Chalmers Johnson - Blowback, Second Edition - The Costs and Consequences of American Empire

The world economy needs leadership to re-create something comparable to the Bretton Woods agreement of 1944 to 1971, with fixed exchange rates and controls over the movement of capital. Instead of attempting to homogenize the global economy, we should be championing results-oriented trade of mutual benefit to nations that do not have identical economic systems. Foreign countries with entirely different legal, economic, and political systems do not need the International Monetary Fund to forcibly impose on them what is a dubious form of capitalism even in the United States. The IMF has already shelled out about $200 billion in a futile attempt to repair the damage that the United States’ globalization schemes caused, even as its own meddling in these sick economies has often ended up making them sicker.

The need to raise incomes in the developing world in order to maintain adequate levels of global demand must also be recognized. Since this almost surely cannot (and probably should not) be done by attempting to institutionalize some version of labor rights on a global scale, the United States should establish minimum-wage levels for the manufacture of goods that are to be exported to our market. As an illustration of the need, the athletic shoe manufacturer Nike proudly announced that effective April 1, 1999, it was increasing entry-level cash wages for its workers in Indonesia by 6 percent. 10Unfortunately, Indonesia had an 80 percent inflation rate for the years 1998 and 1999, and the World Bank projected an inflation rate of 20 percent for the year 2000.

In February 1999, at the twenty-ninth annual World Economic Forum in Davos, Switzerland, U.S. Secretary of the Treasury Robert Rubin defended finance capitalism while acknowledging that the world was in “the most serious financial crisis of the last fifty years.” 11Yet he stonewalled pleas for change from world leaders. Later that month, at a meeting of the finance ministers of the G-7 group of advanced industrial democracies in Bonn, Germany, the United States blocked all proposals for reform: it would not countenance capital controls, a “super IMF” that would act as a central bank for all nations, or anything like minimum-wage levels in poor countries. The most it would condone was cuts in interest rates by the central banks of various individual nations in order to stimulate economic activity. The United States instead advocated yet more deregulation of trade and investment.

Meanwhile, resentment is growing over American exploitation of the global economic crisis. Big American companies are buying up factories and businesses in East Asia and elsewhere at ludicrously low prices. Procter & Gamble, for instance, has picked up several state-of-the-art Korean factories for next to nothing. 12Morgan Stanley, Bankers Trust, Salomon Brothers, and CS First Boston expect returns of around 20 percent on their purchases of real estate loans in Tokyo. 13In Thailand, any number of American investment companies have been buying up service, steel, and energy companies at concessionary prices. In June 1998, a Washington-based merchant bank, the Carlyle Group, sent a group of its executives, led by its adviser, former president George Bush, to Bangkok to “evaluate opportunities.” It plans to invest $500 million in Thailand. Asia Properties, a San Diego firm founded in April 1998, was created specifically “to take advantage of the fire-sale real estate prices along Bangkok’s main thoroughfares.” According to its vice president, “Asia is going through the largest transference of assets in the history of the world.” 14Many East Asians call this “vulture capitalism” and suspect that it was the true purpose of the economic advice given to them in the first place.

The Americans buying these foreclosed properties in East Asia may believe they are merely responding to the signals of normal market forces, but they would be fools to believe that the sellers agree with them. Countries like Thailand and Indonesia have long been on the receiving end of U.S. pressures to deregulate and open their countries to international investors. As a result of doing so they now find themselves destitute, selling off what they built with their own labor in the years since the Vietnam War ended. It is only a matter of time until the small nations of East Asia get tired of this American bullying and find a suitable leader to create an anti-American coalition.

In the meantime, the hollowing out of American industry continues unabated. In 1998, the primary case was steel, but the machine tools, chemical, semiconductor, and apparel industries were in the same boat. During 1998, cheap Japanese steel exports to the United States surged some sixteen times above their 1997 level. Even the most efficient American steelmakers, like Nucor of Charlotte, North Carolina, were unable to compete with Japanese cut-rate prices. In the first decade after the Cold War, the U.S. steel industry closed down thirty million tons of productive capacity. Over the past three decades, it has cut its workforce by 400,000 people. Today, it employs only 163,000 workers but pays each of them an average salary of $65,000 a year. As a result of this restructuring and major investments in the most advanced technology, the American steel industry is today competitive with anyone in the world, yet it continues to be overwhelmed by global overcapacity. 15

Perhaps the American policies that are burying American steel made strategic sense during the period from 1950 to 1970, when they also brought real competition to such complacent industries as automobile manufacturing. By December 1998, however, when the Japanese government decided to reinforce protection of its hopelessly inefficient farmers by imposing tariffs of 1,000 percent on imported California rice, American toleration had become purely self-destructive. In 1997, the United States supplied almost half of the 640,000 tons of rice Japan imported, virtually all of it from California’s 2,500 rice farms. The new tariff was the Japanese government’s way of getting around a commitment it made in 1993, in the so-called Uruguay Round of trade negotiations, to import increasing amounts of rice. There is no question that American rice farming is more efficient than Japan’s and that American farmers have matched the varieties of rice favored by Japanese consumers. But the Japanese government makes its consumers pay ten times the world’s price for their main food staple in order to protect the gerrymandered rural voting base of the Liberal Democratic Party. 16Japan can get away with such policies because the United States wants to keep it as a secure staging area for the projection of military power in Asia.

What is to be done? Were awareness of an impending crisis of empire to rise among American citizens and their leaders, then it would be fairly obvious what first steps at least should be taken: adjust to and support the emergence of China on the global stage; establish diplomatic relations with North Korea and withdraw ground forces from the Korean peninsula; pay the United States’ dues to the United Nations; support global economic diversity rather than globalization; extricate ourselves from our trade-for-military-bases deals with rich East Asian countries, even if they do not want to end them; reemphasize the “defense” in the Department of Defense and make its name fit its mission; unilaterally reduce our stockpile of nuclear warheads to a deterrent level and declare a no-first-use policy; sign and ratify the treaty banning land mines; and sign and ratify the treaty establishing an international criminal court.

More generally, the United States should seek to lead through diplomacy and example rather than through military force and economic bullying. Such an agenda is neither unrealistic nor revolutionary. It is appropriate for a post–Cold War world and for a United States that puts the welfare of its citizens ahead of the pretensions of its imperialists. Many U.S. leaders seem to have convinced themselves that if so much as one overseas American base is closed or one small country is allowed to manage its own economy, the world will collapse. They might better ponder the creativity and growth that would be unleashed if only the United States would relax its suffocating embrace. They should also understand that their efforts to maintain imperial hegemony inevitably generate multiple forms of blowback. Although it is impossible to say when this game will end, there is little doubt about how it will end.