The Economics of Empire

New Labor Forum
Fall 2003

The Economics of Empire

By Walden Bello

In 1995, the World Trade Organization (WTO) was born.
The nearly 20 trade agreements that underpinned the WTO
were presented as a set of multilateral rules that would
subject both the powerful and the weak to a common set
of rules backed by an effective enforcement apparatus In
the WTO, it was claimed, the powerful United States and
lowly Rwanda had exactly the same number of votes: one.

The Crisis of the Globalist Project Now the triumphalism
of those earlier years is gone. Talks at the WTO's fifth
Ministerial in Cancun collapsed, and the organization is
in gridlock. A massive obstacle to restarting
negotiations is the refusal of the United States and the
European Union (EU) to cut their massive subsidies in
agriculture and their insistence, against widespread
resistance from developing countries, on bringing non-
trade issues such as investment and government
procurement into the ambit of the WTO. Meanwhile,
Washington and Brussels continue to be separated by a
whole range of issues, including the EU's moratorium on
genetically modified foods. Developing countries, some
once hopeful that the WTO would in fact bring more
equity to global trade, unanimously agree that most of
what they have reaped from WTO membership are costs, not
benefits.

What happened? In a word, Empire. It turns out that
globalization and U.S. unilteralism don't mix. But
first, some notes on globalization and the globalist
project.

Three Moments of the Crisis of Globalization There have
been three moments in the deepening crisis of the
globalist project.

The first was the Asian financial crisis of 1997. This
event, which laid low the proud "tigers" of East Asia,
revealed that one of the key tenets of globalization-the
liberalization of the capital account to promote freer
flows of capital, especially finance or speculative
capital-could be profoundly destabilizing. This was
clearly shown when, in just a few weeks' time, one
million people in Thailand and 21 million in Indonesia
were pushed below the poverty line.[i] The ambitious
enterprise of subjecting some 100 developing economies
to "structural adjustment" resulted in economic
stagnation, and increased poverty and inequality.

Shortly after the Asian financial crisis, key
intellectual defenders of the neoclassical free market
model began leaving the fold-among them Jeffrey Sachs,
noted earlier for his advocacy of "free market" shock
treatment in Eastern Europe in the early 1990's; Joseph
Stiglitz, former chief economist of the World Bank;
Columbia Professor Jagdish Bhagwati, who called for
global controls on capital flows; and financier George
Soros, who condemned the lack of controls in the global
financial system that had enriched him.

The second moment of the crisis of the globalist project
was the collapse of the third ministerial of the WTO in
Seattle in December 1999, which was the fatal
intersection of three streams of discontent:

a.. Developing countries who resented the inequities of
the Uruguay Round agreements that they felt compelled to
sign in 1995. a.. Opposition from myriad sectors of
global civil society. b.. Unresolved trade conflicts
between the EU and the United States, especially in
agriculture.

The third moment of the crisis was the collapse of the
stock market and the end of the Clinton boom. The crash
was related to overcapacity in the industrial sector,
the most glaring example being in the troubled
telecommunications sector, where only 2.5 percent of
installed capacity globally was being utilized. This
stagnation of the real economy led to capital being
shifted to the financial sector, resulting in the
dizzying rise in share values. But since profitability
in the financial sector cannot deviate too far from the
profitability of the real economy, a collapse of stock
values was inevitable. This occurred in March 2001,
leading to prolonged stagnation and the onset of
deflation.

The New Economics of George W. Bush The globalist
corporate project expressed the common interest of the
global capitalist elites, but did not eliminate
competition among the national elites. As Robert Brenner
has pointed out, in the mid-1990's, the Clinton
administration pushed a strong dollar policy to
stimulate the recovery of the Japanese and German
economies, so that they could serve as markets for U.S.
goods and services. The earlier, more nationalist Reagan
administration, on the other hand, had employed a weak
dollar policy to regain competitiveness for the U.S.
economy at the expense of the Japanese and German
economies.[ii] With the George W. Bush administration,
we are back to the weak dollar and other economic
policies that are meant to revive the U.S. economy at
the expense of the other center economies. Several
features of this approach are worth stressing:

a.. Bush's political economy is very wary of a process
of globalization that is not managed by a U.S. state.

a.. The Bush administration is wary of multilateral
global economic governance. Its growing ambivalence
towards the WTO stems from the fact that the United
States has lost a number of rulings there. b.. For the
Bush people, strategic power is the ultimate modality of
power. Economic power is a means to achieve strategic
power. The globalist approach to China, for instance,
emphasizes an engagement with China as an investment
area and market for U.S. capital. The nationalists,
however, see China mainly as a strategic enemy to be
contained.

If these are seen as the premises for action, then the
following prominent elements of recent U.S. economic
policy make sense:

a.. Achieving control over Middle East oil. This was
clearly aimed partly at Europe, but perhaps the more
strategic goal was to control access to the region's
resources by energy poor China. b.. Aggressive
protectionism in trade and investment matters. One of
the most brazen protectionist acts by the United States
is its stymieing of WTO negotiations over vital matters
of public health. On behalf of the powerful
pharmaceutical lobby, it staunchly resists the loosening
of patent rights to drugs on all but three diseases. c..
Incorporating strategic considerations into trade
agreements. In a recent speech, U.S. Trade
Representative Robert Zoellick stated explicitly that
"countries that seek free trade agreements with the
United States must pass muster on more than trade and
economic criteria in order to be eligible. At a minimum,
these countries must cooperate with the United States on
its foreign policy and national security goals, as part
of 13 criteria that will guide the U.S. selection of
potential FTAA partners." d.. Manipulation of the
dollar's value to force rival industrial economies to
shoulder costs, thereby regaining competitiveness for
the US economy. This is a clear effort to revive the
U.S. economy at the expense of the European Union and
other center economies. e.. Manipulation of multilateral
agencies to push the interests of U.S. capital. This is
more readily done at the World Bank and the IMF, where
U.S. dominance is more effectively institutionalized,
than at the WTO. For instance, the SDRM (Sovereign Debt
Restructuring Mechanism), proposed by the IMF to help
developing countries restructure their debt, was vetoed
by the U.S. Treasury in the interest of U.S. banks,
though it had the support of many European
governments.[iii]

The Economics and Politics of Overextension Without
legitimacy, imperial management is inherently unstable.
The Roman Empire, for example, solved its problem of
legitimacy politically, by extending Roman citizenship
to ruling groups and non-slave peoples throughout the
empire. Combined with a vision of the empire providing
peace and prosperity for all created that intangible but
essential moral element called legitimacy.

Extension of citizenship has never played a role in the
U.S. imperial order. In the post-World War II period,
during its struggle with communism, Washington did come
up with a political formula to legitimize its global
reach. The two elements of this formula were
multilateralism as a system of global governance and
liberal democracy. Today, however, Washington or
Westminster-type liberal democracy is in trouble
throughout the developing world, where it has been
reduced to a façade for oligarchic rule. With no moral
vision to bind the global majority to the imperial
center, this mode of imperial management can only
inspire one thing: resistance.

The great problem for unilateralism is overextension, or
a mismatch between the goals of the United States and
the resources needed to accomplish these goals.
Overextension is relative, that is, it is to a great
degree a function of resistance. Among the key
indicators of overextension are the following:

a.. the inflaming of Arab and Muslim sentiment in the
Middle East, South Asia, and Southeast Asia, resulting
in massive ideological gains for Islamic
fundamentalists; b.. the collapse of the Cold War
Atlantic Alliance and the emergence of a new
countervailing alliance, with Germany and France at the
center of it; c.. the forging of a powerful global civil
society movement against US hegemony; d.. the coming to
power of anti-neoliberal, anti-U.S. movements in South
America; · an increasingly negative impact of militarism
on the U.S. economy, as military spending becomes
dependent on deficit spending, and deficit spending
become more and more dependent on financing from foreign
sources.

In conclusion, the globalist project is in crisis.
Whether it can make a comeback via a Democratic or
Liberal Republican presidency should not be ruled out,
especially since there are influential globalist voices
in the U.S. business community-among them George Soros-
that are voicing opposition to the unilateralist thrust
of the Bush administration.[iv] This, however, is
unlikely, and unilateralism will reign for some time to
come. We must have a healthy respect for U.S. power, but
neither must we overestimate it. The signs are there
that the U.S. is seriously overextended and what appear
to be manifestations of strength might in fact signal
weakness strategically.

Walden Bello is professor of sociology and public
administration at the University of the Philippines, and
executive director of the Bangkok-based Focus on the
Global South. He is active in the peace and anti-
corporate globalization movements and is the author of
some 13 books, including Deglobalization (London: Zed,
2002) and The Future in the Balance (Oakland: Food
First, 2001).

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[i] Jacques-Chai Chomthongdi, "The IMF's Asian Legacy,"
in Prague 2000: Why We Need to Decommission the IMF and
the World Bank (Bangkok: Focus on the Global South,
2000), pp.18, 22

[ii] See Robert Brenner, The Boom and the Bubble (New
York: Verso, 2002), pp. 128-133.

[iii] For the sharpening conflicts between the US
Treasury Department and IMF officials, see Nicola
Bullard, "The Puppet Master Shows his Hand," Focus on
Trade, April 2002
(http://focusweb.org/popups/articleswindow.php?id=41)

[iv] See George Soros, "America's Role in the World,"
Speech at the Paul H. Nitze School of Advanced
International Studies, Washington, DC, March 7, 2003.
Noting that he was for intervention in the Balkans,
including a "NATO intervention without UN
authorization," Soros denounces the war with Iraq on the
grounds that it stems from a fundamentalism that is
unsound and wreaking havoc with the US' relations with
the rest of the world. The arguments he musters are
those heard not only in liberal Democratic Party circles
in Washington but also in "pragmatic" Republican Party
circles and Wall Street.

Published in the fall 2003 issue of New Labor Forum
(http://www.qc.edu/newlaborforum)