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U.S. Hegemony: Continuing Decline, Enduring Danger

Richard B. Du Boff is Professor Emeritus of Economics, Bryn Mawr College.

“Global hegemony” might be defined as a situation in which one nation-state plays a predominant role in organizing, regulating, and stabilizing the world political economy. The use of armed force has always been an inseparable part of hegemony, but military power depends upon the economic resources at the disposal of the state. It cannot be deployed to answer every threat to geopolitical and economic interests, and it raises the danger of imperial overreach, as was the case for Britain in South Africa (1899–1902) and the United States in Vietnam (1962–1975).

Britannia ruled the waves from 1815 to 1913, but by the 1890s she was under economic challenge from the United States and Germany, and between the two world wars was no longer able to function as underwriter to the world system. U.S. hegemony began during the Second World War and peaked some thirty years later. The United States still has immense—unequalled—power in international economics and politics, but even as the sole superpower it finds itself less able than it once was to influence and control the course of events abroad. Its military supremacy is no longer matched in the economic and political spheres, and is of dubious value in preserving the global economic order and the stake that U.S. capital has in it. Even during the golden days of 1944–1971 the United States was unable to avoid military defeat in Vietnam and a draw in Korea.

Slow Merge Ahead: Hegemony Since the 1970s

An idea of the decline of American economic power can be formed from the following:1

  • In 1950 the United States supplied half the world’s gross product, against 21 percent at present. Sixty percent of the world’s manufacturing production in 1950 came from the United States, 25 percent in 1999. The U.S. share of exports of commercial services, the fastest growing part of the world economy, stood at 24 percent in 2001, while the European Union (EU) had 23 percent—40 percent if intra-EU exports were counted.
  • Non-U.S. companies dominated major industries in 2002, accounting for nine of the ten largest electronics and electrical equipment manufacturers; eight of the ten largest motor vehicle makers and electric and gas utilities; seven of the ten largest petroleum refiners; six of ten telecommunications companies; five of ten pharmaceutical firms; four of six chemical producers; four of seven airlines. Of the twenty-five largest banks in the world, nineteen were non-U.S. banks, although the two largest were Citigroup and Bank of America.
  • Of the top one hundred corporations in the world in 2000 ranked by foreign-held assets, twenty-three were American. Together, Germany, France, the United Kingdom, and the Netherlands, with a combined gross domestic product (GDP) seven-tenths that of the United States, had forty; Japan had sixteen. During the 1990s, the share of U.S. multinationals in the foreign sales of the world’s one hundred largest multinationals decreased from 30 to 25 percent; the share of EU-based companies increased from 41 to 46 percent.
  • Twenty-one percent of the world’s stock of direct investment in other countries was American in 2001, compared with 47 percent in 1960. During 1996–2001, 17 percent of all new direct investment abroad came from the United States and 16 percent from Great Britain; together, France and Belgium-Luxembourg supplied 21 percent.
  • Of the twenty-five largest mergers and acquisitions (M&As) in the United States in 1998–2000, five involved takeovers by foreign multinationals (three British, two German). Of the top twenty corporations involved in cross-border M&As from 1987 through 2001, only two were U.S. (General Electric and Citigroup); they accounted for 5 percent of the value of all M&A deals during these years.

In global finance, the United States is not only less dominant, but vulnerable. The weak link is the dollar, whose status as the world’s key currency has been eroding since the 1970s, irregularly and with periodic revivals. Between 1981 and 1995, the share of private world savings held in European currencies increased from 13 percent to 37 percent, while the dollar’s share fell from 67 to 40 percent. Forty-four percent of new bonds have been issued in euros since the new currency was introduced in 1999, closing in on the 48 percent issued in dollars. Half the foreign exchange reserves held by the world’s central banks were composed of dollars in 1990 compared to 76 percent in 1976; the proportion rose back to 68 percent in 2001 because of the phasing out of ecus (reserves issued to European banks by the European Monetary Institute) to make way for the euro.2 For the first time since the Second World War there is another source of universally acceptable payment and liquidity in the world economy—at a moment when the U.S. balance of international payments is chalking up record deficits.

Since 1971, when the United States had a deficit in its trade in goods (merchandise) for the first time in seventy-eight years, exports have exceeded imports only in 1973 and 1975. A nation can run deficits in its trade in goods and still be in overall balance in its dealings with foreign countries. Deficits in trade in goods can be offset by having a positive balance in sales of services abroad (financial, insurance, telecommunications, advertising and other business services) and/or income from overseas investments (profits, dividends, interest, royalties, and the like). But the U.S. merchandise deficit has become too big to be paid for by services sold to foreigners plus remittances on investments. The U.S. current account (the sum of the balances in trade in goods and services plus net income from overseas investment), almost constantly in surplus from 1895 to 1977, is now deteriorating sharply; the merchandise deficit has become too big to be paid for by services sold to foreigners. And since 1990, the positive balance on investment income has been shriveling as foreign investment in the United States has grown faster than U.S. investment abroad. In 2002, the balance turned negative: for the first time the United States is paying foreigners more investment income from their holdings here than it receives from its own investments abroad.

Like most gaps between income and expenses, the current account deficit is covered by borrowing. In 2002, the United States borrowed $503 billion from abroad, a record 4.8 percent of GDP. When foreigners receive dollars from transactions with U.S. residents (individuals, companies, governments), they can use them to buy American assets (U.S. Treasury bonds, corporate bonds and stocks, companies, and real estate). This is how the United States turned into a debtor nation in 1986; foreign-owned assets in the United States are now worth $2.5 trillion more than U.S.-owned assets abroad. By mid-2003, foreigners owned 41 percent of U.S. Treasury marketable debt, 24 percent of all U.S. corporate bonds, and 13 percent of corporate stock. U.S. companies are continuing to invest abroad, but unlike the British Empire in the decades before the First World War, the United States is unable to finance those investments from its current account. By contrast, Great Britain’s current account was in surplus, averaging 3 to 4 percent of GDP every year from 1850 to 1913, when income from services and foreign investment was larger than its merchandise trade deficits.3

So far the global investor class has seemed willing to finance America’s external deficits, but it may not be forever. The deficits are exerting a downward drag on the dollar, arousing suspicion that the United States favors a cheaper dollar to help pay off its ballooning trade deficit. As the dollar declines in value, the return to foreign investors on dollar-denominated assets falls. German investments in choice office properties in New York, San Francisco, and elsewhere were cut back sharply in 2003. While the buildings were becoming cheaper in euros, rents were shrinking when converted from dollars back home. “We can get the same return in Britain and the Nordic countries, so why go to the United States, where the currency risk is greater?” asked the chief investment officer of a Munich-based property fund.4 Until recently all Organization of Petroleum Exporting Countries (OPEC) sold their oil for dollars only; Iraq switched to the euro in 2000 (presumably terminated with extreme prejudice in March 2003), and Iran has considered a conversion since 1999. In a speech in Spain in April 2002, the head of OPEC’s Market Analysis Department, Javad Yarjani, saw little chance of change “in the near future…[but] in the long run the euro is not at such a disadvantage versus the dollar. The Euro-zone has a bigger share of global trade than the US and…a more balanced external accounts position.” Adoption of the euro by Europe’s principal oil producers, Norway and Britain, could create “a momentum to shift the oil pricing system to euros.” Thus, concluded Yarjani, “OPEC will not discount entirely the possibility of adopting euro pricing and payments in the future.”5

If foreign investors get cold feet, ceasing to invest in U.S. industries or selling off their dollar holdings, the dollar would start falling faster. Interest rates in the United States might surge, borrowing money would become harder, and consumers would pay more for imported goods, draining income from other purchases and dampening the economy. A dollar rout could cause skittish investors to dump U.S. stocks and bonds, sending Wall Street into a dive. In any event the dollar is now perceived to be as risky an asset as the euro and possibly two or three other currencies (yen, sterling, Swiss franc).

The Yankee Trader in World Markets

With its economic preeminence under challenge and slipping in the 1970s, the United States turned toward a more belligerent international trade policy. Under Section 301 of the Trade and Tariff Act of 1974, the president, acting as prosecutor, judge, and jury, could seek redress against any nation violating “the rights of the United States under any trade agreement” and retaliate against any foreign activity that is “unjustifiable, unreasonable or discriminatory…and burdens or restricts United States commerce.” Among the new trade weapons were the “orderly marketing agreements,” reached with South Korea, Hong Kong, and Taiwan in 1973 to put “voluntary” restraints on their exports of cotton and synthetic textiles to the United States; in 1981 Japan agreed to slow its automobile exports. When a General Agreement on Tariffs and Trade meeting in 1982 was adjourned without agreement on a new round of negotiations because of European resistance to U.S. proposals, the United States announced that henceforth it would expand trade on a “two-track” approach—reaching bilateral agreements with individual countries while at the same time pursuing multilateral accords to achieve an open trading system. This move toward bilateralism led to the 1984 Caribbean Basin Initiative granting trade preferences to countries in the region, a trade pact with Israel a year later, and the Canada–United States Free Trade Agreement (1988), extended to Mexico in 1994 by the North American Free Trade Agreement (NAFTA).

By 1990, more than a hundred investigations had been initiated under Section 301, with mixed results. A major 301 push began in October 1993 against Japan, which was now bypassing its “voluntary” agreement of 1981 by producing automobiles inside the United States. A 100 percent tariff was to be imposed on the values of thirteen Japanese-made automobiles unless Japan deregulated its auto parts market and imported at least a hundred thousand U.S.-made models annually. Despite what the Clinton administration called the “occasional acrimony” of the talks, and the “disingenuous” criticisms of the Japanese, an agreement was reached in June 1995, just as punitive tariffs were to go into effect. No new tariffs or quotas were imposed; in return, Japan made vague promises to change its system of parts suppliers and to increase numbers of dealers handling American-made cars. “In Tokyo, the agreement was generally seen as not requiring Japan’s major auto makers to do much more than they would have done anyway.”6

In 1998 the United States was rocked by three defeats in the World Trade Organization (WTO). In January, a WTO panel ruled that Japan’s support of Fuji Film in its competition with Kodak did not constitute a trade barrier. In May, another panel found that the United States could not stop imports of shrimp caught in nets that kill sea turtles. Then in June, an appeal panel allowed the EU to reclassify computers and parts as telecommunications equipment in order to protect this industry with tariffs. The United States tried to retaliate in trade involving bananas and hormone-raised beef cattle. The banana dispute began in 1993 when U.S. distributors of Latin American fruit (led by Chiquita Brands chief executive Carl Lindner, a large financial contributor to both Democratic and Republican parties) claimed that they were denied access to European markets because the EU’s quota and licensing system favored bananas grown in former European colonies in the Caribbean and Africa. The United States also targeted the EU’s ban on the use of growth hormones in beef, a ban that applies to domestic EU production as well as imports.

In April 1999, the WTO gave the United States a partial victory in the banana war—no punitive damages but wider access to European markets and reduced preferential trade status for Caribbean and African producers. In the hormone war, the European ban was ruled illegal but the $900 million in damages claimed by the United States and Canada was reduced to $128 million, and the dispute remains unsettled.

The EU struck back. In July 1999, a WTO panel ruled that the U.S. Foreign Sales Corporation (FSC) law, enacted in 1971, constituted an illegal export subsidy and ordered that it be abolished, marking the largest trade defeat ever for the United States. Under the FSC, around six thousand U.S. companies now shelter up to 30 percent of export income from U.S. taxes by setting up offshore subsidiaries for export sales in tax havens like Bermuda and Barbados. Estimated tax savings for 1991 through 2000 totaled $1 billion for Boeing and General Electric, $300 million or more for Motorola, Honeywell, Caterpillar, and Cisco. The annual value of the tax break for all companies reached an estimated $5 billion in 2002. Any attempt by the EU to impose sanctions of this order would detonate a “nuclear weapon on the trading system,” warned U.S. trade representative Robert Zoellick.7 Nonetheless, in August 2002 the WTO ruled that the EU could impose $4 billion in penalties; duties up to 100 percent could be imposed on sixteen hundred items, including dairy and meat products, sugar, cereal, clothes, and machinery.

European leaders now had a club to use against the United States; soon they would have one more. In another unilateral breach of trade rules, President George W. Bush, in March 2002, imposed tariffs of nearly 30 percent on most types of steel imported from Europe, Asia, and South America, the biggest action to protect one industry in decades. The EU, joined by Japan, China, South Korea, New Zealand, Switzerland, Norway, and Brazil threatened retaliation, and U.S. companies that used the steel complained that they could no longer obtain specialty products they needed. Under pressure, the United States backpedaled and excluded 178 steel products from the March 2002 tariffs, but soon imposed new duties as high as 369 percent on imports of steel wire rods from Canada, Brazil, Mexico, and the Ukraine. In July 2003, the WTO ruled that the steel tariffs were illegal, another major loss for the United States at the WTO.

But the United States was also renewing its offensive in agriculture. Two months after he put tariffs on steel, President Bush signed a record farm subsidy bill, increasing spending by 80 percent over existing levels and costing an estimated $190 billion over ten years. This undermined a global effort, at the WTO in Geneva, to scale down agricultural subsidies, not only in the United States but in the EU, Japan, and South Korea as well. In May 2003 the United States, joined by Canada and Argentina, filed suit at the WTO against the EU’s five-year-old moratorium on genetically modified foods, claiming that their farmers were losing sales of bioengineered corn and soybeans. Having a developing nation on board was considered crucial to the U.S. case, but Egypt dropped out under pressure from its major trading partner, Europe, and a seething White House immediately axed plans for a free-trade deal with Cairo. The Europeans pointed out that the United States had refused to join one hundred nations in signing the 2000 Cartagena Protocol on Biosafety, and that the EU is currently processing applications for the sale of geneti-cally modified food varieties. Instead of responding to these statements, President Bush accused Europe of “hindering the great cause of ending hunger in Africa.”8

Then there is the long-running battle over the mother of all markets—Boeing versus Airbus.

A four-nation European consortium created in 1970 as a direct challenge to Boeing, Airbus Industrie (AI) was built on a base of government subsidies and loans. The United States fought it every step of the way. AI replied that Boeing benefited from considerable government aid, from the development of aircraft for the U.S. military and aeronautics and space program. The 1992 Airbus “accord” was basically a victory for AI, legitimizing the subsidies but capping them, at a time when AI was capturing 30 percent of new aircraft orders worldwide. A problem facing the Americans was the integration of business across the Atlantic. Some parts of the U.S. industry—engine manufacturers like General Electric as well as airline companies—had a vested interest in AI’s success and opposed trade actions against it. Lockheed Martin was exploring the possibility of becoming a fifth AI partner and has since agreed to unite with France’s Aérospatiale Matra, an AI consortium firm, to bid for a strategic tanker plane. By 1997 Boeing was purchasing $2 billion in supplies from European countries, generating sixty thousand jobs in Europe, and 30 percent of a typical AI aircraft was being made by U.S. companies or their European subsidiaries. AI reached parity with Boeing in orders for commercial jets in 2001. Two years later it moved ahead in deliveries, secured its first big military contract to produce 180 transport planes for seven European countries, and was now the world’s leading maker of commercial airplanes.

Another American monopoly under challenge is the ten-year-old Global Positioning System (GPS), a satellite navigation system funded and controlled by the U.S. Department of Defense and providing coded signals allowing a receiver to compute position, velocity, and time anywhere on earth. Designed for the U.S. military, it now serves thousands of corporate and individual users worldwide. In 2000, the EU announced plans to launch its own satellite navigation system, Galileo, “a civil program under civil control that permits the EU to shake off dependence [on GPS]…and to be present on the international scene, in all aspects of cutting-edge technologies,” EU Transport Commissioner Loyola de Palacio stated. The United States has tried to block this project too. Deputy Secretary of Defense Paul Wolfowitz warned his EU counterparts in 2001 that Galileo would interfere with GPS (it is planned to be compatible), and that it would present “serious challenges and problems for the NATO alliance.”9 The Bush administration tried to discredit a report by the U.S. accounting firm PricewaterhouseCoopers that Galileo could earn €8 billion or more in profits over twenty years and create 140,000 new jobs. In March 2002 the EU announced that it would proceed with the €3.6 billion Galileo project, slated to be operational in 2008, synchronizing data transmission and controlling land and sea traffic with a positional accuracy within one meter.

The Airbus and Galileo battles are spilling over into another field of competition—corporate M&As. The EU reviews mergers that might create a dominant position in the European market, regardless of the nationality of companies involved. In 1997, the chief of the EU’s Merger Control Regulations (Karel Van Miert) was set to block the merger of the U.S. companies Boeing and McDonnell Douglas. Boeing saved the deal by capitulating to several EU demands, chiefly, that it abandon its twenty-year exclusive supplier contracts with Delta, Continental, and American Airlines. In 1998, Van Miert announced a probe of the planned merger of two U.S. accounting firms, Ernst & Young and KMPG Peat Marwick; a month later Ernst & Young called off the deal. In 2000 the EU’s Competition Commission (EUCC) stopped two U.S. deals (WorldCom’s merger with Sprint and General Electric’s takeover of Honeywell), as well as a merger of Sweden’s truck manufacturers (Scandia and Volvo). After the Bush administration settled the antitrust case against Microsoft in 2001 by dropping several of the proposed penalties, the EUCC announced that it would continue its own investigation of the software giant, for illegally dominating the market for server software and tying its own music, video, and instant messaging software to the monopoly Windows system.

Finally, U.S. economic sanctions against other countries held up well until 1970 before coming under fire; by the 1980s they were successful less than 10 percent of the time.10 The boycott of Cuba is widely ignored, even by Britain, which led the successful opposition in 1982 to the embargo on exports of turbines and other equipment by U.S.-affiliated firms in Europe to the Soviet Union for its gas pipeline to West Germany. In 1998 the United States was compelled to waive its sanctions against any firms that use “confiscated property” in Cuba or invest in energy projects in Iran and Libya; in return, the EU agreed to tighten exports of weapons technologies to Iran and Libya. Left out in the cold, U.S. companies protested to their own government that European competitors were reaping profits from trade with these countries.

The ‘New Economy’ of the 1990s: What Goes Up…

The long-run decline in the relative economic might of the United States was obscured for awhile by the rapid expansion of the late 1990s. But when the economy sank into recession in March 2001, amidst the wealth-destroying collapse of the stock market bubble, the veil was blown away. Renewed rustlings of U.S. decline can be heard.

China is “eroding more than 50 years of American [economic] dominance in Asia,” as it pulls in much of the area’s new foreign investment, exports cheap manufactured goods, imports higher-tech products from Singapore and Japan, and launches diplomatic efforts to establish a free trade zone in East Asia, now the fastest growing trading region in the world. “The policy leverage of the United States as the great market is sure to decline,” observes James Castle, longtime leader of the American Chamber of Commerce in Indonesia. Europe is challenging the United States in its own backyard—Latin America. Of the twenty-five largest foreign companies in Latin America in 2000, fourteen were European, eleven American, and inflows of investment from Europe were beginning to surpass those from el Norte.11 In another diversion of trade away from multilateralism, the United States is seeking bilateral pacts, one by one, with Chile, Colombia, the Dominican Republic, and the five Central American countries to bully its way toward its own Alaska-to-Cape-Horn Free Trade Area of the Americas by 2005. But the two largest South American economies, Brazil and Argentina, with Paraguay and Uruguay, formed their own regional trade bloc in 1991, Mercosur (Mercado Común del Sur). Now the world’s third-largest trade group (after the EU and NAFTA), Mercosur has been reaching out to negotiate trade arrangements with the EU, and is working to form a South American free trade area to give the entire continent greater economic leverage against the United States.

In the late 1990s, many Europeans believed that U.S. corporations had undergone a successful two-decade restructuring, to become dominant in so many industries in terms of technology, productivity, and return on capital that Europe was falling hopelessly behind. But with the “new economy” shrinking down to bare bones—a cyclical upturn in productivity growth, faster diffusion of information technologies in workplaces and production facilities, homes and schools—and with financial scandals, accounting frauds, and bankruptcies spreading among its legions, corporate America is looking less than impregnable. In high technologies, a Japanese laboratory has built a computer matching the processing power of the twenty fastest American computers combined. It far outstrips the previous leader (an IBM machine) and has scientific and practical applications that reflect “a level of will that we haven’t achieved,” according to California Institute of Technology supercomputer designer Thomas Sterling. “These guys are blowing us out of the water, and we need to sit up and take notice.” In the growth of the internet, the United States has lower percentages of broadband users than Canada, Japan, South Korea, Taiwan, and the Scandinavian countries and trails ten countries in internet use per capita. For less than twenty-five dollars a month, half the cost in the United States, customers in Japan and South Korea connect to the internet at a speed of ten megabits a second—ten times as fast as the typical broadband service in the United States.12

Ongoing trouble for the U.S. economy comes from the attack on the federal government, starting with the Reagan administration in the 1980s and reaching unprecedented ferocity in the reign of Bush II. Three tax cuts since 2001, loaded toward the rich, have helped to eliminate the federal budget surpluses of 1998–2001 and produce deficits of $374 billion for 2003 and upwards of $450 billion for 2004–2006. The problem is not the deficits themselves: were they spent on education, transportation, the environment, and health care they would not only produce a stronger and more stable economy but vastly improve the well-being of the bottom four-fifths of the income scale. But these are precisely what Bush and company want to destroy: the tax cuts are aimed at starving the federal government of resources and forcing it to slash spending on everything except the military.

These policies are feeding into a “perfect fiscal storm.” The exploding budget deficits reduce national saving, deepening the country’s international deficit and increasing its dependence on foreign capital to pay for domestic consumption and investment. The damage at home comes from the fiscal squeeze on state and local government (SLG), the worst since the 1930s. Cutbacks in federal aid to SLGs, on the heels of the end of revenue-sharing in 1986, have come at a time when the federal government is dumping heavier fiscal responsibilities on SLGs, chiefly for Medicaid, Social Security Insurance for low-income households, and new domestic security measures in the wake of 9/11. State governments now face deficits totaling $60 to $85 billion over the next year—13 to 18 percent of state expenditures. Since all states except Vermont are required by constitution or statute to run balanced budgets, the deficits are forcing SLGs to make deep cuts in spending on education, public safety, libraries, and parks and hike taxes in the face of recession—the opposite of what the doctor ordered. Thus, discordant, even contradictory policies are adopted by the different levels of government, resulting in impairment of the functioning of the economic system as a whole. If hegemony runs on economic efficiency, the American system of government leaves something to be desired, and the manipulation of it by the radical right-wing oligarchy now in power amounts to “lunacy,” as one voice of global capital, the Financial Times, calls it.13

A Military Remedy for Economic Fallback?

Can America’s military supremacy be used to rebuild economic hegemony? Can it serve the interests of global capital across the world?

For over fifty years the American military establishment has been a source of support for multinational capital, and for alliances whose logic is to preserve an open trade and investment system throughout the world. The U.S. military presence still protects economic interests, notably in Saudi Arabia and other oil satrapies, and it may now allow the United States to control Iraq’s oil fields, but the extent and duration of that control, and whether it will increase the leverage of the United States over supplies and prices in the world’s oil markets, remain highly problematic. Pax Americana has always been a mixed blessing for U.S. allies: it has been maintained partly by military power, undercutting efforts by U.S. allies in Europe and Japan to forge independent foreign policies. With the demise of the Soviet Union, the United States became “the only superpower still standing” and quickly set about using the new configuration of power in the world to reassert and expand its dominion over all comers.

In 1990–1991 the United States cobbled together a coalition to wage the first Gulf War (“By God, we’ve kicked the Vietnam syndrome once and for all,” exclaimed President George Bush the day the war ended), but would not pay for it and complained when its allies started to renege on pledges of $37 billion. At the same time the United States was searching for ways to keep the North Atlantic Treaty Organization (NATO) alliance alive, even though the official rationale for its founding in 1949—the Soviet Union—had disappeared. According to a 1992 Pentagon Defense Planning document, “It is of fundamental importance to preserve NATO as the primary instrument of Western defense and security, as well as the channel for U.S. influence and participation in European security affairs [and] we must seek to prevent the emergence of Europe-only security arrangements….[W]e must maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role.”14 Seven years later the United States used NATO to launch an air war on Yugoslavia for refusing Washington’s terms for settlement of ethnic and territorial disputes in Kosovo—a province of Yugoslavia.15 Thus were Europe’s disunity and grossly inferior military capacity exploited to keep it bound to the United States, in a demonstratively subordinate role. a commanding American presence was reinforced inside the EU, a rival pole of global capitalism. In October 2001, the United States initiated its “war on terrorism,” bombing and invading Afghanistan to eliminate the al-Qaeda network it held responsible for the attacks on New York and Washington. A year later the Bush administration declared that it will use military force against any “potential adversaries…pursuing a military build-up in hopes of surpassing, or equaling, the power of the United States” (The National Security Strategy of the United States, September 2002).

In the run-up to the second war on Iraq in March 2003, the United States attempted to hijack the United Nations, by obtaining a resolution authorizing the use of force to “disarm” Iraq. The effort ended in total diplomatic defeat. Opposed by three permanent members of the Security Council (France, China, Russia), the United States was unable to coerce any of the “middle six”—Angola, Cameroon, Guinea, Chile, Mexico, Pakistan—to vote in its favor, even with enormous diplomatic pressure and outright bribery. Turkey denied the United States permission to use its territory as a staging area for military operations.

After the war it was clear that the United States had no effective means of reprisal against Turkey—or France and Germany. Once again the United States showed that it could exploit divisions within Europe; the governments (not the people) of Britain, Spain, and Poland backed the war, but only Britain supplied substantial military support. Occupying Iraq soon proved beyond the military means the United States put into the country. Afghanistan looked no better once the U.S. war wound down; as early as November 2002 the country was slipping back into chaos, insecurity, and warlord control, and al-Qaeda was regrouping in Paktika province.

Meanwhile, two years of “war on terrorism” have fractured the legitimacy of the United States across the world, dealing a blow, in effect, to the ideology and culture of American imperialism. The war on Iraq, a Pew Global Attitudes survey found, “widened the rift between Americans and Western Europeans, further inflamed the Muslim world, softened support for the war on terrorism, and significantly weakened global public support for the North Atlantic Alliance.” Only seven of twenty foreign nations surveyed had a favorable view of the United States, and in those nations (Britain, Israel, Kuwait, Canada, Nigeria, Italy, Australia) support was falling. In a British Broadcasting Corporation sampling of opinion in eleven nations, including the United States and only one Arab nation (Jordan), two-thirds of those questioned saw the United States as an arrogant superpower that poses a greater threat to peace than North Korea and Iran (the two surviving “axis of evil” members), and only 25 percent, excluding Americans, said U.S. military might was making the world a safer place. A Transatlantic Trends Survey conducted in July 2003 by the German Marshall Fund of the United States and the Compagnia di San Paolo, a Turin (Italy) foundation showed that only 8 percent of all Europeans questioned thought it “very desirable” that the United States exert strong leadership in world affairs; 70 percent in France and 50 percent in Germany and Italy deemed it “undesirable.”16

“The United States has always been ready to use its superior military strength,” as Gabriel Kolko observes, “in its futile, never-ending quest…to resolve political and social instabilities that challenge its interests as it defines them….The same policies that in varying degrees have produced disasters for the United States are still considered the only way to relate to the continuous and growing problems of a world that was already far too complex for it to manage fifty years ago.”17 In the post-Cold War world intercapitalist rivalries are no longer contained by their subordination to Cold War security issues. In this day and age conflicts between rival capitalist states are more likely to destabilize global capital, by undermining the constellation of multinational enterprises whose common interests override allegiance to any state because they incorporate segments of national economies on every continent. Each nation represents and supports its own capital, but all national capitals—to the extent that they remain national—are mutually dependent on cross-border production, trade, and finance. Almost any imperialist thrust by the United States is bound to threaten open markets, political stability, and agreed-upon international institutions on which global capital depends, and that have served the interests of the United States itself since the 1940s.

The United States now faces a formidable rival—the EU, its equal in production and trade. The EU is also an emerging political entity, anchored by France and Germany and bent on greater competition with the United States despite the mismatch in military power. Asian countries are melding into a regional economic zone around Japan and China, flanked by India as an expanding outsourcing center for manufactures, software and computer services. At the WTO Ministerial Conference in Cancún, Mexico in September 2003, Brazil emerged as the organizer and leader of the twenty-two developing countries, including China and India, that rebelled over the “Singapore issues” (rules for investment, trade, competition, and government procurement to advance the interests of multinationals in developing countries) and the huge farm subsidy programs of the United States, the EU, and Japan. The rich countries were pushing the first while avoiding all but shallow concessions on the second. The collapse of the Cancún talks was also a sign of the post-Iraq backlash against the United States. The Mercosur alliance came out of Cancún with new momentum, supporting a Peruvian proposal for a “South American Nation” trade area, uniting Mercosur and Andean Community countries (Peru, Bolivia, Colombia, Ecuador, Venezuela) as a counterweight to the U.S. plan to lock the Americas into a free trade area of its own making.

The war on Vietnam coincided with the first splinterings of American hegemony, and the “war on terrorism” will accelerate the decline. The United States can no longer control a multipolar world through unilateral action, military or otherwise; it can only bring devastation and disruption and prevent any other rules of the game from materializing, if it so chooses. To resist the new American imperialism is to give hope to its victims, and to progressive forces now stirring in the developing world, as well as in the first.


  1. The data that follow are drawn mainly from World Bank, Development Indicators 2003 (New York: Oxford University Press, 2003); World Trade Organization, International Trade Statistics 2002 (Geneva: WTO, 2002); Fortune, July 21, 2003; The Banker, July 2003; United Nations Conference on Trade and Development, World Investment Report 2002 (New York: UN, 2002). The European Union (EU) includes all countries in Western Europe except Norway and Switzerland; see
  2. Eurecom, May 1997, at; International Monetary Fund, Annual Report 2002 (Washington: IMF, 2002), Table 1.2
  3. Imports of goods exceeded exports every year except 1870; B. R. Mitchell, British Historical Statistics (New York: Cambridge University Press, 1988), 869–870.
  4. “Auf Wiedersehen, Park Avenue,” Business Week, July 7, 2003.
  5. “The Choice of Currency for Denomination of the Oil Bill,” at (then News & Info, Speeches).
  6. Economic Report of the President 1995 (Washington: U.S. Government Printing Office, 1995), 231–235; “A Deal on Auto Trade,” New York Times, June 29, 1995.
  7. “Exporters Fear Loss of Subsidy,” Wall Street Journal, May 1, 2002; “US sends top official to help resolve trade dispute,” Financial Times, November 27, 2001.
  8. “Bush Links Europe’s Ban on Bio-Crops with Hunger,” New York Times, May 22, 2003.
  9. “Les Etats-Unis multiplient les pressions contre le project européen ‘Galileo,’ ” Le Monde, December 19, 2001.
  10. Kimberley Elliott and G. Hufbauer, “Same Song, Same Refrain? Economic Sanctions in the 1990s,” American Economic Review 89 (May 1999); “U.S. Backs Off Sanctions, Seeing Poor Effect,” New York Times, July 31, 1998.
  11. “Asian Leaders Find China a More Cordial Neighbor,” New York Times, October 18, 2003; “China Emerges as Rival to U.S. in Asian Trade,” New York Times, June 28, 2002; “Latin America Tops Asia in Luring Foreign Investors,” Wall Street Journal, February 22, 2000.
  12. “Japanese Computer is World’s Fastest, as U.S. Falls back,” New York Times, April 20, 2002; “What’s Slowing Us Down?” Wall Street Journal, October 13, 2003.
  13. Editorial, Financial Times, May 23, 2003.
  14. “U.S. Strategy Calls for Insuring No Rivals Develop,” New York Times, March 8, 1992.
  15. See Diana Johnstone, Fools’ Crusade (New York: Monthly Review Press, 2002).
  16. “World’s View of U.S. Sours after Iraq War,” New York Times, June 4, 2003; “U.S. is arrogant, poll in 11 nations says,” Philadelphia Inquirer, June 19, 2003;
  17. Gabriel Kolko, Another Century of War? (New York: New Press, 2002), ix–x, 87.
2003, Volume 55, Issue 07 (December)
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