Part XIII: And the Future…

And will the 21st century be the “Asian century” -advocates of this view, such as Kishore Mahbubani¹¹⁴, refer us back to earlier times when the great empires of the East dominated the world. We have already mentioned in Part I of this series that India and China were indeed among the world’s largest economies at various times during the 19th century (and clearly before that).

Or will the 21st century usher in the epoch of humanity?

The driving factors in the world economy, independent of the desires of America’s “military-industrial complex”, have been in the civil technology sphere¹¹⁵. But America has invested billions to eat up the enormous abundance unleashed by science and technology and hard work over some 50-odd years through an accumulation of the “means of destruction”. This covers the entire period from the Administration of Truman to Bush Sr., the containment strategy continuing with the entry of the neo-conservatives under Reagan in the 1980s. However, the situation had already begun to change before the collapse of the Soviet Union, as is evident from America’s search for new enemies as noted earlier -the fall of the Soviet Union consolidated this. Part of the problem was that the American economy was by now in the hands of the military-industrial complex, whose raison d’être, built up during the Cold War, depended on the existence of large enemies, preferably States. But, as we have seen, America’s profits were also in decline, even its home market threatened, and its economic omnipotence of times past now challenged, threatened and toppling.

As we have seen in the brief discussion on America’s balance of payments, that country has become more dependent upon trade. But this is a worldwide trend, and it is not just trade in merchandise (imports and exports) or services, but also investment flows. This has led to a degree of complexity that has probably not been seen before, in which branches of American transnational corporations (exploiting the abundant, and therefore cheap, human and material resources abroad) export goods to the United States and contribute to America’s growing deficit. There appears to be a dearth of quantitative information on this aspect of America’s external deficit, but it is surely significant, considering, for example, that one of the largest U.S. corporation, Walmart, depends upon China for much of the merchandise it sells throughout the world, including within the United States. Clearly, the dividends from these operations abroad help to boost America’s earnings from abroad, although, as we have seen, these have been outdone by the outflow of earnings of foreign investors in America.

This massive growth in the world’s external economy is also reflected in the figures given in the first part for export growth -far greater than overall economic growth -i.e. world exports grew by 53,985% between 1820 and 1992, and in the years since World War II. Although America’s exports have grown fast and its openness has ballooned, it has not been able to hold on to the economically dominant position it had in the world until the 1960s. Nevertheless, it has counted on its weapons development as its ultimate instrument for world domination, and has now initiated a very dangerous process to reclaim the world which is growing faster and faster out of its hands.

The major blocs and countries the United States faces -the European Union, China, East Asia (Japan, joined by Malaysia, South Korea, Thailand, Viet-Nam etc.), Russia and South Asia (the Indian Subcontinent) -represent a gigantic complex of markets and economic resources, as shown below in the tables¹¹⁶. They are also encroaching seriously on America’s “backyard”, Latin America and the Caribbean. And America’s “backyard” (including Brazil, one of the so-called BRIC countries -see note 116) is itself now producing and exporting more than ever.

What about the Arab countries, the Middle East, Central Asia? Since they are the ones feeling the brunt of the current U.S. war trajectory, don’t they also represent a threat to the United States? Yes, but there the threat is not so much their economic weight, although petroleum is at its cheapest there, but strategically, in relation to the other great blocs, all of them located in what is referred to as the “Old World”. Not only that, but their cultures, combined with their religious autonomy have resisted U.S. and other Western penetration for a long time, giving rise to governments that still openly oppose U.S. hegemony . Coca-Cola did not do well in Iraq, even if the Shah welcomed it in Iran. Saudi Arabia, one of the most secretive places on Earth, despite great American influence since the 1940s, remains a combination of the strict Wahabi Islamic sect and the vast Royal dynasty that traces its origins back to Abdul Aziz Ibn Saud’s rise at the end of World War I. Somehow this fragile-looking structure has survived.

It should be evident from the graph for 20th century economic growth in Part I of this article that the world economy has been growing at substantial rates, and not just in one or two large countries. Such growth is normally welcomed by the business community as “opportunity”. However, not all growth takes place within spheres of influence of American big business or under the aegis of its capitalist property. Indeed, humanity’s demographic growth has long surpassed the old formal State mechanisms to operate economically within what is labeled the “informal sector”, now a vast virtually unmeasurable area of society whose very existence challenges the old State formation; but its own practices are capitalistic and it has become inexorably intertwined with the formal sector of the economy, and is now an essential part of the system, of how things work, generating modes of behavior that have helped to push down wages and increase social polarization worldwide.

It is, therefore, surely important to bear in mind the geographical focus of America’s policy of aggression. Certainly, this brings oil into the question -not for reasons of scarcity, but (as mentioned already) due to its cheapness. It also seems relevant that Central Asia stands between the greatest generators of wealth on the planet -Europe to the west, the Russian Federation to the north, the Indian subcontinent to the south and East Asia to the east.

Basic statistics for the large blocs and countries
(all figures are estimates for 2005)

	European Union	Russia	India	PR China
Area (square kms)	3,976,372	17,075,200	3,287,590	9,560,985
Population	456,953,258	143,420,309	1,080,264,389	1,306,313,812
Labor force	218,500,000	74,220,000	496,400,000	791,400,000
GDP (ppp) US$ trn	12.18	1.535	3.678	8.158
GDP (official exchange rate, US$ trn)	13.31	0.7407	0.7356	1.833
Real GDP growth rate (%)	1.7	5.9	7.1	9.2
Per capita GDP (US$ ppp)	28,100	10,700	3,400	6,200
Economic structure:
Agriculture (%)	2.2	5	20.6	14.4
Industry (%)	27.3	35	28.1	53.1
Services (%)	70.5	60	51.4	32.5

PPP = parity power purchasing
SOURCE: CIA World Factbook

Basic statistics for the NAFTA countries
(all figures are estimates for 2005)

	United States	Canada	Mexico	PR NAFTA
Area (square kms)	9,631,418	9,984,670	1,972,550	21,588,638
Population	295,734,134	32,805,041	106,202,903	434,742,078
Labor force	149,300,000	17,350,000	37,380,000	204,030,000
GDP (ppp) US$ trn	12.37	1.077	1.066	14.513
GDP (official exchange rate, US$ trn)	12.77	1.047	0.717	14.534
Per capita GDP (US$) ppp	41,800	32,800	10,000
Real GDP
growth rate (%)	3.5	2.8	3
Economic structure:
Agriculture (%)	1	2.2	4
Industry (%)	20.7	29.1	26.5
Services (%)	78.3	68.7	69.5

Compare these numbers with those for the North American Free Trade Agreement (NAFTA), made up of the United States, Canada and Mexico. These countries represent more than 211/2 million square kilometers (the old world blocs and countries together account for nearly 34 million square kilometers). The NAFTA countries have a combined population of nearly 435 million. But the European Union alone now has nearly 457 million inhabitants. Adding that to China, India Russia gives a population of nearly 3 trillion. The “Old World” blocs and countries have a total labor force of 1,580,520,000 people, compared with NAFTA’s 204,030,000. NAFTA’s GDP in purchasing power parity terms or using the official exchange rate is just over $ 14.5 trillion while the “Old World” blocs’ and countries’ GDP is S$ 25.551 trillion and measured at the official exchange rate is US$ 16.6193 trillion -and we ignore in all this many vast areas not included within the 4 groups in the graph, e.g. Afghanistan, Iraq, Iran, Kazakhstan, Kyrgyzstan, Pakistan etc.

Within this there is much for the world’s dominant power, the United States to worry about, one of which is surely the way the European Union keeps growing by adding new countries to its membership, and increasing its economic size. In other words, the United States is not simply concerned about China, whose economic growth-rate remains dramatic, despite its present size, pushed on by its strong export performance, which at the time of writing places it as a country as the third largest trader after the United States and Germany. It is forecast that China’s economy will surpass the size of the U.S. economy (both measured according to the official exchange rate) by about 2025.

Indeed, the United States is concerned about its own “backyard”, Latin America, partly because its Old World rivals are competing with it there for sources of wealth. By establishing military bridgeheads in Central Asia, it hopes to begin to limit the power of its rivals. America appears to have calculated some time ago that its economic influence will be dependent upon its military superiority. Another is its growing influence elsewhere, and especially in Latin America. Several of the largest banks in Latin America are now owned by European banking groups: the Spanish banks are reclaiming their “Old Empire” for example -BBV and Santander Central Hispano; meanwhile, the Scots-Hong Kong HSBC is moving fast everywhere.

Meanwhile, trade between the Latin American States and Europe has been growing fast. In 2003, although North America remained Latin America’s largest trade partner¹¹⁷, Mercosur’s¹¹⁸ largest trading partner was the European Union, according to the EU external relations page¹¹⁹. Such incursions on America’s traditional trading areas can certainly lead to worldwide conflicts between the big rivals, and the trend towards “left popular” governments has been supported by the European Union, but it has the United States worried.

The world is hanging on a series of fragile financial threads whose existence is determined in the end by what happens in the so-called “real” economy, and these threads are likely to become more entwined, more complex and hence more subject to shocks from the “real economy”. In December, 2005, the Federal Reserve Bank of New York issued an analysis of America’s net foreign income position¹²⁰, arguing that although the inflows into the United States of investment income from abroad have exceeded outflows of investment income from the United States to the rest of the world up to now, despite the fact that its net investment position in the world has been negative during the 1980s¹²¹, the authors conclude that its positive net foreign income position is unlikely to continue, and that this will put further pressure on the U.S. current account deficit.

The United States wants to deal with this problem, and if the world were a “purely economic” one it could surely do so by allowing history to take its course, and reducing its dependence on the rest of the world. However, the world is not “purely economic”, and such a step would imply the end of its dominion. America’s financial oligarchy sees the world through the lens of power, and fear that it will slip from their grasps in the face of growing world abundance. Their solution is therefore to attempt to turn back the wheel of history by resorting to force.

The United States is in a knot, however, subjectively as well as objectively because although most of its power elite’s dominant groups see war as the best bet, this has created and continues to create friction at all levels in its own society, and with its capitalist rivals at a world level, with the old consensus. Is it merely to be globalization rewritten, then? As we have seen, the military route out of this has been promoted since the 1980s¹²², but the world is very complicated.

The financial web America (the world) has got itself into is a fragile web of dependence, masked as “cooperation”. Continued US supremacy depends on investment from abroad continuing to flow in, and this also helps to maintain the power of the dollar. But the governments of the countries that invest in America, even though their corporations appear not to earn such high returns there as they might elsewhere in the world¹²³, know that withdrawing their investments from America would not only bring about an economic collapse in America, but throughout the world, and this would include themselves. They therefore go on piling up their investments in a haven of uncertainty, whose success is becoming increasingly tied to war, which they are effectively financing.

This returns us to our original presentation of the problem. If China and Europe and India et al grow larger and more united, only America’s military strength will stand between them and the collapse of America. If America collapses in a world that has grown big enough (and this is happening) then its collapse will no longer mean the collapse of the world economy. By acting as it is now, destructively, it hopes to stifle the productive forces that are pushing to that result.

History appears to be repeating itself, but on a grander scale. The present war policy of the United States is a reflection of the growing worldwide abundance and the effect this has on the power status of what is presently the largest economy on Earth, the United States of America. The world is growing too fast for the United States, or more specifically, for U.S. imperialism. Whatever the story, whatever the pretext given for war, science, technology and hard work have created a dilemma for capitalist property, and the hub of this system, the United States, has now gone beyond its post-War containment strategy into one that spells great danger, in a world where opportunities for real change are struggling to break out of the straightjacket of capitalist business.

END

N.B. This is a continuing project. We welcome comments, corrections, suggestions, criticisms from readers.

NOTES

¹¹⁴ For example, his speech: “The Rest of the West”, June 1, 2000

¹¹⁵ See Mario Pianta, ibid.

¹¹⁶ According to a report by Goldman Sachs – “Dreaming with BRICs,” the path to 2050, by Dominic Wilson, Roopa Purushothaman, October 1, 2003 – in less than 40 years the BRIC countries (i.e. Brazil, Russia, India and China) “together could be larger than the G6 in US dollar terms, although “currently they are worth less than 15%”. During this period, the BRIC growth-rates will slow -China’s will fall from around 8% to around 3% -but India’s will go from just over 6% to about 5%.

¹¹⁷ Figures from WTO, inter-regional trade, 2003.

¹¹⁸ Mercosur consists of Argentina, Brazil, Paraguay and Uruguay.

¹¹⁹ http://europa.eu.int/comm/external_relations/mercosur/intro/

¹²⁰ Matthew Higgins, Thomas Klitgaard and Cédric Tille: The Income Implications of Rising U.S. International Liabilities in Current Issues in Economics and Finance: www.newyorkfed.org/research/current-issues

¹²¹ See Part VI; The Structure of U.S. Profits in the Post-War Period.

¹²² See the Irving Kristol quote at the beginning of beginning of Part VIII; The 1980s and 1990s, and note 54.

¹²³ Matthew Higgins, Thomas Klitgaard and Cédric Tille, Ibid.