Neoliberalism and the U.S. turn to naked imperialism
The sustained structural crisis of the capitalist world-economy
In my May 18 commentary, I noted that the capitalist world-economy is characterized by two fundamental contradictions. First, the world-economy imposes peripheral structures on peoples in vast regions of the world, who do not accept the peripheral role assigned to them, and who therefore form anti-systemic movements that seek to attain their political and economic independence. The capitalist world-economy is thus characterized by a permanent condition of conflict between the West and the Third World; and within the peripheralized zones, between those sectors that have an interest in accommodation to Western interests, and those who favor a more sovereign road. Secondly, the capitalist world-economy has reached and overextended the natural geographical and ecological limits of the earth, and therefore it can no expand as it once did; new discoveries that fuel economic advances must be found in territory already conquered. (See “The capitalist world-economy and its contradictions: Post-Marx, but not post-Marxist,” May 18, 2021).
The Western corporate elite, in facing these contradictions, reacted with new strategies of aggression against the Third World: neoliberal economic policies imposed by international finance agencies (1980s and 1990s); wars of aggression (in a systematic form since the 1990s); and unconventional wars (since 2014). Such aggressive strategies disregarded the rules of imperialism as they had been developed during the course of the twentieth century, which had maintained that imperialist economic penetration ought to grant political and economic space to the sector of the national bourgeoisie allied with imperialist interests, in order that the neocolony would have political stability and the appearance of democracy. (See “From colonialism to neocolonialism: Beyond the false ‘human rights’ frame of the representative democracies,” June 15, 2021; and “The façade of defending democracy: US Imperialism and the military-industrial complex, 1933 to 1964,” June 29, 2021.)
The turn to imperialism with a weak democratic façade, or what we could call “naked imperialism,” can be understood as having economic and military components. I address in today’s commentary the economic dimensions, reserving the military dimension for my next commentary, but keeping in mind that the two dimensions are interrelated.
The fundamental problem face by the U.S. power elite in the last three decades of the twentieth century was the erosion of the economic capacity of the USA, making it less and less capable of maintaining economic penetration in other nations without direct military intervention. In effect, the USA was losing its capacity to function as the hegemonic power in the neocolonial world-system, in accordance with the rules of neocolonialism.
The first signs of crisis appeared in the 1960s. The USA was spending beyond its real productive capacity, as a result of the war in Vietnam, the maintenance of military bases throughout the world, and an increasingly higher pattern of consumption in the middle class. There emerged therefore a “double deficit”: a government deficit, with the state spending more than it was taking in through taxes and tariffs; and a balance of trade deficit, with the nation importing more goods than it was exporting. To cover this undisciplined spending, the government was circulating dollars without adequate backing in gold reserves, with the result was that the dollar was overvalued.
The Nixon administration had a quick fix for this situation. It ended the gold standard, by which the value of the U.S. dollar was fixed at $35 per ounce of gold, in accordance with an agreement among the global powers in 1944; replacing it with a system in which the value of all currencies would be established by the currency exchange market. This resulted in the devaluing of the dollar, thus making U.S. goods cheaper and more competitive in the world market.
The U.S. devaluation of the dollar did not address the structural source of the U.S. problem: military expenditures and consumer spending beyond the productive capacity of the nation. What really was needed was a comprehensive, long-term national plan involving reductions in military expenditures, restraints on consumer spending, and investments designed to increase national production.
Rather than addressing the structural sources of the problems in the U.S. economy, the U.S. elite launched a project that represented an attack on the most vulnerable and weakest persons on the planet, while bringing more income to itself. The neoliberal project was developed on the basis of the economic theory proposed by Milton Friedman and others at the School of Economics of the University of Chicago. The “Chicago boys” put forth the principle of the unlimited supremacy of the market, and they maintained that states should not interfere with the free play of supply and demand. Applied to the peripheral and semiperipheral zones of the world-economy, specific neoliberal policies include: the elimination of government protection of national currency in favor of the trading of currency at a free market rate; privatization of government-owned enterprises; reduction of protection for national industry, by reducing or eliminating tariffs and taxes on imported goods; and facilitation of the free flow of capital into and out of the country.
Neoliberal policies were imposed on Third World nations during the 1980s and 1990s by international finance agencies, such as the International Monetary Fund (IMF) and the World Bank, which used the Third World debt as a weapon. The external debt of Third World governments had emerged as a result of core banks seeking to maximize profits from surplus deposits. Northern banks in the 1960s and 1970s had excess liquidity (more money to lend than available borrowers) as a consequence of a long period of rapid expansion from 1945 to 1968 and as a result of the oil price increase of 1973. In response to the excess liquidity problem, representatives of Northern banks descended in droves on the countries of the Third World during the 1960s and 1970s, offering governments high amounts of low-interest loans, but with floating rates; and often sweetening the offer with bribes to government officials. But in the early 1980s, as a result of interest rate increases during 1979 and 1980 as well as declining terms of exchange for raw materials exports, Third World governments found themselves unable to sustain debt payments.
Here the Third World debt and the global turn to neoliberalism became joined. In response to the Third World debt crisis, the International Monetary Fund (IMF) and the World Bank stepped in to offer new loans and a rescheduling of debt payments, on the condition that the debtor nations adopt neoliberal economic policies. The maneuver served the interests of the core, for it prevented default on the loans, which represented a considerable part of the capital assets of Northern banks. At the same time, the IMF maneuver greatly increased the long-term debt for Third World governments, creating a situation where they paid more money than they ever owed, but owed more than ever. From 1980 to 1992, Third World countries paid $1.7 trillion, an amount three times what they owed in 1980. But by 1992, their debt was three times what it was in 1980. The constant flow of dollars from the poor countries of the world to the banks of the core was consolidated.
The payment of the debt interest and the coerced adoption of neoliberal policies by Third World governments has negative consequences for the people. The higher government expenditures for the service of the debt, combined with the budget austerity that was one of the neoliberal policies, led to drastic reductions in government spending on social services, including such areas as education, health care, and nutrition, as well as a reduction in government subsidies for such necessary services as electricity and buses. Moreover, debt payments and neoliberal adjustments mean that there is little possibility of an autonomous development project that would increase the standard of living of the people. Indeed, the imposition of the neoliberal project brought to an end hopes and visions for the social and economic development of the Third World, which had been alive since the Bandung conference of 1955 and had been formulated by the declaration of the UN General Assembly for a New International Economic Order in 1974.
In 1985, in a number of interviews and speeches, Fidel Castro described the Third World debt as a cancer created by imperialism, and he maintained that the debt was economically, politically, and morally unpayable. He called upon the indebted nations to agree to a strike, a collective suspension in payments, in order to compel conversations that would seek a solution in accordance with the principles formulated by the UN declaration of a New International Economic Order. This prophetic call, formulated by the head of state of a nation that did not have a debt problem, was not heard.
The imposition of neoliberal policies on the Third World had direct short-term benefits to core corporations. The Third World governments were required to eliminate government protection of national currencies and to permit the trading of currency at a free market rate, thus greatly increasing the purchasing power of the U.S. dollar in Third World nations. In addition, Third World governments were compelled to privatize government-owned enterprises, thus making economic enterprises available for purchase at devalued prices. The governments were required to reduce protection of their national industries, reducing or eliminating tariffs and taxes on imported goods, thus expanding the market for the goods of core corporations. In addition, neoliberal policies facilitated the free flow of capital into and out of countries, thus making possible enormous profits through financial speculation.
Neoliberalism is imperialism in a new form. It is an economic form of imperialism, not enforced by gunboats, but by government officials and bankers dressed in expensive suits. But it is equally serious in its consequence, reducing the standing of living of already impoverished peoples.
Whereas imperialism in its best forms deepens and consolidates neocolonial relations, imperialism in a neoliberal form undermines neocolonialism itself. Neocolonialism depends on a national bourgeoisie that has a degree of space in the global economic order, and whose members are able to present themselves before the people as defenders of the nation. But with the higher-levels of foreign economic and financial penetration made possible by neoliberal policies, the national bourgeoise has no option but to integrate itself into foreign capital, abandoning any effort at partially autonomous economic development within the context of the neocolonial world-system. Under neoliberalism, the national bourgeoisie loses all credibility among the people, and it finds itself unable to direct a state that is capable of maintaining control. Reacting to this dynamic, Hugo Chávez in Venezuela was able to capture the presidency on an anti-neoliberal platform, declaring of the national bourgeoisie, “They are on their knees before the imperial power.”
Neoliberalism is naked imperialism. It reduces the role of the national bourgeoisie to an appendage to foreign interests, thus exposing for all to see the complete economic subordination of the nation. Neoliberalism shows that the independence of the nation is a sham. Neoliberalism destroys the democratic façade of neocolonialism. In Latin America, neoliberalism gave rise to anti-capitalist popular movements, which transformed the politics of the regions in the period 1994 to 2014.
The neoliberal project of the core powers was an aggressive response by the global elite to the structural crisis of the world-system, and it had a certain short-term logic to it, for it facilitated the flow of capital from neocolonies to the core. But the U.S. corporate and financial elite did not use the influx to address the long-term structural problems of the U.S. economy. To the contrary, the U.S. balance of trade deficit and the government deficit increased significantly during the 1980s. At the same time, the declining rates of profits led U.S. manufacturers to search for reduced labor costs by relocating factories to semiperipheral and peripheral zones, thus promoting a deindustrialization of the nation’s economy. And taking advantage of the deregulation of international capital flows, the U.S. elite increasingly invested in financial speculation, surpassing new investments in production and commerce. In the 1980s, the U.S. corporate elite demonstrated an indifference toward developing the national economy; it failed to envision investment in various branches of industry and commerce, with the intention of increasing the productive capacity and the diversity of the national economy.
We see here the complete moral and intellectual unpreparedness of the U.S. corporate elite to respond to the challenges posed by the contradictions of the capitalist world-economy and by the decline of the USA relative to other core power. In a subsequent commentary (July 23), I will address the militarist dimensions of the unpatriotic conduct of the American corporate elite and political establishment since 1965.
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