[WSMDiscuss] Hegemony undone: America’s neoliberal financialization policy vs. China’s industrial socialism

Fayyaz Baqir fbaqir at gmail.com
Wed Apr 21 21:11:21 CEST 2021

Very interesting and insightful.

On Wed, Apr 21, 2021 at 12:41 PM Brian <brian at radicalroad.com> wrote:

> https://www.counterpunch.org/2021/04/16/americas-neoliberal-financialization-policy-vs-chinas-industrial-socialism/
> America’s Neoliberal Financialization Policy vs. China’s Industrial
> Socialism
> by Michael Hudson   - CounterPunch.org
> Nearly half a millennium ago Niccolo Machiavelli’s *The Prince* described
> three options for how a conquering power might treat states that it
> defeated in war but that “have been accustomed to live under their own laws
> and in freedom: … the first is to ruin them, the next is to reside there in
> person, the third is to permit them to live under their own laws, drawing a
> tribute, and establishing within it an oligarchy which will keep it
> friendly to you.”[1]
> Machiavelli preferred the first option, citing Rome’s destruction of
> Carthage. That is what the United States did to Iraq and Libya after 2001.
> But in today’s New Cold War the mode of destruction is largely economic,
> via trade and financial sanctions such as the United States has imposed on
> China, Russia, Iran, Venezuela and other designated adversaries. The idea
> is to deny them key inputs, above all in essential technology and
> information processing, raw materials, and access to bank and financial
> connections, such as U.S. threats to expel Russia from the SWIFT
> bank-clearing system.
> The second option is to occupy rivals. This is done only partially by the
> troops in America’s 800 military bases abroad. But the usual, more
> efficient occupation is by U.S. corporate takeovers of their basic
> infrastructure, owning their most lucrative assets and remitting their
> revenue back to the imperial core.
> President Trump said that he wanted to seize Iraq’s and Syria’s oil as
> reparations for the cost of destroying their society. His successor, Joe
> Biden, sought in 2021 to appoint Hillary Clinton’s loyalist, Neera Tanden,
> to head the government’s Office of Management and Budget (OMB). She had
> urged that America should make Libya turn over its vast oil reserves as
> reparations for the cost of destroying its society.
> “We have a giant deficit. They have a lot of oil. Most Americans would
> choose not to engage in the world because of that deficit. If we want to
> continue to engage in the world, gestures like having oil rich countries
> partially pay us back doesn’t seem crazy to me.”[2]
> U.S. strategists have preferred Machiavelli’s third option: To leave the
> defeated adversary nominally independent but to rule via client
> oligarchies. President Jimmy Carter’s national-security advisor, Zbigniew
> Brzezinski, referred to them as “vassals,” in the classical medieval
> meaning of demanding loyalty to their American patrons, with a common
> interest in seeing the subject economy privatized, financialized, taxed and
> passed on to the United States for its patronage and support, based on a
> mutuality of interest against local democratic assertion of nationalistic
> self-reliance and keeping the economic surplus at home to promote domestic
> prosperity instead of being sent abroad.
> That policy of privatization by a client oligarchy with its own source of
> wealth based on the U.S. orbit is what American neoliberal diplomacy
> accomplished in the former Soviet economies after 1991 to secure its Cold
> War victory over Soviet Communism. The way in which client oligarchies were
> created was a grabitization that utterly disrupted the economic
> interconnections integrating the economies.
> “To put it in a terminology that harkens back to the more brutal age of
> ancient empires,” Brzezinski explained, “the three grand imperatives of
> imperial geostrategy are to prevent collusion and maintain security
> dependence among the vassals; to keep tributaries pliant and protected; and
> to keep the barbarians from coming together.”[3]
> After reducing Germany and Japan to vassalage after defeating them in
> World War II, U.S. diplomacy quickly reduced the Britain and its imperial
> sterling area to vassalage by 1946, followed in due course by the rest of
> Western Europe and its former colonies. The next step was to isolate Russia
> and China, while keeping “the barbarians from coming together.” If they
> were to join up, warned Mr. Brzezinski, “the United States may have to
> determine how to cope with regional coalitions that seek to push America
> out of Eurasia, thereby threatening America’s status as a global power.”
> [4]
> By 2016, Brzezinski saw Pax Americana unravelling from its failure to
> achieve these aims. He acknowledged that the United States “is no longer
> the globally imperial power.”[5] That is what has motivated its
> increasing antagonism toward China and Russia, along with Iran and
> Venezuela.
> The problem was not Russia, whose Communist *nomenklatura* let their
> country be ruled by a Western-oriented kleptocracy, but China.
> The U.S.-China confrontation is not simply a national rivalry, but a
> conflict of economic and social systems. The reason why today’s world is
> being plunged into an economic and near-military Cold War 2.0 is to be
> found in the prospect of socialist control of what Western economies since
> classical antiquity have treated as privately owned rent-yielding assets:
> money and banking (along with the rules governing debt and foreclosure),
> land and natural resources, and infrastructure monopolies.
> This contrast in whether money and credit, land and natural monopolies
> will be privatized and duly concentrated in the hands of a *rentier*
> oligarchy, or used to promote general prosperity and growth, has basically
> become one of finance capitalism and socialism. Yet in its broadest terms
> this conflict existed already 2500 years ago. in the contrast between Near
> Eastern kingship and the Greek and Roman oligarchies.
> These oligarchies, ostensibly democratic in superficial political form and
> sanctimonious ideology, fought against the concept of kingship. The source
> of that opposition was that royal power – or that of domestic “tyrants” –
> might sponsor what Greek and Roman democratic reformers were advocating:
> cancellation of debts to save populations from being reduced to debt
> bondage and dependency (and ultimately to serfdom), and redistribution of
> lands to prevent its ownership from becoming polarized and concentrated in
> the hands of creditors and-landlords.
> From today’s U.S. vantage point, that polarization is the basic dynamic of
> today’s U.S.-sponsored neoliberalism. China and Russia are existential
> threats to the global expansion of financialized *rentier* wealth.
> Today’s Cold War 2.0 aims to deter China and potentially other counties
> from socializing their financial systems, land and natural resources, and
> keeping infrastructure utilities public to prevent their being monopolized
> in private hands to siphon off economic rents at the expense of productive
> investment in economic growth.
> The United States hoped that China might be as gullible as the Soviet
> Union and adopt neoliberal policy permitting its wealth to be privatized
> and turned into rent-extracting privileges, to be sold off to Americans.
> “What the free world expected when it welcomed China into the free trade
> body [the World Trade Organization] in 2001,” explained Clyde V. Prestowitz
> Jr, trade advisor in the Reagan administration, was that, “from the time of
> Deng Xiaoping’s adoption of some market methods in 1979 and especially
> after the collapse of the Soviet Union in 1992 … increased trade with and
> investment in China would inevitably lead to the marketization of its
> economy, the demise of its state-owned enterprises.”[6]
> But instead of adopting market-based neoliberalism, Mr. Prestowitz
> complained, China’s government supported industrial investment and kept
> money and debt control in its own hands. This government control was “at
> odds with the liberal, rules-based global system” along the neoliberal
> lines that had been imposed on the former Soviet economies after 1991.
> “More fundamentally,” Prestowitz summed up:
> China’s economy is incompatible with the main premises of the global
> economic system embodied today in the World Trade Organization, the
> International Monetary Fund, the World Bank, and a long list of other free
> trade agreements. These pacts assume economies that are primarily market
> based with the role of the state circumscribed and micro-economic decisions
> largely left to private interests operating under a rule of law. This
> system never anticipated an economy like China’s in which state-owned
> enterprises account for one-third of production; the fusion of the civilian
> economy with the strategic-military economy is a government necessity; five
> year economic plans guide investment to targeted sectors; an eternally
> dominant political party names the CEOs of a third or more of major
> corporations and has established party cells in every significant company;
> the value of the currency is managed, corporate and personal data are
> minutely collected by the government to be used for economic and political
> control; and international trade is subject to being weaponized at any
> moment for strategic ends.
> This is jaw-dropping hypocrisy – as if the U.S. civilian economy is not
> fused with its own military-industrial complex, and does not manage its
> currency or weaponize its international trade as a means of achieving
> strategic ends. It is a case of the pot calling the kettle black, a fantasy
> depicting American industry as being independent of government. In fact,
> Prestowitz urged that “Biden should invoke the Defense Production Act to
> direct increased U.S.-based production of critical goods such as medicines,
> semiconductors, and solar panels.”
> While U.S. trade strategists juxtapose American “democracy” and the Free
> World to Chinese autocracy, the major conflict between the United States
> and China has been the role of government support for industry. American
> industry grew strong in the 19th century by government support, just as
> China is now providing. That was the doctrine of industrial capitalism,
> after all. But as the U.S. economy has become financialized, it has
> de-industrialized. China has shown itself to be aware of the risks in
> financialization, and has taken measures to attempt to contain it. That has
> helped it achieve what used to be the U.S. ideal of providing low-priced
> basic infrastructure services.
> Here is the U.S. policy dilemma: Its government is supporting industrial
> rivalry with China, but also supports financialization and privatization of
> the domestic economy – the very policy that it has used to control “vassal”
> countries and extract their economic surplus by rent-seeking.
> *Why U.S. finance capitalism treats China’s socialist economy as an
> existential treat*
> Financialized industrial capital wants a strong state to serve itself, but
> not to serve labor, consumers, the environment or long-term social progress
> at the cost of eroding profits and rents.
> U.S. attempts to globalize this neoliberal policy are driving China to
> resist Western financialization. Its success provides other countries with
> an object lesson of why to avoid financialization and rent-seeking that
> adds to the economy’s overhead and hence its cost of living and doing
> business.
> China also is providing an object lesson in how to protect its economy and
> that of its allies from foreign sanctions and related destabilization. Its
> most basic response has been to prevent an independent domestic or
> foreign-backed oligarchy from emerging. That has been one first and
> foremost by maintaining government control of finance and credit, property
> and land tenure policy in government hands with a long-term plan in mind.
> Looking back over the course of history, this retention is how Bronze Age
> Near Eastern rulers prevented an oligarchy from emerging to threaten Near
> Eastern palatial economies. It is a tradition that persisted down through
> Byzantine times, taxing large aggregations of wealth to prevent a rivalry
> with the palace and its protection of a broad prosperity and distribution
> of self-support land.
> China also is protecting its economy from U.S.-backed trade and financial
> sanctions and economic disruption by aiming at self-sufficiency in
> essentials. That involves technological independence and ability to provide
> enough food and energy resources to support an economy that can function in
> isolation from the unipolar U.S. bloc. It also involves decoupling from the
> U.S. dollar and from banking systems linked to it, and hence from U.S.
> ability to impose financial sanctions. Associated with this aim is creation
> of a domestic computerized alternative to the SWIFT bank-clearing system.
> The dollar still accounts for 80 percent of all global transactions, but
> less than half of today’s Sino-Russian trade, and the proportion is
> declining, especially as Russian firms avoid dollarized payments or
> accounts from being seized by U.S. sanctions.
> These protective moves limit the U.S. threat to Machiavelli’s first
> option: destroy the world if it does not submit to U.S.-sponsored
> financialized rent extraction. But as Vladimir Putin has framed matters:
> “Who would want to live in a world without Russia?”
> [Kin Chi: My quick comment: The USA surely would want to destroy its
> rival, taking the first option. But it knows it is impossible to succeed,
> even in the case of Russia, and not to mention China. Thus it hopes for the
> rival to disintegrate from within, or for substantial interest blocs from
> within to be complicit with US interests. Hence we need to assess how
> Russia and China are reacting to this challenge, given that there are
> multiple contesting forces within each country. And that is also why we
> have been very concerned with pro-US neo-liberal political economists and
> policy-makers in these two countries.
> [I agree with you that China has put much investment into infrastructure
> and industry. However, we have been concerned with China’s financialization
> moves. Hence your statement that “China has avoided financialization” may
> not be the actual case, as various moves have been taken in
> financialization, but we can say that China seems to be aware of the risks
> in financialization, and has taken measures to attempt to contain it,
> causing discontent from US financial interests which would want to see
> China going further down the road.
> [It is interesting that yesterday, the White House expressed concern over
> the China-Iraq use of digital RMB to settle oil accounts as this would be
> beyond US monitoring of transactions.]
> *……*
> *Michael Hudson* is the author of *Killing the Host
> <http://store.counterpunch.org/product/killing-the-host-digital-book/> *(published
> in e-format by CounterPunch Books and in print by Islet
> <http://www.amazon.com/exec/obidos/ASIN/3981484282/counterpunchmaga>).
> His new book is* J is For Junk Economics
> <http://www.amazon.com/exec/obidos/ASIN/3981484258/counterpunchmaga>*.
> He can be reached at mh at michael-hudson.com
> *Notes.*
> 1) Niccolo Machiavelli, *The Prince* (1532), Chapter 5: “Concerning the
> way to govern cities or principalities which lived under their own laws
> before they were annexed.” ↑
> 2) Neera Tanden, “Should Libya pay us back?” memo to Faiz Shakir, Peter
> Juul, Benjamin Armbruster and NSIP Core, October 21, 2011. Mr. Shakir, to
> his credit, wrote back: “If we think we can make money off an incursion,
> we’ll do it? That’s a serious policy/messaging/moral problem for our
> foreign policy I think.” As president of the Center for American Progress,
> Tanden backed a 2010 proposal to cut Social Security benefits, reflecting
> the long-term Obama-Clinton objective of fiscal austerity at home as well
> as abroad. ↑
> 3) Zbigniew Brzezinski, *The Grand Chessboard: American Primacy and its
> Geostrategic Imperatives* (New York: 1997), p. 40. See the discussion by
> Pepe Escobar, “For Leviathan, It’s So Cold in Alaska,” Unz.com, March 18,
> 2021. ↑
> 4) Brzezinski, *ibid*., p. 55. ↑
> 5) Brzezinski, “Towards a Global Realignment,” *The American Interest*
> (April 17, 2016) For a discussion see Mike Whitney, “The Broken Checkboard:
> Brzezinski Gives Up on Empire,” *Counterpunch*, August 25, 2016. ↑
> 6) Clyde Prestowitz, “Blow Up the Global Trading System, *Washington
> Monthly*, March 24, 2021.. ↑
> >>>>>>>>>>>>>>>>>>>>>>
> Visit:  https://murphyslog.ca
> Twitter:  @BrianKMurphy2
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