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What is liberal empire?

July 9, 2008
NORAD Air Command

[this text is unfinished – more soon…]

Like Britain before it, the United States has assembled an empire on which “the sun never sets.” And even more than Britain’s before it, the U.S. empire is a strikingly liberal one. This is the driving paradox of the contemporary period.

In his book Nemesis: The Last Days of the American Republic, the great critic of empire Chalmers Johnson makes these observations:

“Most empires, ancient or modern, have not felt the need to establish a legal basis for their activities in sovereign countries. Might makes right, and imperialists normally do as they please…. But in this area, American administrations have proved legalistic sticklers, crossing the t’s and dotting the i’s of the largely one-sided agreements they make to garrison the planet.”

The U.S. spends more on “defense” than all other nations of the world combined. It admits to maintaining upwards of 750 overseas bases, with critical counts that vary according to how a base is defined and how many unavowed locations are considered. Its hi-tech electronics provide commanders and even ordinary troops with “the kind of Olympian perspective that Homer had given his Gods,” as General Tommy Franks has explained with all due modesty. Its Status of Forces Agreements (SOFAs) ensure conditions of extraterritoriality with respect to local regulations and criminal codes, which is why the United States has refused to adhere to the treaties constituting the World Court. Since the invasion of Iraq in March of 2003 for the oil, on the basis of trumped-up “evidence” that recalls the pretexts for the first Gulf War (or earlier, the so-called Tonkin Gulf Incident off the shores of Vietnam), it’s abundantly clear that U.S. power serves a sovereign imperialist project of the most classic stripe, comparable to European or Japanese incursions around the world in the late 19th century. Why, then, this insistence on the letter of the law? How does U.S. imperialism differ from the others that have gone before? What is liberal empire?

These questions will appear nonsensical, and above all hypocritical, to an Iraqi or Afghani whose sister, father, brother or daughter has been killed by an American bomb, raped by a G.I. or thrown into the Bagram, Abu Ghraib or Guantanamo prisons on grounds that no one even bothers to specify, given the Bush administration’s brutal refutation of the elementary right of habeas corpus (the legal obligation to produce valid charges against any and all detainees). The hypocrisy of liberal empire is extreme. Yet the naked arrogance of power seems to fade into the background in a prosperous and peaceful country like the Republic of South Korea, home to one of the largest overseas deployments of American troops on bases maintained permanently across the country since 1950-53 war against its Communist doppelganger to the North. Under U.S. protection and tutelage, more-or-less dictatorial regimes led South Korea to industrial modernity and consumer abundance until 1987, when free elections brought entry to the democratic community of nations. For over sixty years, the American version of liberal empire has been the cradle of middle-class prosperity in the Republic of Korea and over much of the surface of the earth. A condition that could not be attained without what many perceive as a more-or-less legitimate use of force. To the point where anyone who would argue today that this imperial condition should be analyzed, denounced and overcome, must provide not just a catalogue of isolated or even systematic military horrors, but also a deep and clearly formulated understanding of the how the American economic, political and security system actually works across the world, and what unnecessary abuses and deadly contradictions flow directly from its operating principles. Only if such an understanding were broadly internalized could even a significant minority of the world’s middle classes participate, alongside the exploited and the oppressed, in an attempt to dismantle the current military and trading regimes and allow the sun to set, as gracefully as possible, on a complex and interlocking set of protocols and procedures that have definitively outlived their democratic purpose. Yet intellectual arguments are not enough, however clear and penetrating they may be. We must also touch and feel the poignancy of failed chances and forgotten dreams beneath the banal and anaesthetizing surface of consumer prosperity: and we must glimpse the possibility of a better life to come, after the imperial sunset.

Origins

The modernized societies that we move through every day took on their characteristic forms in the period of the Second World War and its aftermath, extending as far as the 1980s. At the root of this globe-shattering conflict was a long-term geopolitical struggle for resources and markets, waged through shifting alliances and rivalries between three maritime powers, the U.S.A., Great Britain and Japan, and two land-bound continental blocs, the U.S.S.R. and Nazi Germany. As the major victor in 1945, the U.S. set about reorganizing the world economy to minimize the chances of any new Great Depression, widely understood as the fundamental cause of the war. Seeking to ensure an adequately large zone of monetary circulation, and consequently, a wide range of well-functioning national markets that could absorb its vast industrial production, American economic strategists conceived a free trade regime covering all of Western Europe as well as the sphere of former Japanese hegemony, in addition to Latin America which had been under its sway since the 19th century. The economic collapse and imperial rollback of its major ally, Britain, along with the absorption of the scientific and technological prowess of its chief adversary, Germany, set the stage for the foundation of a new type of empire which would no longer rely on colonies and exclusive currency blocs or trading zones (which the U.S. itself had cultivated to a minor degree around the turn of the century). Instead, it would establish open markets with freely convertible currencies, where the premier industrial and financial power could easily dominate the field and set the terms of exchange. The Bretton Woods conference of 1944 institutionalized this preeminent role from the very outset, by making the gold-backed American dollar into the benchmark value of the international monetary system. The preference for open markets regulated by one stable currency, already pioneered under the British-managed gold standard of the 19th century, would also take on an ideological importance through its identification with political democracy, in opposition to the Soviet system of centrally managed industrial production and direct political control over populations. In this way the installation of the liberal free-trade regime became inseparable from the simmering quarrels and explosive conflicts of the so-called Cold War.

In the West, the massive export of American industrial machinery for European reconstruction under the aegis of the Marshall Plan is commonly misrepresented as a simple transfer of money, and remembered as an exceptional act of generosity. The Americans were liberators and benefactors — a role that still looms large in their own national imaginary. But the reality of postwar generosity should not hide the fact that the offer of publicly subsidised credits to Western Europe was a way for the American state to keep the wartime economy rolling domestically: the dollars that were given to Europe never actually left the United States, but instead were used by the recipients to purchase key infrastructure elements from American producers. The reconstruction efforts thus established the material conditions under which Germany, in particular, could function as a new productive platform for American industrialists and financiers, at the center of a vast European market operating under liberal rules. Nor should one ignore that U.S. military support for the Greek colonels against the popular Communists, followed shortly thereafter by the formation of North Atlantic Treaty Organization and the outbreak of the Cold War, represented a pursuit of America’s postwar industrial boom under the new and deadly guise of subsidised arms exports to the European allies, always accompanied by military supervision, joint training exercises and the installation of permanent bases on European soil. The alliance of democracy and free trade, in opposition to the Soviet Union, gave rise to a militarized economy in which state-sponsored arms production played a key economic and political role. NATO was the way in which the circulation of dollars and goods through the European theater would be secured. And the formula was extended to Japan and Asia, with even more highly militarized characteristics, through the fortuitous opportunity offered by the Korean War.

How, one might wonder, did the Japanese yen recover from economic devastation, to ultimately form, along with the German deutschmark, the third major pole in the currency system established in 1944 at Bretton Woods? The answer lay in the American export of finances and capital goods to Japan, in order to launch the tremendous military production required by the American-led battle against Communism in Korea, which claimed upwards of a million lives. The future Japanese steel, shipbuilding and automotive industries, which would dominate the Asian regional economy all the way through the 1980s, received their jump-start from the destructive furies of the Korean War, just as South Korea would later establish its own industrial base during the boom years of the Vietnam War. Thus the productive network of Japan and the East Asian Tigers grew in parallel to the European Economic Community. The “military-industrial complex,” which the outgoing American President Dwight D. Eisenhower identified as a danger to the American democracy in 1961, had been at the economic and geopolitical foundations of the democracies and dictatorships of both Western Europe and East Asia, all throughout the 1950s. And the psycho-social consequences of those militarized foundations have been enormous.

The postwar free-trade system, with its theoretically democratic mode of regulation and legitimation by civil society, was predicated in fact on the crucial economic contribution of a state-controlled core of military production which could only be justified and maintained when it was periodically used in battle. Or to put it another way, only the real threat of attack by an external or internal enemy could convince national populations to go on making sacrifices to the coercive regime that upheld the nominally democratic order. Outbreaks of violence became the social glue of a permanent war economy, which was militarized even in peacetime, far beyond the specific sectors of armaments production. The high frequency of dictatorships among the U.S. client-states in Africa, Asia and Latin America, where the insurgencies and wars were actually fought was thus an inherent necessity: only wartime discipline could reorganize the existing economic order and set the country on the path to American-style modernization, which itself had found its culminating form in the total mobilization of WWII. The complementary structure of external threat and internal discipline was most perfectly exemplified at the national level by the unresolved Korean conflict, maintained throughout the Cold War and even to this day. But it was also visible at the continental scale over a period of some forty years, in the relations between Western and Eastern Europe; and above all at the world scale, in the nuclear standoff of the two superpowers, which America used as the motor for the research and development of its new hi-tech industries (computers, jet transport, nuclear power, communications, satellite technology, etc). Here, in an industrial system that could only supply the goods of free trade at the price of military regimentation and the constant threat of planetary war, lies the historical core of the immense contradiction that I am calling liberal empire.

Turning point

How then did we move from the clearly demarcated battle-lines of the military-industrial order to the complex exchanges and endless corporate restructuring of a financialized world-economy, oscillating at the light-speed of electronic communications? And how do the psycho-social underpinnings of interstate rivalry continue to inform a transnational economic order which appears on the contrary to be based on the infinitely fickle choices of global individualism? To answer these questions we have to look at the geopolitical consequences of what seemed, at the time, to mark the end of U.S. hegemony: the unraveling of the world monetary system in the early 1970s, accompanied by domestic social turmoil, the first OPEC oil shock and the defeat of the American military in Vietnam.

To begin it must be recalled that the forty-four nations whose representatives gathered in 1944 at the Mount Washington Hotel in the otherwise insignificant American town of Bretton Woods accomplished something truly unprecedented: the consensual negotiation of an international monetary order. What this entailed was an all-inclusive system of currency pegs fixing the exchange rate of each country’s money with respect to the U.S. dollar, which became an international reserve currency which was “good as gold,” since it could be exchanged for gold bullion by all central banks (at the fixed price of $35 per ounce). The national currencies could, however, fluctuate within a narrow band of 1% on either side of their target or “par” value, to adjust for variations in their balance of payments with the outside world; and the need for any larger fluctuation could be negotiated with the newly created International Monetary Fund (IMF), which would supply dollar credits allowing the country to buy up its own currency and thereby prop up its price on the world market, thus bringing its money back to the agreed-upon par value. The aim of all this was to avoid the closed trading spheres and currency blocs of the 1930s, and foster a wide-open yet secure monetary system under which every country would find a market for its goods at stable prices.

The U.S. was doubly advantaged under this arrangement for it controlled both the supply of the international reserve currency and the IMF itself, according to quotas which demanded the largest contributions, but also accorded the most votes, to the countries with the highest gross national product — thus giving the U.S. a 25% stake and a unilateral veto power over any decision unfavorable to its interests. In addition the IMF and also what would become the World Bank were both located in Washington, and primarily staffed by American citizens. Nonetheless, the benefits to the elites and middle classes of the entire non-Communist world were enormous: participation in a stable world market opened up tremendous opportunities for the development of resource-extraction operations and local industries. Partnership with America was therefore a chance to modernize the country and get the social elevator moving, through the creation of national education and university systems as well as educational and scientific exchanges with U.S. universities. What is more, America at the close of WWII not only possessed by far the most efficient and productive industrial system, which it had developed at the scale of its huge internal market since the late 19th century, but through its role as wartime supplier and lender to the European countries it had also accumulated some 65% of the world’s gold reserves; and with this backing it was able to distribute the industrial and military largesse described above, pouring dollars out into the world to provide the necessary liquidity for a universal free market and also to ensure that that there would always be buyers for its abundant goods. American hegemony was therefore not only military, far from it; and nor was it based only on the generosity of wartime liberators, the alluring sound of jazz and the popularity of Hollywood movies. Important material and political rewards were offered to whoever could help keep international Communism at bay. And of course, at WWII had so well shown, the help of the Marines or the Air Force in a pinch could be extremely useful to the local elites and middle classes…

In the course of the 1960s, three things happened to unbalance this seemingly perfect equilibrium. First, after the initial period of American investment had injected the latest capital goods and the most efficient business processes into their economies, both Japan and European Economic Community began to outproduce the U.S. in key sectors such as automobiles and electronic, putting an end to American industrial dominance. Second, rising demands from the American working classes, both in terms of wages and of welfare-state provisions, put a further crunch on the profitability of the great U.S. corporations. And third, the politically expedient refusal of presidents like Johnson to tax the national population in order to pay both for rising welfare expenditures and for the astronomical costs of foreign military adventures in places like Vietnam led to enormous balance-of-payments deficits. These could only be countered with an immoderate use of Treasury printing presses, flooding the world with increasingly dodgy U.S. dollars which faithful allies were supposed to merely hold in their central banks, and not exchange for gold, so as not to jeopardize the baseline value of the international reserve currency. But U.S. insolvency and aggression were not universally appreciated, not even by its European allies. No one will be surprised that critical leaders such as De Gaulle perferred instead to cash in the large stocks of dollars earned by French corporations doing business with the Americans in Vietnam, exacerbating the outflow of gold from Fort Knox and eventually helping to precipitate a crisis in the value of the U.S. currency. That crisis began in earnest during the same fateful year of 1968 that saw unheard-of levels of domestic unrest, labor struggles and agitation against the war. The upshot of this crisis was Nixon’s closure of the so-called “gold window” (or the possibility to convert U.S. dollars into gold) in 1971, and the formal abandonment of the entire Bretton Woods parity system in 1973, exacty when the first oil shock was unleashed by the Organization of Petroleum Exporting Countries (OPEC), leading the way for significant increases in raw materials prices from a broad range of Third World countries. Currencies now began to “float” against each other, with no consensual price-fixing system or rational anchor; and at the same time, inflation began to sap the very foundations of the American economy, just before defeat in Vietnam brought U.S. military prestige to an all-time low.

Nixon’s response to all this seemed to border on the absurd: at the time it was called “ping-pong diplomacy.” At stake was a new rapprochement with China as a counter to lost prestige in Southeast Asia, a diplomatic and economic ploy whose effects would only become clear long afterwards, in the late 1980s and early 1990s. What happened in the short run, after Nixon’s ejection from office, was merely further percolation of the crisis, coincident with a short reprieve for Third World countries, but also for the American working classes and the new alternative social movements, which had their brief hour in the fading sun under Carter. Indeed it undoubtedly seemed, at that point, that the sun was already setting on liberal empire. But a new oil shock in 1979, combined with a major hostage crisis in the new Islamic revolutionary state of Iran, led to Carter’s eclipse and the advent of Ronald Reagan, whose administration would change the rules of the game entirely, discovering a way to profit from the floating curency regime, and to relaunch American industry while at the same time landing a last decisive blow on the long-term Soviet adversary. Here was the turning point, the fulcrum on which world society would shift its bases. Reagan would in fact be the rising sun of a whole new formula of American empire.

Voodoo neoliberalism

(to be continued…

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