The sources and future of U.S. global power

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The goals of U.S. power.

With the fall of Communism in Russia in 1991, the USA found itself an unrivaled global power. Two factions in the U.S. governing establishment—the deep state, the establishment, the power elite, call them what you will—decided to keep it that way.

They set policy all through the Clinton, G.W. Bush, Trump and Obama administrations, and they continue to set policy today.

Neoconservatives sought full spectrum military dominance for the United States in every region of the world. Aside from the love of power for its own sake, they thought this would forever secure the United States from any military threat.

Neoliberals sought to give U.S. banks and global corporations access to every region of the world as a source of customers, raw materials and cheap labor. 

This meant suppression of socialist and nationalist regimes that opposed foreign domination of their economies, and, above all, any regime that refused to do business in U.S. dollars.

Other motives are loyalty to alliances with Saudi Arabia and Israel and avoidance of the humiliation of obvious defeat.

No doubt there were and are individuals in the U.S. power structure who sincerely believe in using U.S. power to promote democracy, human rights, a “rules-based international order” and the like.  But they are not the decision-makers.  They are only allowed to speak when their ideals happen to coincide with U.S. policy goals.

The sources of U.S. power.

The main source of U.S. power is the dominance of the U.S. dollar in conducting world trade.

This gives the U.S. government the power to borrow money to finance the world’s most expensive military establishment, and not worry about paying it back.

The U.S. Navy dominates the world’s sea lanes, and the U.S. Air Force dominates the air over poor countries such as Afghanistan, Iraq and Syria.  This allows bombing with impunity.

By using air power and flying killer drones, special operations forces and subsidized foreign fighters, the U.S. military can wage war without large-scale sacrifice of life.

The Central Intelligence Agency has a record of plotting the overthrow of left-wing governments and installing U.S.-friendly dictators.  Latin Americans have a joke: There will never be a military coup in the United States because there is no U.S. embassy in Washington, D.C.

Another source of U.S. power is the thousands of weapons in its nuclear arsenal, the largest in the world.  The only nation with a comparable arsenal is Russia.  This means that no other nation except Russia can rule out the possibility of a nuclear attack.

The power of the dollar also gives the U.S. government control of the financial bottlenecks of world commerce, and impose sanctions and embargoes on foreign countries without having to worry about retaliation.

Much of the world’s commerce flows through the New York money center banks.  This gives New York banks the authority to impound the funds of nations such as Iran and Venezuela.  It also gives federal judges in New York jurisdiction over such things as Argentina’s settlement with his creditors or Ecuador’s fine of Chevron for environmental violations.

The SWIFT system—Society for Worldwide Interbank Financial Telecommunication, based in Brussels—is a messaging system used by banks to transfer money and communicate information.  Being cut off from the SWIFT system means being cut off from the bulk of the world financial system, and SWIFT enforces U.S. sanctions.

The World Bank and International Monetary Fund are dominated by Americans.  They have a record of insisting that debtor countries impose “austerity”—higher taxes, fewer government services, higher prices and lower wages.  The debtor countries have to sell national assets and open up to U.S. and other foreign investors.

The 2014 coup in Ukraine came after the incumbent President decided to take a Russian loan instead of an IMF loan.  The new government took the unpopular IMF loan.

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The threat to U.S. power.

The greatest threat to U.S. power is neither Islamic terrorism, nor Russian subversion, nor China’s growing industrial power. 

It is the replacement of the U.S. dollar as the medium of exchange for doing world business.  Without dollar supremacy, all other sources of U.S. power would collapse.

Even before World War Two, the U.S. was the world’s greatest industrial power.  After the war, it was the only industrial power left standing.  The U.S. was the world’s leading creditor nation.  This gave the U.S. the power to make the dollar the medium of exchange for world commerce.

Today the U.S. is being overtaken—some would say left behind—by China.  It is the world’s leading debtor nation.  Our industrial base is being hollowed out.  But the financial structure put in place back then remains—for now.

When I was a schoolboy in the 1940s and early 1950s, I was taught that the U.S. had never lost a war.  Nowadays our military is unable to win wars, if by winning you mean forcing the enemy to surrender and submit.  But neither can it be defeated. 

So long as the U.S. is a financial superpower, it can keep its bases in Afghanistan, Iraq, Syria and other countries indefinitely and keep these countries forever weak and chaotic.

The main threat to U.S. power is the rise of China.  The Chinese leaders, unlike U.S. leaders, made the choices to subordinate financial interests to industrial interests, and to subordinate private enterprise to the government. 

Chinese leaders require foreign investors to build facilities in China, to transfer technology and know-how and to give lip service to Chinese foreign policy.  Foreign investment strengthens China. 

U.S. leaders made no such demands.  Most foreign investment in the U.S. is purchases of existing companies.  Foreign investment, if anything, subtracts from U.S. power.

China is extending its power through the interior of Eurasia by building railroads and pipelines, and lending money to finance infrastructure to be built by Chinese companies.  This is the one region of the world where U.S. sea and air power cannot reach.

The power of China is the power to grant or deny foreigners access to their markets, or to financing.  U.S. leaders have chosen not to exercise this kind of power.  Instead they try to compel compliance by use and threat of economic, military and covert power.

It is in the interest of Britain, France and Germany to trade with Iran, for example, to trade with Iran.  The governments of these countries did not agree with the Trump administration’s cancellation of the nuclear agreement with Iran.  But because of U.S. financial power, they went along.

The U.S. has unwisely driven Russia and Iran into the arms of China.  These three countries are a new and strong anti-American alliance, which helps countries such as Venezuela against which the U.S. is also waging economic and covert war.

Each of them is a credible military challenger to the United States, not in terms of global power, but in terms of defending their borderlands and nearly waters.

In time, the Chinese alliance may be joined by U.S. vassals, such as Germany, who are being pressured against their interests to join in economic warfare against U.S. enemies.

But the decisive threat to U.S. power will come when the Chinese=led bloc finds a replacement for the U.S. dollar.  This is likely to come, as the saying goes, at first gradually, then suddenly.

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It would be better in the long run for we the American people if our government gave up the goals o world financial and military domination, if it apologized and maybe even paid reparations to the nations we have invaded, bombarded and subverted, and if it pursued out national self-interest within the framework of international law.

But there would be a lot of difficulty and pain to get to that point.  No American President, no matter how decisive and wise, can tame the Pentagon and the intelligence agencies without strong support from the American people.

So far as I can tell, most of the public has little interest in foreign affairs, and much of the Washington press corps are stronger war hawks than the military itself.

The warfare state employs millions.  These include the professional military and intelligence agencies, their suppliers and subcontractors and the U.S. armaments industry, which makes up a large fraction of U.S. exports.  Their incomes and careers, and also their self-esteem, would be threatened by change.

In the long run, this would be offset by the benefits of building up our peacetime industry and attending to domestic needs, but getting there would require a long-time commitment.  It won’t be accomplished in one or two presidential terms.

There also would be benefit to the American people of letting the exchange rate for the U.S. dollar fall.  The price of our exports would fall, relative to our imports, and we would gain an advantage in world trade.  In the short run, though, we’d lose the benefit of cheap imports.

But as difficult as a transition would be, it would be better than experiencing a sudden collapse of power and having the world turn against us.

LINKS

China and Russia Launch a ‘Global Resistance Economy’ by Alastair Crooke for the Strategic Culture Foundation.

America’s Neoliberal Financialization Policy vs. China’s Industrial Socialism by Michael Hudson.

 

 

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9 Responses to “The sources and future of U.S. global power”

  1. Fred (Au Natural) Says:

    There’s a problem with that. As much as you may dislike the US for its military policy, if we withdraw from the world stage, there will be no vacuum. Every inch we yield will be occupied by the Chinese or the Russians or whoever. It has always been this way in world affairs.

    The truth of it is that we have not really tried to remain the world’s superpower. Having outlasted the Soviet bear, we got fat and lazy. Everything has slowly shrunk over the years; manpower, the quantity of equipment, the percentage of the federal budget that goes to defense. We are no where near Cold War levels. We’ve been doing nothing but coasting for the last 30 years, building small numbers of expensive high tech weapon systems to try to balance out our actual shrinking deployable forces.

    I do believe an intelligent foreign policy would have made Russia more prosperous and prevented them from wanting a new czar. I don’t know if there’s anything we could have done to encourage China not to install a new Emperor. But it is what it is. Nation states do not have a morality. Apologies and reparations would change nothing.

    Russia lacks the economy and the population base to be a real threat outside eastern Europe. I expect Putin will continue to annex slices of other countries but will probably stop when he runs out of ethnic Russian enclaves to go after.

    Keeping China from becoming the defacto owner of all Asia will be the challenge of this century. Fortunately, its aggressive salami slicing strategy have made its neighbors very nervous. Hopefully an alliance of India, Japan, the US, S.Korea, Australia, Taiwan and smaller states in the region can maintain stability. (Rather like NATO in Europe.) The alternative will be for many of them to be subdued individually.

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    • philebersole Says:

      We disagree on a fundamental level. The priority us Americans should be to put our own house in order rather than trying to determine the course of other nations. Trying to dominate the world will result in other nations joining together to protect themselves from our government. Better to strive for a balance of power, in which no one nation dominates, the great powers agree to coexist and all nations work together to meet our common threats—pandemics, climate catastrophes, overpopulation and overconsumption.

      Liked by 2 people

      • Fred (Au Natural) Says:

        We don’t need to dominate the wrld but we do need to be strong enough to discourage others from dominating us. China is not interested in a balance of power. Their Emperor feels that it is time to China to dominate the world economically and eventually militarily and we are the only thing in the way.

        They also need to keep economic growth surging for another couple of decades or internal issues may overwhelm them.

        The Uighers and Tibetens are the Chinese version of Germany’s Jews. I see zero difference between what China is doing in the South China Sea, Russia is doing in the Ukraine and Hitler did in the Sudatenland. China is indeed looking to create their own Greater East Asia Co-Prosperity Sphere.

        Russia is by far the lesser of the two threats because of a weak economy and a low population.

        OTOH, China has developed levels of thought control never before possible. Our open society make it easy for them to steal our technology. Their closed society makes it easy for them to stifle dissent. In terms of dollar parity, one Chnese dollar spent on the military gets two to three times the actual value of an American dollar.

        Putin is walking a tightrope. He has his own dream of salvation for the ethnic Russian people. The only thing that gives him a seat at the table with the big boys is the legacy of nuclear weapons from the cold war. Otherwise their are a half dozen countries that have him outclassed economically. NATO and China both have him matched or beat in conventional military, depending on the scenario. I would like to not back Putin into a corner but letting him slice off pieces of other countries at will is also not a good option.

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  2. philebersole Says:

    During the first two-thirds of the 20th century, the United States was the world’s leading manufacturing nation and the world’s leading creditor nation. The U.S. was a leader in technology and engineering, and American working people had the higher material standard of living than workers in any other major country.

    Following World War Two, U.S. manufacturing, industrial and financial strength and the appeal of the American way of life put the U.S. in a position to dominate the world’s financial system and to finance the world’s most extensive and expensive military.

    American manufacturing is now in decline, the U.S. is the world’s leading creditor nation, China and other nations are overtaking the U.S. in science and technology, and American workers have a lower material standard of living than workers in many other rich nations.

    The financial and military structures that were put in past in late 1940s remain, but the foundation that supports them is no longer there.

    I think the structure will crack under pressure—another financial crash, climate-related emergencies, more pandemics or something I can’t foresee.

    There are a lot of things wrong with China. There are a lot of things wrong with Russia. We Americans do not have the power or responsibility to fix Russia or China. We do have the power and responsibility to fix what’s wrong with the USA.

    The United States does need a military force for self-defense and for defending allies to which the U.S. is bound by treaty.

    A strong defense force will be vital to survival when U.S. power collapses and nations that have submitted to U.S. financial and military power turn on us.

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  3. whungerford Says:

    Is the US currently supporting a high dollar exchange rate somehow? How are they doing that?

    Like

    • philebersole Says:

      Because the U.S. dollar is the medium for international trade, there is a demand for dollars that doesn’t have to be supported by a positive balance of trade.

      Economics 101 teaches that if a nation buys more than it sells, then foreigners have an oversupply of its currency, and the value of the currency falls. The fall in the value of its currency makes its goods cheaper and (all other things being equal) brings trade into balance.

      The fact that European nations were locked into a common currency meant that nations such as Greece could not bring their trade into balance through this mechanism.

      The U.S. is in the fortunate position of not having to do this—as long as the rest of the world finds it more convenient to do business in dollars rather than switch to a new currency.

      The main reason for the tight U.S. alliance with Saudi Arabia is that the Saudis long ago agreed to price their oil in dollars, use the dollars to buy advanced weapons from U.S.-based corporations and deposit the rest in U.S. banks.

      This is beneficial to the U.S. consumer because we can buy foreign merchandise for less than if our currency was allowed to fluctuate.

      Like

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