Economic Imperialism: Fact or Fiction?

I recently wrote that no government debts need ever be repaid

I later noticed a couple of comments on Twitter along the lines of ‘not when they are created by a nuclear superpower like the USA’. So, the implication was that the USA is not paying its debts because its creditors are scared of it militarily!

In actual fact, the USA does repay its debts to anyone who wants them repaid. Anyone holding US securities can cash them in any time they like for US dollars and buy whatever those dollars will buy. Subject to US government agreement of course. China would , for example, be welcome to spend some of its US dollars on commercial aircraft from the Boeing factory , but probably not on military aircraft and it certainly wouldn’t be allowed to buy the Boeing company outright even though it has the money to do so. So there is an element of imperialism there, it could be argued.

Michael Hudson is known for his book “Super Imperialism”. Some quotes:

“Never before has a bankrupt nation dared insist that its bankruptcy become the foundation of world economic policy; that, because of its bankruptcy, all the nations what their economies transferring its bankruptcy to themselves, stultifying their industries, and paying tribute to the beggar.”

“Effectively speaking, the United States has compelled the older nations of the West to pay for the overseas costs of the US war in Asia. Whatever they may desire, the central banks of Europe had no choice but to continue to except the paper dollar equivalents annually created as the domestic and overseas deficit of the United States increase. Otherwise, the whole of shaky structure of the world monetary system will collapse into rubble. America has succeeded in forcing other nations to pay for its wars on a systematic basis, something never before accomplished by any nation in history .”

Is this at all realistic? Michael Hudson should know better than to suggest the US or any other sovereign currency issuing country could become bankrupt! MMT has shown conclusively that to be a nonsense. America doesn’t have to force the US dollar on anyone or beg that its use continue. Nearly everyone is happy to accept it, but if anyone isn’t, that really can’t be enough to cause any loss of sleep in the US!

Does it matter if Iraq wanted to sell some of its oil to Russia for Euros rather than US$? Some allege this was something the US government couldn’t allow and was the cause of their invasion. If Iraq, or any other country, had, for example, wanted to buy European airbuses rather than an American equivalent,  the US may have felt a bit peeved but as far as I know there has been no suggestion that any purchase from a foreign competitor has ever been the cause of any war launched by the US. There is a lot of arm twisting going on behind the scenes though and it wouldn’t be unrealistic to describe that as economic imperialism. But that is not what Michael Hudson meant

The USA doesn’t pay down its debts is arguably what I should have written. They hardly ever have become less from one year to the next. Anyone wanting to cash in their US securities gets paid out from the issuance of new securities and as there is a healthy demand for those securities that’s never a problem for the US government. China, and many other countries, seem to be as happy as they ever have been to swap real goods and services for what , in effect, are just the IOUs of the US government. To suggest that they have to supply radios, calculators, mobile phones etc because the are commanded at the point of a gun seems really quite fanciful and conspiratorial. Nonsense even. Anyone selling their produce into the US market can stop at any time they like. There would be many in the US who would welcome exactly that. The more the US imports, the greater both their trade imbalance and national debt  becomes.

Economic imperialism comes about largely through the activities of the IMF and to a lesser extent the World Bank. They impose the most draconian conditions in return for loans and other financial help. They will insist on the privatisation of previously successful nationalised industries for no other reason than neoliberal ideology. They will insist that governments cut spending to run balanced budgets and create pools of unemployment where none existed previously.

That’s the real imperialism which is at work today. Not just in developing countries but, with the IMF assisted by the European Commissioners and European Central Bank (the Troika),  in the heart of Europe too. It really doesn’t matter, to anyone, not the US government, nor anyone else, if any  transaction is conducted in Euros or US dollars, or Japanese Yen. These currencies are all fully exchangeable on the currency markets and can be swapped at will either afterwards or before.  So let’s get it right and identify what should be our real target for opposition instead of what we might imagine it to be.