Although Marx discerned in the middle of the 19th century that a new class of capitalists was creating ‘a world after its own image’, it actually took until the beginning of the 21st century before ‘a constantly expanding market’ could be said to have fully spread capitalist social relations ‘over the entire surface of the globe’. Moreover, it was not a generic ‘bourgeoisie’ driven by competition to ‘nestle everywhere, settle everywhere, establish connections everywhere’ that alone made global capitalism after its own image. It took an empire of a new kind, founded on US capitalism’s great economic strength and centred on the capacities of the American state, to make global capitalism a reality. Yet no sooner did the task look to be more or less complete when the fourth great crisis of global capitalism (after those of the 1870s, the 1930s and the 1970s) spread rapidly across the world. Marx’s observation 150 years earlier, that the making of capitalism on a global scale was ‘paving the way for more extensive and more destructive crises’ while at the same time ‘diminishing the means whereby crises are prevented’, seemed all too fully confirmed. And it was now the American empire that seemed to resemble ‘the sorcerer who is no longer able to control the powers of the nether world whom he has called up by his spells’.
Given the severity and duration of the latest crisis in a global capitalist economy that the American state had been so central to constructing, it was hardly surprising to see a resurgence of pronouncements that US hegemony was coming to an end. As pundits of every persuasion once again blur the lines between a capitalist crisis and the decline of the US empire, it is especially important to recognize the central role which the American state continues to play in reproducing global capitalism. To be sure, the current crisis has amply demonstrated the many challenges and contradictions it faces in doing this, but it has also demonstrated that while the American empire is certainly not always able to control the spirits it has called up from the deep, it nevertheless remains critical to the system’s survival.
The new crisis has confirmed more generally the continuing significance of states in global capitalism. Although the institutions of the European Union have more constitutional authority than other international organizations, their inability to intervene so as to resolve the debt crisis of their smaller member states is largely due to the internal political dynamics within other member states, above all Germany. The eurozone crisis also confirms a basic fact about the nature of both globalization and informal empire: state sovereignty is not effaced within it. This can be seen in the difficulties the American state has continually had to confront in getting the German state, from the time of the Herstaat banking crisis in the 1970s to the Mexican crisis in the 1990s to the crisis of the Euro today, to overcome its obsession with inflation and ‘moral hazard’ and to take its share of responsibility for containing crises. Yet this cannot be understood in terms of states, least of all Germany, retreating from free trade and free capital flows in favour of economic nationalism. After decades of economic integration, there are no national bourgeoisies like those that supported the fascist turn in Germany or Italy in the interwar period.
When the term ‘empire’ was openly embraced to characterize the American state at the time of the Bush administration’s response to 9/11 (including by some of its advisors), the stress was placed, in Niall Ferguson’s words, on the ‘potential advantages of a self-conscious American imperialism’ as against ‘the grave perils of being an “empire in denial”’. The anxieties of a Kansas farmer that ‘we are trying to run the world too much… like the Romans used to’ were taken as exemplifying not just the difficulties of mediating the American state’s international and domestic roles, but the loss of imperial vigour and discipline, the main measure of which, allegedly, was that the bill for Social Security in the US was larger than the bill for national security. Notably, it was not a new world of rival imperial states that occupied the minds of such analysts of US empire. The eyes cast askance at Germany and France over the tensions which the invasion of Iraq initially produced were largely overcome once these states introduced the motion at the UN to have it endorse the occupation a year later; while the US integration with China was such that Ferguson himself dubbed it ‘Chimerica’. With the typically absurd hyperbole that was so common in the years after 9/11, he rather claimed it was now only ‘non-state actors’ like criminal organizations and terrorist cells ‘who truly wield global power’.
The real problems of the US empire today appear in a very different light. As the global economic crisis triggered by the American financial crisis of 2007-8 persists, these problems have more to do with the difficulties of implementing adequate measures for ‘failure containment’, let alone ‘failure prevention’. Yet unlike the 1930s this has not been due to a breakdown of cooperation among capitalist states. As the G20 Toronto Summit communiqué of June 2010 proclaimed: ‘While the global economic crisis led to the sharpest decline of trade in more than seventy years, G20 countries chose to keep markets open to the opportunities that trade and investment offer. It was the right choice.’ The leaders renewed their ‘commitment to refrain from raising barriers or imposing new barriers to investment or trade in goods and services… [and] minimize any negative impact on trade and investment of our domestic policy actions, including fiscal policy and action to support the financial sector.’
As the global economic persists, these problems have more to do with the difficulties of implementing adequate measures for ‘failure containment’, let alone ‘failure prevention’
But capitalist solidarity itself could not resolve the crisis of a finance-led global economy, where the orthodoxy of insisting on austerity – both to ensure that states pay their bond holders and to maintain vigilance against inflation – reinforces the stagnationist tendencies of under-consumption that comes with the diminished consumer credit available to sustain effective demand. The liberalization and expansion of finance, as this book has shown, was essential to the making of global capitalism, yet it came with a degree of volatility that threatened economic stability.
Reviving capitalist health today requires strengthening the confidence of bankers that their activities will be appreciated and their assets protected. The unresolved dilemma for all capitalist states today is how to both stimulate the economy and regulate financial markets so as to limit increasingly dangerous volatility without undermining the ability of finance to play its essential role in capitalism. For most states, any attempt at fiscal stimulus aggravates the fears of bond holders that they won’t be repaid, and the increased rate of interest on the bonds necessary to fund fiscal and trade deficits requires restructuring state expenditure to prioritize interest payments over social expenditures, infrastructure development and public employment – thereby negating the very attempt at stimulus. This is the less the case for the US itself due to the ‘safe haven’ Treasury bonds represent, the appreciation of which is inseparable from the role of the American state as the ultimate guarantor of global capitalist interests. But the US faces its own policy dilemmas in terms of economic stimulus. The one immediate measure the US administration could take on its own to quickly revive effective demand, instructing the US housing agencies it directly controls to write off mortgage debt above the current value of existing homes, has been ruled out because it would reduce the banks’ mandated capital adequacy just as they are being required to raise it, and lower their revenues as homeowners made smaller monthly
payments. This once again reveals the structural relationship between Wall Street and Washington: what makes such a move impossible is not that the votes in Congress are not there, but that it would threaten the solvency of some of the very large banks who are more than ever ‘too big to fail’ because their failure would trigger the failures of other financial institutions, not only in the US but around the world.
To be sure, the conflict between Congress and the administration, reflecting the internal contradiction which the American state faces between acting as both the state of the United States, and as the ‘indispensable’ state of global capitalism, has certainly worried leading capitalists and officials. The CEO of Caterpillar, the world’s largest manufacturer of construction and mining equipment, called Washington’s debt ceiling saga in the summer of 2011 not only ‘ugly’ but also ‘a red herring’ which got in the way of Congress’s ratification of outstanding free trade agreements, as well as much-needed domestic infrastructure programs. The Fed’s Ben Bernanke, noting that Congress had ‘disrupted financial markets’, warned that ‘similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.’ Yet although it was precisely on these grounds that the credit rating agency Standard & Poor’s downgraded US Treasury bonds, what was especially remarkable was that the appetite for these bonds, even at record low interest rates, far from abating, increased. Ruminations about an alternative reserve currency went nowhere, especially as the smouldering crisis in Europe’s interbank markets burst into flames, sending the widespread earlier expectations that the Euro would challenge the dollar up in smoke.
Much like Germany in the crisis of the 1970s, even China today explicitly speaks in terms of the US’s unique responsibilities for ‘the world’s economic soundness’ given its status as ‘the world’s largest economy and the issuer of the dominant international reserve currency’. American political leaders were reminded that ‘political brinkmanship in Washington is dangerously irresponsible… It risks, among other consequences, strangling the still fragile economic recovery of not only the United States but also the world as a whole.’ Similarly, the concerns of capitalists in developing capitalist states were that the US might now abandon them. The extent to which they continued to look to the American state to help them restructure their own states was seen when Obama visited India in November 2010, accompanied by the largest ever entourage of US businessmen on such a trip, and told an assembly of Mumbai capitalists: ‘We don’t simply welcome your rise, we ardently support it. We want to invest in it.’ The importance of this to Indian capitalists was made very clear by the cofounder of India’s National Association of Software and Service Companies, who recalled that the US ‘was the one who said to us… “Go for free trade and open markets.”’ This was crucial to his industry’s success in ‘pushing our government to open our markets for American imports, 100 percent foreign ownership of companies and tough copyright laws when it wasn’t fashionable.’ Stressing the continuing importance of the US in overcoming ‘the socialist/protectionists among India’s bureaucrats’, he emphasized that ‘We don’t want America to lose selfconfidence… there is nobody else to take that leadership. Do we want China as the world’s moral leader? No. We desperately want America to succeed.’
There were deep structural factors at work here, reflecting not only the extensive networks that link the world’s capitalists to US MNCs, but to US financial, legal and business services more generally. The enormous demand for US Treasury bonds showed the extent to which the world remained on the dollar standard and the American state continued to be regarded as the main underwriter of value. The US Treasury and Fed’s central role in global crisis management – from currency swaps to provide other states with much needed dollars, to overseeing policy cooperation among the G20 as well as G7 central banks and finance ministries – was also confirmed. It was the formerly highlytouted supranational system of European governance – exposed in the crisis for its lack of central authority over taxation, bond issuance and budget approval – which now appeared most dysfunctional for the management of global capitalism.
The eurozone crisis was not something that cheered the American state. The Fed’s provision of liquidity to US financial institutions was undertaken with one eye to their passing that liquidity to Europe through the interbank market. The Treasury was intimately involved in policy discussions, directly as well as through the IMF, with Geithner ‘pressing Europe to take more decisive action’ at the regular conference calls of the G7 finance ministers now taking place almost weekly. It was a sign of ‘the growing concern in Washington at Europe’s handling of its debt crisis’ by the fall of 2011 that Geithner flew over to attend meetings of European finance ministers. Particularly frustrating was the limited extent to which the European Central Bank was prepared to act as lender of last resort. But behind this lay a frustration with the European states themselves. At a meeting in Washington an ECB official was greeted by his American host who ‘brandished the Articles of Confederation, the 1781 precursor to the United States Constitution, to use as an example of why stronger unions become necessary’. It was clear by this time that all the heady talk between Russia, China and other emerging market states about using ‘SDRs’ (the IMF’s ‘special drawing rights’), let alone the Euro, to displace the dollar as the international reserve currency had amounted to little more than rhetoric. Rumours that the Middle East’s oil exporting states would abandon the dollar vanished with the 2011 ‘Arab spring’, just as May ’68 put a stop to expectations that France might lead a return to the gold standard. The dollar’s continuing central global role certainly produced problems for rapidly growing emerging market economies, which experienced high capital inflows and currency appreciation as a result of the Fed’s low interest rates and quantitative easing policies. This stoked real estate and stock market bubbles in these countries, and threatened to undermine their competitiveness and bring back hyper-inflation. But criticisms such as those repeatedly heard in 2011 from Brazil, that US policy might lead to ‘currency wars’, amounted to nothing like a challenge to US hegemony.
The notion that the G20 would effectively become the linchpin of crisis management and policy coordination appeared mere window dressing by the time of the Cannes summit in the fall of 2011, with the BRIC countries left to insist that whatever financial contributions they might make to the European bailout would be channelled through an IMF still dominated by the G7 and especially the US Treasury. The most significant change from the pattern of crisis management in the 1980s and 1990s was that whereas it had earlier been the developing states that were required to practise austerity, the prescription for a capitalist cure for this structural crisis was reversed: the G7 states now committed themselves to austerity, while encouraging the emerging market states to stimulate their economies. This reflected the fact that the major developing states were now so much more an integral part of global capitalism, so the issue was no longer just to restructure them so as to facilitate free trade but also to make them more responsible for sustaining global demand. Yet the rising purchasing power of the developing countries could hardly make up for stagnation in the developed ones (US consumption expenditure alone remained some five times that of China and India combined).
The real issue was less about changing consumption patterns than whether any other state would be capable of playing the crucial role in the reproduction of global capitalism played by the American state. Claims that this would be a European supra-state now looked threadbare indeed. And amidst all the talk about the impending dominance of China, the crucial question rarely posed was whether the Chinese state had the capacity to take on extensive responsibilities for managing global capitalism. No one seriously imagines Russia, even with its admission to the WTO, could readily develop such capacity, but even China is manifestly still a very long way off from being able to do so. To this point, far from displacing the American empire, China rather seems to be duplicating Japan’s supplemental role in terms of providing the steady inflow of funds needed to sustain the US’s primary place in global capitalism.
Were this to change, it would require deeper and much more liberalized financial markets within China, which would entail dismantling the capital controls that are key pillars of Communist Party rule – at a time, moreover, when its own banking system is under severe stress. Furthermore, a major reorientation of Chinese patterns of investment and production away from exports towards domestic consumption would have incalculable implications for the social relations that have sustained China’s rapid growth and global integration. It would involve a restructuring of the country’s coastal industries, which would come up against powerful vested interests among Chinese capitalists and regional officials. And getting households to spend their savings on current consumption would also involve developing a welfare state as well as ongoing increases in wages. Given the redistribution of income that this would entail, which could only happen through a substantial shift of power to the working class, all of this – while certainly possible in the long run – would meet resistance that would go well beyond just those firms involved in exporting lowwage goods.
The current conflicts in which Chinese workers are engaged, as seen in the strike wave of 2010 which yieldedsome large wage increases but no clear organizational transformation in Chinese trade unionism, pose increasingly sharp choices for the whole of Chinese society. It cannot be known in advance whether working class struggles in China will lead to the emulation of the West’s individualized consumerism or whether they will lead to new collectivist claims. What is clear is that the outcome cannot but impinge on, and possibly even be affected by, the direction working classes elsewhere take out of the current crisis.
