad schools of thought emerging. Two recent books sum up the differences very clearly. Paul Hampton reviews John Bellamy Foster and Robert W McChesney eds. Pox Americana, Exposing the American Empire (Pluto) and Leo Panitch and Colin Leys eds. The Empire Reloaded: Socialist Register 2005 (Merlin)

A view about neoliberalism which is largely a fable is expressed lucidly by Immanuel Wallerstein in Pox Americana. He argues that after 1945 the United States was dominant economically, militarily and culturally. This lasted for about twenty-five years, when the US ran into difficulty because of the rise of economic rivals Germany and Japan and the Vietnam War.

The US handled its “loss of hegemony” by appearing to offer other big powers “an alliance of semi-equals” while actually aiming to stop the European Union. It also imposed the Washington Consensus, globalisation, neo-liberalism etc on the rest of the world.

Wallerstein argues that this approach failed because: the collapse of the Soviet Union “removed the most important political weapon [the US] had in relation to Western Europe and East Asia”; Saddam Hussein challenged the United States by invading Kuwait in 1990; the US economic revival in the 1990s turned out to be a bubble rather than a boom; and 9/11 showed that the United States was vulnerable.

Wallerstein believes that George Bush’s Presidency marks a break with the US ruling class’s previous mode of handling decline. He says Bush “did not go to war on Iraq even for oil” but rather to intimidate states that want nuclear weapons and European rivals.

Wallerstein says: “Europe will construct itself. It will be very difficult, but they will construct themselves and they will construct an army. Maybe not all of Europe, but the core. The United States is really worried about it, and that army will sooner or later link up with the Russian army.”

He thinks an Asian rival will emerge: “China, a reunited Korea, and Japan will begin to move together politically and economically.”

His conclusion is that “The United States has lost legitimacy, and that is why you cannot call it hegemonic anymore.” Instead the world situation is “chaotic” and likely to remain so for “the next twenty or thirty years”.

By contrast, the main essays in the Socialist Register 2005 explain the inadequacies of the “US decline” arguments and set out the basis for an alternative theory of imperialism. The key essay is by Leo Panitch and Sam Gindin.

Panitch and Gindin argue that a “new type of imperial order” emerged after 1945, one “very different from the one that had been characterised by the ties between the imperial states and their colonies in the pre-World War I era.”

This new order successfully overcame the fragmentation of capitalist states into rival empires, which had led to two world wars. This unique “informal empire” was characterised by “the US state’s economic penetration of, and close institutional linkages with, the other advanced capitalist states.”

The advanced capitalist states became more integrated and interpenetrated, largely because of the foreign direct investment and trade by US multinational corporations in Europe and Asia.

So even though economic competition among the advanced capitalist states continued “any revival of inter-imperial rivalry was foreclosed”. For example US investment in Germany affected the nature of German capital, both directly (GM, Ford, IBM) and also via suppliers, banks, and customers. “This was reinforced by German firms’ consequent need to establish a countervailing presence in the US, all of which tended to create cross-border networks of finance and integrated production.”

Thus the unity and cooperation of the big powers was more than simply a result of the Cold War.

Although the US did suffer set backs in the 1960s and 1970s, far from mechanically leading to decline, this period saw a resurgence of US finance capitalism.

The ending of convertibility of the dollar by the Nixon administration in 1971 “restored the American state’s economic autonomy in the face of a threatened rush to gold” and the devaluation of the dollar corrected the US balance of trade deficit, at least temporarily.

Panitch and Gindin argue that the US’s ability to re-finance its debt is not a sign of weakness but evidence of its “great structural power in financial relations”.

The liberalisation of finance enormously strengthened Wall Street through the 1970s. In 1979 the “Volcker shock” — the American state’s self-imposed structural adjustment programme — demonstrated the power of US finance capital to its own working class and to the rest of the world.

US production continues to account for around a quarter of total world GDP into the twenty-first century. Far from catching the US, its “rivals” Germany and Japan stagnated by the 1990s and it was the US economy that was resurgent.

The US state has also reforged its political ties with other big powers. The G8 became a forum to control macroeconomic problems such as exchange rate adjustments and to discuss wider political issues. The Bank for International Settlements re-emerged as a major international coordinating agency. The IMF shifted from dealing with balance of payments problems to imposing structural adjustment on third world countries. The World Bank supported this and also focused on capitalist state-building — what it called “effective states”.

The idea of Europe and Asia as immediate rivals to US hegemony is therefore “fanciful”.

The evolution of the European Union was encouraged from the beginning by the American state and “its recent development through economic and monetary union, the launching of the Euro and the European Central Bank, has never been opposed by American capital within Europe, or by the American state”.

The steps towards an independent European military posture have been halting and were put in perspective by US-led NATO action over Kosova. Given the costs involved (in the context of slow growth) Europe is likely to remain dependent on US military technology for years to come.

Nor is there any evidence that the Euro is about to replace the U$ dollar as the dominant world currency. As Panitch and Gindin put it: “As of 2002, 65% of central bank foreign exchange reserves were in dollars, as compared with only 15% in Euros; the dollar was used in over 90% of transactions in foreign exchange trading, as compared with under 38% in which the Euro was used….”

Nor do European governments seem to have the will to make the Euro a challenger to the dollar. And given the interdependence between the two blocs, a dollar crisis would not be exclusively American, but a crisis of the system as a whole.

Neither do its “rivals” in Asia pose a greater threat. Japan remains dependent on American markets and on the security of its investments within the US. Its central bank buys dollars to prevent the appreciation of the Yen.

China may emerge eventually as a pole of inter-imperial power, but it is very far from reaching such a status. The Chinese economy is far smaller than the US and its substantial land army remains far behind US military technology. China’s economic growth has aggravated internal social contradictions, along fault lines of class and region — which may lead to huge unrest in the coming period. Chinese exports to the US make it hugely dependent on the US market. As Zhao explains, US foreign investment in China suggests that China is a growing regional power being integrated into the US informal empire rather than a rival.

This framework leads to a more sober evaluation of the war on Iraq. Panitch and Gindin argue that: “These tensions [between the US and others] pertain very little to economic ‘rivalries’… rather more to a preference on the part of these states themselves… for the use of international financial institutions, the WTO and the UN to try to fashion the ‘effective states’ around the world that global capitalism needs. But the bourgeoisies of the other capitalist states are even less inclined to challenge American hegemony than they were in the 1970s.”

The US Treasury and Federal Reserve worked closely with their counterparts in the other core capitalist states during the war on Iraq, whatever their governments’ disagreements over that war. And subsequent G8 summits have managed to paper over the disagreements, at least for now.

Overall, the account given by Panitch and Gindin is a far more adequate explanation of the nature of imperialism today than Wallerstein’s apocalyptic fantasies.

Comments

Submitted by PaulHampton on Sun, 04/11/2007 - 10:31

Arthur,
I see you haven't lost your habit of misrepresenting other people's arguments, ignoring what they actually wrote in another context and then going off about your latest pet hobby horse.

Actually I was not writing about the state of the US economy at all, but about the argument that the US was in economic decline - the main argument used by the kitsch left to "explain" its drive to war. I think its possible to accept the argument about the bubble - and Robert Brenner wrote about it long before you did - without swallowing the rest of the leftwing "common sense" on imperialism.
Paul

Submitted by PaulHampton on Mon, 05/11/2007 - 20:58

Arthur,
The fact that you can't (won't) make the distinction between the relative position of the US economy over the past 50 years (which I wrote about) and the current instability of the US economy (which I didn't write about), only proves once more that debating with you is utterly pointless.

I guess your own blog is not getting much traffic, so you've come back to spoil ours. Please go back to the obscurity from which you came.

Paul

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