Hudson on Super Imperialism 2

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Asad Zaman
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from Asad Zaman and WEA Pedagogy Blog

This is the second post in a sequence explaining post WW2 USA strategies for global dominance. For the previous post, see: Hudson on Super Imperialism 1

U.S. Financial Strategies for Global Dominance 

Introduction: Michael Hudson, in his podcast and writings, provides a profound critique of the U.S.’s economic and financial strategies that have underpinned its global dominance. This blog post explores Hudson’s insights into the transition from surplus to deficit financing, the manipulation of European economies, and the economic warfare against Russia. Combining these topics reveals a comprehensive picture of how the U.S. has maintained its imperial power through financial maneuvers and strategic policies.

Post-WWII Economic Strategies: From Surplus to Deficit Financing

Post-WWII Economic Strategies: After World War II, the United States emerged as the world’s leading economic power, possessing a significant portion of the world’s gold reserves. From 1945 until 1950, the U.S. accumulated even more gold, holding over 70% of the global monetary gold supply. This period marked a time of economic strength and dominance for the U.S., but it also set the stage for future financial strategies.

The Korean War marked the beginning of a significant shift. Starting in 1951, the U.S. balance of payments moved into deficit, a trend that accelerated during the Vietnam War. Military spending abroad was the primary driver of this deficit. Hudson’s analysis for Arthur Anderson revealed that the entire U.S. balance of payments deficit from the 1950s through the 1970s was due to military expenditures, while the private sector remained balanced.

This outflow of dollars as a result of military spending meant that foreign central banks, particularly in countries like France and Germany, accumulated large reserves of U.S. dollars. These countries frequently exchanged their dollars for gold, leading to a steady decline in U.S. gold reserves.

Creation of the Treasury Bill Standard: When President Nixon closed the gold window in 1971, effectively ending the Bretton Woods system, many feared that U.S. imperialism would decline. However, Hudson quickly realized that this move actually enabled a new form of financial control. With the end of gold convertibility, the dollars held by foreign central banks could no longer be exchanged for gold. Instead, these central banks invested their dollars in U.S. Treasury securities.

This shift created what Hudson terms the “Treasury Bill Standard.” Foreign countries, now holding vast amounts of dollars, had little choice but to buy U.S. government bonds. This influx of investment financed the U.S. budget deficit, effectively allowing the U.S. to fund its military and economic activities abroad without the need for a gold-backed currency.

The outcome was a system where the U.S. could run perpetual trade and budget deficits, supported by the continuous recycling of dollars through foreign central banks. This new financial system cemented the U.S.’s global economic dominance, as it provided a seemingly endless supply of funds for military and economic expansion.

Financial Imperialism in Europe

U.S. vs. British Revival: Hudson describes how the U.S. systematically undermined British efforts to revive its economy post-WWII. Through financial manipulation and strategic policies, the U.S. aimed to absorb the British Empire into its own sphere of influence. The 1946 British loan, Lend-Lease agreements, and restrictions on devaluing the pound sterling until 1949 were key elements of this strategy.

By controlling the balance of payments and exchange rates, the U.S. ensured that Britain could not compete economically. The overvaluation of the pound made British goods more expensive on the global market, further weakening Britain’s economic position and reinforcing U.S. dominance.

Economic Warfare Against Russia

Russian Privatization: The collapse of the Soviet Union in 1991 presented an opportunity for the U.S. to expand its influence through economic means. Hudson explains that the U.S., through institutions like the IMF and World Bank, imposed neoliberal policies on Russia. These policies included shock therapy, which led to hyperinflation, the wiping out of savings, and the privatization of state assets.

The privatization process was disastrous for Russia. State-owned enterprises were sold off at a fraction of their value, often to foreign investors. This led to the deindustrialization of Russia and the collapse of its economy. Key industries, particularly those related to military production, were dismantled or repurposed for non-productive uses.

Economic Interests in Ukraine: Hudson also delves into the economic motivations behind the U.S.’s involvement in Ukraine. He argues that the U.S. has supported right-wing factions in Ukraine to destabilize the region and exert pressure on Russia. By backing neo-Nazi parties and promoting anti-Russian sentiment, the U.S. aims to weaken Russia’s influence and prevent economic integration between Russia and Europe.

The sanctions imposed on Russia following its actions in Ukraine were intended to cripple its economy. However, Hudson points out that these sanctions have often backfired, strengthening Russia’s self-sufficiency and pushing it to form closer economic ties with non-Western countries. This miscalculation highlights the complexities and unintended consequences of economic warfare.

Impact on the Global South and Future Prospects

Impact on Developing Nations: Hudson’s critique extends to the impact of U.S. financial strategies on developing nations. The policies of the IMF and World Bank have often trapped these countries in cycles of debt and dependency. Loans provided for development projects were typically tied to conditions that prioritized exports over self-sufficiency, ensuring that developing nations remained economically subordinate.

Case studies from Latin America, Africa, and Asia illustrate the devastating effects of these policies. Countries that attempted to implement agrarian reform or develop their industries were often met with economic sanctions or political intervention. This maintained a global economic order favorable to U.S. interests.

Future Prospects: Despite the challenges, Hudson suggests that there are ways for countries to escape the grip of U.S. financial imperialism. Forming regional alliances and developing alternative financial systems are key strategies. For example, countries in Eurasia and the Global South are increasingly trading in their own currencies, reducing their reliance on the U.S. dollar.

Hudson highlights the importance of countries learning from past mistakes and avoiding the pitfalls of neoliberal economic policies. By prioritizing self-sufficiency and equitable development, nations can build more resilient and independent economies.

Conclusion

Michael Hudson’s analysis reveals the intricate and often insidious ways in which the U.S. has maintained its global dominance through financial strategies and economic manipulation. From the transition to deficit financing to the undermining of European and Russian economies, the U.S. has employed a variety of tactics to sustain its imperial power. Understanding these strategies is crucial for those seeking to build a more equitable and just global economic system.

In the next blog post, we will explore Hudson’s insights into the impact of U.S. economic policies on the Global South and discuss potential pathways for these nations to achieve economic independence and sustainable development. Stay tuned for a detailed examination of how countries can break free from the cycle of debt and dependency imposed by global financial institutions.