Extracts from Neo-Colonialism, & the Modern-Slavery of Dollar Imperialism, Debt-Based Money and Neoliberalism
LegacyofColonialism (revised lead article - will be uploaded to website when i can be arsed - www.legacyofcolonialism.org)


The post-war Anglo-American consensus:

As an aftermath of WWII, due to the immense cost of post-war reconstruction, the colonial empires belonging to the main European powers broke up through the success of the national liberation movements of the 1950s and 1960s (P.46, Alexander and Renton), enforcing a temporary economic retreat of these imperialist powers (exhibiting a relative and temporary economic decline). All of the ex-imperialist nations replaced direct colonial control with indirect neocolonial relations to further their economic and political interests after independence. The western powers worked with new governments in these “new countries”, who were comprised of an elite capitalist class who were usually toadies of the imperialist nations. European colonial powers had to come together and work as a regional block as politically they could not afford to individually maintain their direct control over their own overseas colonies, sharing the trading regimes related to their overseas territories consolidated within a new European Common Market, later enshrined within a new European federalist union. The six founder member-states of the European Union agreed on integrating the overseas territories of France, Italy, Belgium, and the Netherlands into the new "European" Common Market, so instituting the process of neocolonial expropriation. Triangular trade patterns were re-established, whereby a system of bulk-buying of commodities produced in the colonies at prices below market prices became the norm, whilst the colonies had to pay fully competitive prices for manufactured goods they had to import which were produced in the industrialised North. This situation of commodity prices being driven down on world markets - primary commodities for which countries in the south were reliant upon as their main source of export earnings - remains the basic blueprint of the international economy as it stands at the start of the 21st century.

Generally, the post-colonial state since independence can be said to have inherited many of the attributes and structures of the colonial state. British official, Sir Hilton Poynton, a former administrative head of the British Colonial office, while speaking at a Cambridge symposium in 1978, reminded those assembled that the objectives of British colonial policy could be summed up in one word: ‘Nation-building’; ‘building’ separate nation states as the successors and inheritors of colonial states (Prof. Dani W. Nabudere in “African Unity in Perspective” taken from Kilombo Vol.5 Issue.2, August 2002).

The United States overtook the British Empire’s role as the leading economy on the world stage. By 1949, realising that her Empire was on the wane, Britain opted for a special relationship with the United States, so as to ensure that she would still achieve her foreign policy goals – albeit in a subordinate role to the new American Empire. That “special relationship” has continued to the present day, and has been perhaps most explicitly demonstrated in the Middle East – for instance in the joint MI6-CIA coup in 1953 against the Iranian government that had nationalised the British controlled oil industry. The substance of this strategic understanding spread to the extent that most of America’s brutal interventions abroad – from Guatemala in 1954 to Nicaragua in the 1980s, were given unconditional support by various British governments. Britain herself engaged in many interventions abroad, with the failed invasion of Suez in 1956 proving to be the turning point for British power globally (P.21, Curtis). However, the Anglo-American relationship has consistently steered the operational agenda of the UN Security Council whilst hypocritically flouting international law (e.g. continuing diplomatic support for repressive governments, pursuing arms exports), and has been at the heart of the neoliberal mandate, which underpins the world trade system, the Bretton Woods institutions (World Bank and International Monetary Fund) and structural adjustment.

The overall goal of American foreign policy after the Second World War was nothing less than control of the international economy. The justification for the numerous interventions abroad were put down to containment of Soviet influence. US documents reveal the true motivations of US post-war policy. Noam Chomsky: “[The] world system was to take the form of state-guided liberal internationalism, secured by US power to bar interfering forces and managed through military expenditures, which proved to be a critical factor stimulating industrial recovery. The global system was designed to guarantee the needs of US investors, who were expected to flourish under the prevailing circumstances”(P.10, Curtis). US aid was explicitly identified as a key component of America’s foreign policy goals, which was largely seen as a means to support economic stability throughout the world by means of encouraging private investment, to prevent the growth of ‘national or international power which constituted a threat to US security’, and to orientate foreign nations toward the US. US policy statements on this subject were very explicit during this time. Former head of the CIA and Secretary of State John Foster Dulles was quoted as saying: “Our so-called foreign aid programme, which is not really foreign aid because it isn’t to foreigners but aid to us, is an indispensable factor in carrying out our foreign policy” (quoted by Curtis, p-85 and taken from a State Department Memorandum of discussion, 25th October 1956, Vol X, p.118). This latter quote eloquently summed up the position; US aid was essentially a taxpayer subsidy to exporters and investors abroad. This was a main trend within the post-war Marshall plan, and has been ever since. Andrew Young, former US representative to the UN, noted in February 1995 that: “we get a five to one return on investment in Africa, through our trade, investment, finance and aid …we’re not aiding Africa by sending them aid.. Africa’s aiding us!” (quoted by Curtis, p.88 and taken from African Agenda Vol. 1 No.2 “A five to one return”, by Patrick Bond, 1995). In recent times, US food aid has been used as a means to swamp developing country markets, destroying local agriculture. More recently, food aid has been used as a vehicle of foreign policy to establish global market acceptance for Genetically Modified (GM) food in the south. For example, the US response to the 2003 famine in the south of Ethiopia was an inflow of food aid in the form of GM US grain, not cash, even though farmers in the north of the country had a bumper harvest of cassava.

As long ago as 1949, a US government study for the NSC stated that the US should find ways of “exerting economic pressures on countries that do not accept their role as suppliers of strategic commodities and other basic materials”(Chomsky, p.122-123). British priorities in the post-WWII international economy were highlighted in a Treasury memorandum of 1945. Spelt out in this document was how “the UK must devise techniques for bringing influence to bear upon other countries’ internal decisions” (Curtis, p-67).

This logic could be said to have been relevant to any of the imperialist nations namely France, Holland and Belgium. For instance, the installation of Mobutu by the west in the Democratic Republic of the Congo [DRC] (subsequently renamed “Zaire” for a number of years) occurred after the post-colonial leader Patrice Lumumba was murdered after he was leading his country in an anti-imperialist direction. Mobutu was provided with funds to carry on with his corruption as a form of bribe by the IMF, World Bank and the west.

In short, then, the post-WWII supremacy of the United States in the world economy involved a mixture of “covert action, military intervention and a range of international economic instruments, such as the Bretton Woods institutions” (Curtis, p.66). As the new centre of global hegemony initially in competition with the geopolitical sphere of influence wielded by the USSR, the USA represented a different face of the old hegemonic imperialist powers hidden under the cloak of a new framework and justification - a more sophisticated institutionalised arrangement to confine the less developed countries under political and economic subjugation (taken from “THE NEW PARADIGM OF FORCED SOCIOECONOMIC UNDERDEVELOPMENT” by Mohammed Daud Miraki). The USA’s manipulation of World Bank and IMF policies in its favour has been historically possible due to the fact that the US remains the major controlling shareholder on the steering committee of both these global financial institutions. Since the fall of the Soviet Union, at the end of the first Gulf War when President Bush Senior declared the beginning of the New World Order, US objectives have been clearly exposed within a US Defence Department document commissioned by the existing Vice-President Dick Cheney - then Secretary of Defence - entitled ‘Defence Planning Guidance’, where it stated categorically that "our first objective is to prevent the re-emergence of a new rival" – a significant statement from the last remaining global superpower clearly intent on consolidating it’s global hegemony. Mohammed Daud Miraki: “The positioning of the US military forces in different regions has two intertwined goals: to prevent the emergence of any global rival, and to secure global energy resources and raw materials”.


Powerful trading blocks such as the United States and the European Union make a nonsense of the assumption that “freetrade” is what constitutes the world trading system, as they have instilled a degree of protection in the face of rigorously applied world trade rules which are fully applied to nations in the South (such as the farming sectors in the US and EU through a widely-acknowledged 'bending of the rules' on agricultural subsidies which has led to the dumping of agricultural produce on world markets, driving down world prices to the detriment of farming sectors in the South, quite apart from the political use of food-aid by the USA).

“Subsidies are basically a transfer of money from the pockets of taxpayers to large corporate farmers, so that they can stay in business despite low prices, and to the ones who benefit the most – the Cargills and ADMs of the world who have all this grain that they’re giving away at giveaway prices and using to capture markets around the world and drive small farmers out of business in Mexico, India , Africa, Asia and South America”, (quote by Peter Rosset, Ph.D who is executive director of the Oakland, California-based Institute for Food and Development Policy). Transnational corporations such as Cargill – the largest grain transnational corporation in the world - hold structural control of the global food system in terms of integration up and down the food chain in that it has mill, storage and port facilities all over the world for it’s massive trading in grain supplies and processing (and so, holds the world-price of grain within it’s grasp). In countries of the South, export-orientated farmers are increasingly engaged in contracts with the latter-day “colonial landlords”, while now, the US government bribes countries in Africa to have their farming sectors accept GM technology in return for aid for HIV, armlocking farmers into chemical dependency and facilitating market share for biotech companies as farmers pay corporate royalties.

Cross-sector mergers are an increasing phenomenon, with amalgamation creating larger concentrations of corporate power. For example, this has been particularly the case in the 'holy trinity' of the pharmaceutical, seed and agrochemical industry, a combination that has served the interests of seed companies in particular respect of GM technology.

The broad picture which has become established is that freemarket orthodoxy or "neoliberalism" leads to national economies engaging in constantly cut-throat competition, with each economy trying to "out-compete with one another" for both multinational investment and in the shorter term, favourable market approval by investors on the stock-exchange. The result is a continual competitive race-to-the-bottom across the world, in terms of environmental and labour standards. John Bunzl: "The inherent uncertainty of international de-regulated capital markets tends to engineer a kind of paralysis of national economic policy ensuring governments' adherence only to policies they can be sure will not displease world markets" (from "The Simultaneous Policy" by John Bunzl 2000 - New European Publications). The widespread imposition of Structural Adjustment Programmes (SAPs) by the IMF and World Bank have emanated from and have been intrinsically inter-connected with the debt-crisis (i.e. being as they are policies conditional upon re-negotiation of debtor nations' loan repayment schedules). These rigid macro-economic policy prescriptions, which by the 1980s had become the accepted doctrine of the International Monetary Fund and World Bank, are based upon the deregulatory, anti-inflationary austerity policies of "monetarism"- first associated with the Thatcher and Reagan era. The World Bank and IMF largely took over responsibility for most of the "bad debt" incurred by the "Third World" countries by the mid-1980's. Much of this debt was initially owed to private banks like Barclays, Credit Lyons, Chase Manhattan etc, but the IMF and the WB moved in and 'loaned' money to a wide range of countries who were about to default on these loans. This saved the big "private banks" from disaster, and gave the IMF and WB a position of overwhelming power that they have never relinquished.

The austerity programmes of governments and the IMF and World Bank are based on misleading criteria, and not-least narrowly focused theory, combining deflationary policies such as use of interest rates and fiscal restraint (holding down government expenditure), with holding down exchange rates (so as to encourage cheaper exports and so, improve balance of payments - the supposed prospects for increased national wealth for the given indebted country). The crude science of attaching disproportionately more weight to tampering with the rigid interelationship between these 2 policies so as to rely on this as the main platform for economic growth, together with across-the-board privatisation and enforcement of neoliberal policies, has been disastrous and, in terms of the ‘one-size-fits-all’ way it has been executed across the globe, it amounts to a reductionist logic that has been taken to an insane extreme.


Capitalism entered a deep economic crisis on the early 1970s. Between 1945-73, the world capitalist system went through a boom unprecedented in all history. When the crisis hit and economic growth slowed down, profits came under threat. Now, capitalist firms - who were always in competition with each other - had to keep competing with eachother despite the crisis. The main way that they have done so has been to cut back on all drags on profitability. This means two things - a drive to cut back on labour costs and at the same time forcing workers to work harder and longer. This has taken place through work reorganisation, with the aim of cutting wages (for example, through casualisation and subcontracting), and increasing productivity while keeping wages at the same or lower level.

In these circumstances of capitalism in a constant state of self-flagellation to the point that it continually sheds and uses up human and physical resources in it’s continual fulfilment of profit margin, we witness with the forerunners of this world economic trend – the multinationals – as with the logic of capitalist growth - that these main actors need constant growth just to survive. The latest manifestation of the drive for greater and greater corporate enclosure is the proposed General Agreement on Trade in Services (GATS) which is to be negotiated in the WTO - legislation which contains policy frameworks that will eliminate any government policy "interference" where liberalisation of a particular sector has gone ahead (for e.g. a multinational will have full discretion as to whether it enacts for instance, environmental legislation, or subsidy options for the poor as provider of water provision). A recent example of GATS in action has been the privatisation of the water industry in Bolivia where those earning the minimum wage spent half of their income on water bills, while people were even charged for collecting rainwater! In Trinidad and Tobago where British company Severn-Trent have sought to privatise their water supply, the local newspaper - the Trinidad Guardian - described how, "like Christopher Columbus they came bearing small gifts and big promises. And like Columbus, their allegiance is not to the people of Trinidad & Tobago, but to their backers and shareholders" (Article in "WDM in Action", World Development Movement, Dec 2000). The preparation of this agreement was lobbied with massive support by several US finance corporations such as American Express & Citicorp (WDM, December, 2000).


Financial Capitalism - the rollercoaster ride on the flow of the dollar empire to the last stage of Imperialism & the New World Order?

The goldrush of financial capitalism is driven forward without regard to environmental damage (e.g rainforest destruction, industrial agriculture’s effects on soil erosion, the depletion of the ozone layer and global warming), unsustainable levels of resource extraction (e.g. dependence on fossil fuels), the socio-economic repercussions of working communities left stranded by the international movement of multinational investment to cheaper locations overseas, or the misallocation of resources that private investment tends towards. In terms of the latter, distortions in the economy occur such as businessmen being misled to expand when there is no market for their goods or stock speculation to drive the market to unrealistic heights (e.g. the 'net bubble'). There is left a massive susceptibility to the whims of the market and the threat to people's livelihoods through a recession or market crash (this is especially true for the millions of people relying on pension funds which are inextricably linked to stock and share portfolios). The attempts of borrowers to repay debt that grows at compound interest by investing in physical assets that display precisely the opposite tendency of compound decrement means that substantial resource depletion occurs. For example, multinationals who are driven by their pressure to achieve rapid rates of return on their shareholders’ investment capital and interest-bearing bank credit such as the “goldrush” of mineral extraction by Rio Tinto in regions like West Papua which occurs with scant regard for local indigenous populations and environmental limits, results in a trail of environmental devastation (unless it is severely regulated against, which is currently a practice that doesn’t even happen in industrialised countries and is currently something which is now perceived as “anti-free trade” by the WTO trade regime).

Neocolonialism is pursued by countries in the North who are increasingly reliant on investments abroad to sustain their own economies. For instance, Britain now is the second largest country in the world investing overseas. Much of this investment is in multinational investments abroad, such as in mining, primary-commodity production, water and electricity utilities ..etc, to name a few. For ex-colonising nation states of the post-industrialised world whose citizens are no longer cheap-labour for the manufacturing industry, the ability to earn rates of return on investments abroad can balance their own trade-deficits which exist because goods are no longer produced and are instead being imported. For instance, Britain’s trade and current account deficit is growing to such an extent that without property income, interest and returns on investments from abroad, it’s deficit would be completely unsustainable - a woefully insecure state of affairs while the world economy is seriously vulnerable to external economic shocks (for example, Britain’s foreign investments abroad increased from £90.2 billion in 1997 to £228.7 billion in 2000). This extent of investments around the world means British foreign and military policy is framed by the need to protect and promote these investments.

Whilst privatisation of national assets in the south is a process essential to ensuring that this process continues, privatisation is a process also underway in the North – an indication that a new era of corporate enclosure is well under way. This combines with the perverse reality that countries of the South literally are slaves to the repayment of unsustainable “Third-World debt” to keep the whole world financial system afloat.

Meanwhile, whilst multinational investment continually moves to countries with less regulations/cheaper labour and environmental standards, the resulting upward pressure on unemployment in the post-industrialised world means that the consumer market for the mass-production base of consumer goods can only relatively shrink in the long-term (goods which are increasingly produced in the south, such as white goods which are not built to last, so as to keep the production line that is the capitalist machine ticking over). This process of ‘deflation’ has been seen in the Japanese economy, and is the only realistic long-term projection of any economy within the post-industrialised world which has achieved continuous economic growth for so long that a levelling out of the growth-curve’s projection into the long-term is inevitable. Simply, we enjoy levels of consumption to which there will soon come a point that we can no longer continually go on consuming more and more, not least because present levels of consumption cannot hope to be sustained on a planet of such finite resources (if the entire world’s population had the same standard of living as the average American citizen, we would need the material resources of 8 planets to sustain mankind).

This is allied to the long-term crisis facing the world economy, particularly the oil multinationals as well as the American economy, from the fact that – with present consumption levels of oil – according to Colin Campbell from the ‘Oil Depletion Analysis Centre’, at this rate there will only be enough oil to sustain the world economy for another 35 years under the best of scenerios. As oil reserves in Europe, Russia and the North Sea have all peaked alongside that of the US whose reserves peaked as far back as the 1970s, the OPEC countries of the Middle East have yet to have done so (Saudi Arabia contains 25% of the oil on the planet, while Iraq has 11%). The US economy would have to be importing 90% of its oil by 2020 to hold even current demand (“Colin Campbell on Oil”, by Michael.C. Ruppert).

The war on Iraq has been nothing more than the last-chance saloon for the American oil industry to give itself a last shot-in-the–arm as they seek to consolidate oil reserves to keep open the pathway to future economic growth. This is part of the latest phase of neocolonialism by US multinationals, which has already been recently seen in the Congo, and which is now bringing in the full might of the American war machine. The prospect of the Middle East being effectively in control of the world oil economy is a pressure too great to bear for the one-upmanship of American imperialism. In terms of holding reign on the world economy, it may also be a pressure too great to bear for US capitalism if restricted supply caused rising oil prices and inflation, since the world economy is largely based upon the sale of products that are either made from oil or need hydrocarbon energy (including natural gas), via internal combustion or via electricity demand (“Colin Campbell on Oil”, by Michael.C. Ruppert). This long term trend explains why, as world oil supply shrinks, the major oil companies have been merging, downsizing, and not investing in new refineries, as “merger hides the collapse of the weaker bretheren” (Michael.C. Ruppert) so as to satisfy the whims of the stockmarket which want to see a continuing rise in share-price. This underlying process was part of the same trend which took off in the 1980s and beyond, particularly in the US and UK, of the capitulation of companies and corporations to the pension fund owners who increasingly dominated management decisions for the sake of increasing their share-price, at the expense of asset-stripping and downsizing of thousands of workers in any part of a business which was not showing a ‘suitable’ level of profit. As is the case with the oil multinationals now, staff have been purged in mergers, leading to the combined fixed costs of the new merged business ending up much less than the sum of the previous components. The never-ending pressure on corporations to attain favourable profit and loss figures for the benefit of the stock market means that the pressure of capitalist advancement takes every country on earth to ransom, leaving a trail of inequality, unemployment, poverty and social deprivation in it’s wake.

The military-industrial complex, which the US economy has traditionally relied upon to fulfil it’s economic domination of the world economy, has embarked on military intervention in Afghanistan and the Middle East which isn’t so much bankrolling its economy out of the financial hole it is now finding itself in as in previous times, but is deepening the extent of that financial hole. The cost-projection of the “War on Iraq” has been estimated to be around $100 billion, but will go on increasing as it becomes clear that the post-conflict troop deployment will be sustained for several years. This rushed, ill-thought out military intervention in Iraq will become a major strain on an already vast national budget deficit, at a time when the American economy has been on the brink of recession, though it fulfilled it’s short-to-medium term objective of kick-starting an economy which had started to stagnate before September 11th 2001.

Slowly, the long-term trend towards deflationary wind-down closes in on the dollar empire like the grim-reaper as it has done in Japan, where levels of domestic consumption become increasingly no longer sufficient enough to keep the economic growth level sustained on an upward curve. Meanwhile, the pressure on the multinationals to maintain desired levels of profit margin into the future can be observed in the way Citibank and American Express – who lobbied strongly on the GATS agreement – have done so, so as to make inroads into the state-sectors of countries in the North through GATS. Corporations such as these, looking to move into the health and education sectors of countries in the North and the South – to put it plainly - are feasting their eyes on the last section of the domestic economy which they have been unable to reach before now as they realise that their profit streams are not rising in value sufficiently, whilst economies in the North are left submissive to the self-aggrandisement of multinationals as they struggle to find enough money to fund all of their public services - unaware that this trend directly correlates with the fact that credit in the long run has become increasingly privatised, so shrinking the ability of the state to raise it’s own credit to pay for basic public services.

Unfortunately, this model of private credit monopoly has spread throughout countries in the south, hand-in-hand with this general push for privatisation in the south, and means that these same countries are gradually being held more hostage to rampant forces of global capital, even more than has resulted from the historical process of imperialism which has operated up until now.

Without the extraordinary power of money creation by international and large commercial banks, financial markets would not operate to such a massive extent. It is obvious that as the amount of debt that can be recycled into loans increases, this generates greater and greater capital for speculative investment. Due to the volatile nature of the stock exchange - effectively gambling shops or dens of predatory speculation - the value of companies ride on the crest of the wave of the market. What is at the centrepiece of this 'roulette-table of stock and shares', "where the chips are peoples' lives and livelihoods" is the power of international finance - banks, pension and trust funds, investment houses and ''hedge" funds - which is simply colossal and dwarfs even the power of multinationals (Corporate-Watch, 1999 and Rowbotham, 1998). Companies can even use this 'easy credit' to buy their own stock which drives the price up, making fortunes for the stockholders. Of course these companies are greatly increasing their debt which will have to be paid back out of future profits. In the first quarter of 1999, IBM spent $2.1 Billion buying its own stock. At the same time IBM had increased its outstanding debt to $30 billion dollars. (from New York Times 22/4/99).

Since the start of the New Millenium, several chickens have been coming home-to-roost for the economy of the United States. The whole foundation of American capitalism, is conceivably now more at risk of falling like a deck of cards than ever before, ever-since the financial crisis of Enron exposed the accounting deception at the heart of a major US multinational corporation, creating a surge of loss of confidence on the American stock exchange. The company had thousands of offshore partnerships, through which it had hidden over a billion dollars in debt.

The money-creation process concentrated within the private banking sector - which drives the engine of this financial capitalism without being able to take it's foot off of the accelerator pedal – continues onwards and upwards until such a point that economic activity, which the debt repayment is reliant upon, can’t keep up with the extent of return-on-investments needed, causing a pinprick in the economic bubble. This is the nature of the business cycle, boom then bust. The extent of a worldwide “bust” being larger than we have ever seen has been temporarily averted with the growing intensity of the use of US military power, the sponsorship of military intervention in Colombia, the flow of IMF money to large-scale capitalist development projects in Latin America such as the Plan Puebla-Panama, continued manipulation of world trade terms in the WTO (with the Cancun G20 having capitulated due to the “buying-off”of Brazil and India in recent trade negotiations) and ongoing strangulation of nation-by-nation economic autonomy through the dominance of the IMF, despite Latin American alternative economic zones such as the bolivarian revolutionary process in Venezuela and the subversive example it is starting to propogate and Mercosur (the new economic zone being set up between Brazil, Uruguay, Argentina and Paraguay). Resistance in Latin America – America’s backyard - is key to a unravelling of the US’ colossal economic empire (with Uribe’s Right-Wing democratic-dictatorship government supported by paramilitaries in Colombia being the US’s key partner in the region). However, this unravelling would necessarily lead to the unravelling of global capitalism in the short-to-medium term.

All the major nation state economies in the world are extremely interconnected. America’s current account deficit is effectively financed by the holding of dollar reserves in banks across the whole world, and, other investments such as bonds, stocks, land ..etc (by late 2002, foreigners had total claims on the US economy of $2,600 billion net of US claims on the rest of the world - equal to 25% of US GDP in 2002). As has long been forecast and was expected after the Asian crisis of 1997, in a short-term scenario, the financial-capitalist model is susceptible to collapsing in on itself because, in an increasingly interconnected world, financial collapse in the American economy would lead to the whole deck of cards tumbling. The system which survives on a positive spiral of monetary value forever spiralling upwards could just as easily spiral dramatically downwards at twice the speed if there was a financial collapse and run-on-the-banks, as happened in Argentina. Currently, the US deficit is sustaining the world economy. If US consumers stopped spending for whatever reason, then the world economy would grind to a halt. America’s twin towers of debt (it’s current account and fiscal balance) would implode the American economy. A prolonged war in Iraq is certainly bleeding the economy as the US has spent extra billions on it’s huge military budget.
This excessive National Debt “overdraft” which will never have any chance of being paid off is continually added to, as the US is able to finance unlimited trade deficits with the rest of the world. The US trade deficit now stands at $500 billion per year; the US economy infact is racking up a trade deficit of $1.4 billion per day. Financial liberalisation, such as through the emergence of the Eurodollar market in the 1960s, has meant that speculative flows have increased massively since then to the extent that they partially counteract this trade deficit, largely financed by these financial inflows (sharedealing, currency dealing and other investment incomes). The US economy’s departure from the Gold Standard in 1971 to flexible interest rates and exchange rates came about for reasons not normally mentioned in the conventional explanation. Between 1944 and 1971 America lost more than half of its gold reserves. This crisis brought about a new and just as pragmatic solution. If gold reserves were the problem, the government reasoned, then just get rid of the gold standard, while the world financial markets sustain confidence in the dollar - the world's most widely used currency. The lack of constraint on America's ability to create their own currency at will correlates directly with both the rate of money-creation in the banking system and the rate of increase in the national debt of the US. As the Dollar has remained the international medium of exchange used by foreign business, in order for investors to buy American stocks or bonds, they exchange their currency for U.S. dollars and so, these countries have to hold more U.S. dollars in reserves to accommodate all the exchanges, just as they had held gold in the past during the Gold Standard (before 1971). The volatile nature of capital flows has exacerbated the liquidity shortage and forced other countries (particularly developing countries) to keep far higher reserves of foreign exchange than used to be necessary, as a protection against sudden market feelings. During the same time as the dollar proportion of global reserves has increased, so has the sensitivity of other countries to its value. Because of the US trade deficit, international liquidity has risen very speedily since 1998. Total world foreign reserves also rose to $1.53 trillion, a rise of 11% of which 68% was in dollars. Data from the IMF suggests that the year 2001 was the second year in a row when capital flowed from developing countries to support consumption in the west (P.Bowring, “From Poor to Rich: Capital is flowing in the wrong direction”, International Herald Tribune, 12/12/2001).

Today, increasing monetary convergence within defined trading blocks (e.g. the EU) has increasingly become a growing trend. More & more countries are being encouraged to make the Dollar their main currency. Peru has been the latest, whilst open revolt to this and structural adjustment (liberalisation) is spreading, particularly in Chiapas. It is no coincidence that in the post-war situation of Iraq, the dollar has been established as the most trusted currency, due in no small effort to the fact that it is the currency with which workers have been paid in, in the post-war reconstruction effort.

In short, then, the combination of free capital mobility, free trade (except imports that threaten domestic US industries), international investment free from any discriminatory favouring of national companies, the dollar as the main reserve currency in the world economy and the lack of constraint on America’s ability to create their currency at will (such as a dollar-gold link), means that the US can finance unlimited trade deficits with the rest of the world so that normal world market forces bolster the economic pre-eminence of the US economy, allowing American citizens to consume far more than they produce. The extent of the American empire is such that other national economies’ export markets hugely depend on the buying power of American consumers, so securing the flow of dollars into America. Meanwhile, with the ability to create their currency at will, the US economy has autonomy to decide on its own exchange rate and monetary policy, whilst intense competition between exporters in the rest of the world gives them an inflow of imports at constantly decreasing prices relative to the price of US exports. Meanwhile, the US trade deficit stays locked in place, so that the US’ national debt continually expands, as America’s “waistline of consumption” has no bounds (the American population constitute 10% of the world population, but consume a third of total world consumption – Total World GDP).

However, the most serious trend in the world economy is the ever-increasing level of international debt charged at compound interest (owed by the less-developed nations - debt which is altogether different than national debt which is not owed to outside financial institutions or overseas economies). Poor countries are borrowing at interest rates as high as 18%, while the US borrows through US Treasury bonds at 3%, which means that borrowing countries in crisis have to repay more when their capacity to repay is less. (Ref: New Economics Foundation/Jubilee Research, "The US as an HIPC or 'heavily indebted prosperous country'" April 2002). The HIPC (the Highly Indebted Poor Countries) programme - has proved to be nothing more than a brief period of respite to prepare the ground for a new round of corporate enclosure through a more robust version of SAPs which are largely targeted to greater liberalisation and privatisation.

The World Bank and IMF, like any other banking institution, continually loans out money which is created out of nothing! The World Bank actually creates money through drawing up bonds which it sells to commercial banks, which these banks actually pay for through their own process of fractional reserve themselves (their own depositers' money does not reduce itself). Meanwhile, the IMF operates a system called "Special Drawing Rights", which serve as an additional currency convertible to any national currency, another form of money which was originally a debt converted to money. With greater outflows of money than inflows affecting the indebted nations of the south due to the continuation of their debt-repayment schedules together with capital flow from the developing world due to the maintenance of higher reserves in those countries as protection from the volatility of world markets – this continued flow of money perversely continues to prop up the world financial system to a small extent, as this flow of money is a part of the total amount of reserves which sustain the money creation process which the banking system requires to continue into perpetuity.

So, for those countries with this international debt, these chains of debt keep going round a fairytale roundabout of economic progress, which only goes to create ever spiralling debt as it moves round, and so, these chains can never be disentangled within a system which keeps moving forward with it's own self-generating momentum. To use another analogy, the spiralling distortion of this system means that the manner in which indebted nations are increasing economic growth to pay off their debt is akin to them running up a downward moving escalator.

What the World Bank and IMF is effectively complicit in suggesting, then, is that in refusing to bail out these countries, what it is doing is rather-like consigning these countries to the lower deck of the slave ship, and so while it periodically checks to see if her crew is showing any signs of physical exhaustion, they are given just enough scraps from the dining table to keep them in toil to keep the slave ship on course. And of course, if the slaves all refused to stop rowing, what then for the Capitalist voyage? Well the rich elites' bounty would be at risk. Captain of the ship - the WB & IMF - would lose their bearings as the seas got rough - the ship might even completely lose course? Then anything could be possible - even a mutiny ...and the slaves could even achieve liberation within the new order!


The stark reality is that the global economy - based upon confidence in a banking system which underwrites interconnected investment decisions based upon short-term speculation, creates value into perpetuity which bears no relation to underlying environmental wealth/health, whilst millions in the North rely on pension investments which derive value from exploitative investments abroad and the whims of the marketplace – all of which are susceptible to a financial crash if the wheels of economic progress became suddenly halted (for e.g. due to a major terrorist attack) to such an extent that it abruptly switched off the money flow to banks and so caused a banking crisis. Compared to the financial crash of 1929, a financial meltdown would be much more swifter and harsher now because the pyramids of bank-generated numbers upon numbers which the economic might of nations, corporations, financial institutions and individuals directly and indirectly props up is much larger in scale now than it was back then. And it would be precisely those economies deeply reliant upon investments abroad, inward investment coming from overseas and whose underlying economic base was predominantly concentrated in the service sectors who would have the furthest to fall down, as the financial bubble abruptly burst. This is especially the case since more and more capital is engaged in non-productive investment such as speculation in land, property and currencies, and predatory purchasing of mortgage, debt, insurance and pension policies. With the threat of international capital flow suddenly drying-up in response to a financial crash, and so, accelerating the momentum of an economic downturn, Britain would be in a particularly vulnerable position, being as it is more dependent on inward capital investment from abroad than any other economy in the world. Meanwhile, US hegemony is propped up by the universal confidence in the dollar.

With the global economy now transformed into one where much of the ever-expanding wealth of the combined largest economies in the world is comprised of financial capital flows in the non-banking financial institutions, tweaking the whole world system to make it more “sustainable” with it’s complex web of financial institutions, banks, corporations and stockholders working in tandem with eachother, chewing up the world’s resources and leaving a trail of destruction in it’s wake, is now as futile as turning a steam ship in the middle of the ocean 180 degrees around when its inevitable course has already been set. Like the Titanic, however, the iceberg of huge financial meltdown could conceivably approach the American economy (and so, the world economy) at any time in the hazy mist of economic buoyancy. And after the crash, nations states and those sectors in the world economy increasingly owned by corporations, will have to pick themselves up and go on to regenerate – with China and Russia being major players, with the corporate sector having the option of the Euro if, indeed, the US economy implodes in on itself to such an extent that the dollar loses it global superiority.




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