The US uses finance and debt to maintain its empire, working through its minions the IMF and World Bank to immiserate developing countries so they can be plundered. What is evangelized as U.S.-style democracy is really a financial oligarchy privatizing basic infrastructure, health and education.
Instead of increasing the ability of borrowers to pay off their debts US economic imperialism has made developing countries more dependent on their creditors, worsened their terms of trade by promoting raw materials exports and food dependency, and forestalled needed social modernization such as land reform and progressive taxation. Washington is guided by the economic imperialism of American financial interests and it becomes belligerent in an attempt to make other countries just as equally paralyzed by making these countries pay tribute to the U.S. by means of financial engineering, by means of debt service, by means of selling their mineral resources, their public utilities, their land, their roads all to foreign investors. America’s international diplomacy aims to dictate financial, trade and military policies that will lock other countries into dollar debt and trade dependency by preventing them from developing alternatives.
Going further, the reason that the “too big to fail” banks and their criminal CEO’s were bailed out in the aftermath of the 2008 Wall Street Crash is that they are deemed to be essential to the US’s financialized foreign policies.
While US capital markets are perceived as the most open and liquid and the US has long been a bastion of economic stability, the “exorbitant privilege” enjoyed by America is backed up by the Pentagon. Globalization fan-boy, Thomas Friedman wasn’t wrong when he wrote–“The hidden hand of the market will never work without a hidden fist. McDonald’s cannot flourish without McDonnell Douglas, the designer of the U.S. Air Force F-15. And the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the U.S. Army, Air Force, Navy and Marine Corps.” US financial imperialism threatens to destabilize countries and perhaps bomb them until they agree to adopt neoliberal policies and privatize their public domain. Military coups, like the one in Ukraine in 2014 are described as democratic if they are sponsored by the United States in the hope of promoting financial imperialism.
The “exorbitant privilege” of maintaining the worlds reserve currency allows the US to issue paper for raw materials, resources and finished products, flooding the world with dollars to absorbing foreign countries material output, increasing US domestic consumption levels and appropriation of foreign assets. Since dollar convertibility into gold ended in August 1971, dollarization of the world’s trade and investment has created a need for other countries to hold most of their new international monetary reserves in U.S. Treasury securities and bank deposits. The US also spends an enormous amount of money on military spending but since the it went off gold in 1971 America now had a cost-free means. Meanwhile, that huge foreign debt that deficit scolds are always warning about will be paid back with more paper.
As the author of Super Imperialism, Michael Hudson puts it–“Suppose you were to go to the grocery store and just pay in IOUs. You could just keep spending if you could convince the owner, the grocer to use the IOU to pay the farmers and the dairy people for their products. What if everybody else used these IOUs as money? You would continue to get your groceries for free.”
This “Washington Consensus” would not be so problematic if America used the advantages of its reserve currency to invest in productive capitalism that supported rising living standards and environmental balance. Instead, the dollars in which foreign central banks hold their savings have financed an imperial military and financial superstructure that imposes dependency rather than self-sufficiency on its client countries.
Indeed, the tendency of US economic imperialism is to retard world development, loading down Third World countries with dollar-denominated debt while requiring America’s own dollar debts as the medium to settle payment imbalances in every region. At the most basic level this involves extending its own financialized economy to the entire world. This distorts the economies of other countries because the aim of finance capital is not to hire labor to make profits from tangible capital investments raising productivity and living standards. Rather, it is to extract economic rent from land, natural resources and monopolies. That is why the IMF and World Bank, US economic actors, sponsor privatization of rent-yielding assets away from the public domain throughout the world.
This is what led China, Russia, Iran and other countries to say that they are done giving America a free ride. They claim that these dollarized IOUs are being used to surround them of military bases, to overthrow them and to threaten to bomb them if we don’t do what American diplomats tell them to do and it’s hard to argue contrary.
This paradigm is the key to understanding recent US foreign policy machinations from the proxy war in Ukraine against Russia, to the never ending economic sanctions against Iran, Cuba, Venezeala, etc, to the continuation of the Trump tariffs against China, to Nancy Pelosi’s provocative junket to Taiwan.
What’s darkly amusing is that US provocations are achieving just the opposite of America’s aim of preventing China, Russia and their allies from acting independently of U.S. control over their trade and investment policy. What’s depressing is to see so much arrogance and evil combined with so much incompetence from our leaders.