WWII Redux: The endpoint of U.S. policy, from Ukraine to Taiwan

Boeing B-29 Assembly Line - 1944

Boeing B-29 Assembly Line – 1944

View of the world

Ukraine – what you’re not told

WWII Redux: The endpoint of U.S. policy, from Ukraine to Taiwan

[The article below was first published on the CounterPunch website on 23rd February 2022. It’s reproduced here as part of the effort to put what is happening in Ukraine at the moment into perspective.]

WWII Redux: The endpoint of U.S. policy, from Ukraine to Taiwan

by John V. Walsh

The Threatened Peoples of East Asia and Europe Can Stop the U.S. Drive to Restore its Global Domination.

“This is not going to be a war of Ukraine and Russia. This is going to be a European war, a full-fledged war.” So spoke Ukraine’s President Volodymyr Zelensky just days after berating the U.S. for beating the drums of war.

It is not hard to imagine how Zelensky’s words must have fallen on those European ears that were attentive. His warning surely conjured up images of World War II when tens of millions of Europeans and Russians perished.

Zelensky’s words echoed those of Philippine’s President Rodrigo Duterte on the other side of the world at the Eastern edge of the great Eurasian land mass:When elephants fight, it is the grass that gets trampled flat.” We can be sure that Duterte, like Zelensky, had in mind WWII which also consumed tens of millions of lives in East Asia.

The United States is stoking tensions in both Europe and East Asia, with Ukraine and Taiwan as the current flashpoints on the doorsteps of Russia and China which are the targeted nations. Let us be clear at the outset. As we shall see, the endpoint of this process is not for the U.S. to do battle with Russia or China but to watch China and Russia fight it out with the neighbors to the ruin of both sides. The US is to “lead from behind’ – as safely and remotely as can be arranged.

To make sense of this and react properly, we must be very clear-eyed about the goal of the U.S. Neither Russia nor China has attacked or even threatened the U.S. Nor are they in a position to do so – unless one believes that either is ready to embark on a suicidal nuclear war.

Why should the U.S. Elite and its media pour out a steady stream of anti-China and anti-Russia invective? Why the steady eastward march of NATO since the end of the first Cold War? The goal of the U.S. is crystal clear – it regards itself as the Exceptional Nation and entitled to be the number one power on the planet, eclipsing all others.

This goal is most explicitly stated in the well-known Wolfowitz Doctrine drawn shortly after the end of the first Cold War in 1992. It proclaimed that the U.S.’s “first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet union or elsewhere….” It stated that no regional power must be allowed to emerge with the power and resources “sufficient to generate global power.” It stated frankly “we must maintain the mechanism for deterring potential competitors from even aspiring to a larger regional or global power.” (Emphasis, jw)

The Wolfowitz Doctrine is but the latest in a series of such proclamations that have proclaimed global domination as the goal of U.S. foreign policy since 1941 the year before the U.S. entered WWII. This lineage is documented clearly in the book by the Quicny Institute’s Stephen Wertheim “Tomorrow, The World: The Birth of US Global Supremacy.

Let us consider China first and then Russia, the foremost target of the U.S., first. China’s economy is number one in terms of PPP-GDP according to the IMF and has been since November, 2014. It is growing faster than the U.S. economy and shows no signs of slowing down. In a sense China has already won by this metric since economic power is the ultimate basis of all power.

But what about a military defeat of China? Can the U.S. with its present vastly superior armed forces bring that about? The historian, Alfred McCoy, answers that question in the way most do these days, with a clear “no”:

“The most volatile flashpoint In Beijing’s grand strategy for breaking Washington’s geopolitical grip over Eurasia lies in the contested waters between China’s coast and the Pacific littoral, which the Chinese call “the first island chain.”

“But China’s clear advantage in any struggle over that first Pacific island chain is simply distance. …The tyranny of distance, in other words, means that the U.S. loss of that first island chain, along with its axial anchor on Eurasia’s Pacific littoral, should only be a matter of time.”

Certainly the U.S. Elite recognizes this problem. Do they have a solution?

Moreover, that is not the end of the “problem” for the U.S. There are other powerful countries, like Japan, or rapidly rising economies in East Asia, easily the most dynamic economic region in the world. These too will become peer competitors, and in the case of Japan, it already has been a competitor both before WWII and during the 1980s.

If we hop over to the Western edge of Eurasia, we see that the U.S. has a similar “problem” when it comes to Russia. Here too the U.S. cannot defeat Russia in a conventional conflict nor have U.S. sanctions been able to bring it down. How can the U.S. surmount this obstacle? And as in the case of East Asia the U.S. faces another economic competitor, Germany, or more accurately, the EU, with Germany at its core. How is the U.S. to deal with this dual threat?

One clue comes in the response of Joe Biden to both the tension over Taiwan and that over Ukraine. Biden has said repeatedly that he will not send U.S. combat troops to fight Russia over Ukraine or to fight China over Taiwan. But it will send materiel and weapons and also “advisors.” And here too the U.S. has other peer competitors most notably Germany which has been the target of U.S. tariffs. The economist Michael Hudson puts it succinctly in a penetrating essay, “America’s real adversaries are its European and other allies: The U.S. aim is to keep them from trading with China and Russia.”

Such “difficulties for the U.S. were solved once before – in WWII. One way of looking at WWII is that it was a combination of two great regional wars, one in East Asia and one in Europe. In Europe the U.S. was minimally involved as Russia, the core of the USSR, battled it out with Germany, sustaining great damage to life and economy. Both Germany and Russia were economic basket cases when the war was over, two countries lying in ruins.

The US provided weapons and materiel to Russia but was minimally involved militarily, only entering late in the game. The same happened in East Asia with Japan in the role of Germany and China in the role of Russia. Both Japan and China were devastated in the same way as were Russia and Europe. This was not an unconscious strategy on the part of the United States. As Harry Truman, then a Senator, declared in 1941: “If we see that Germany is winning the war, we ought to help Russia; and if that Russia is winning, we ought to help Germany, and in that way let them kill as many as possible.. . ”

At the end of it all the U.S. emerged as the most powerful economic and military power on the planet. McCoy spells it out:

“Like all past imperial hegemons, U.S. global power has similarly rested on geopolitical dominance over Eurasia, now home to 70% of the world’s population and productivity. After the Axis alliance of Germany, Italy, and Japan failed to conquer that vast land mass, the Allied victory in World War II allowed Washington, as historian John Darwin put it, to build its “colossal imperium… on an unprecedented scale,” becoming the first power in history to control the strategic axial points “at both ends of Eurasia.”

“As a critical first step, the U.S. formed the NATO alliance in 1949, establishing major military installations in Germany and naval bases in Italy to ensure control of the western side of Eurasia. After its defeat of Japan, as the new overlord of the world’s largest ocean, the Pacific, Washington dictated the terms of four key mutual-defense pacts in the region with Japan, South Korea, the Philippines, and Australia and so acquired a vast range of military bases along the Pacific littoral that would secure the eastern end of Eurasia. To tie the two axial ends of that vast land mass into a strategic perimeter, Washington ringed the continent’s southern rim with successive chains of steel, including three navy fleets, hundreds of combat aircraft, and most recently, a string of 60 drone bases stretching from Sicily to the Pacific island of Guam.”

The U.S. was able to become the dominant power on the planet because all peer competitors were left in ruins by the two great regional wars in Europe and East Asia, wars which are grouped under the heading of WWII.

If Europe is plunged into a war of Russia against the EU powers with the U.S. “leading from behind,” with material and weapons, who will benefit? And if East Asia is plunged into a war of China against Japan and and whatever allies it can drum up, with the U.S. “leading from behind,” who will benefit?

It is pretty clear that such a replay of WWII will benefit the U.S. In WWII while Eurasia suffered tens of millions of deaths, the US suffered about 400,000 – a terrible toll certainly but nothing like that seen in Eurasia. And with the economies and territories of Eurasia, East and West, in ruins, the U.S. will emerge on top, in the catbird seat, and able to dictate terms to the world. WWII redux.

But what about the danger of nuclear war growing out of such conflicts? The U.S. has a history of nuclear “brinksmanship,” going back to the earliest post-WWII days. It is a country that has shown itself willing to risk nuclear holocaust.

Are there U.S. policy makers criminal enough to see this policy of provocation through to the end? I will leave that to the reader to answer.

The Peoples of East and West Eurasia are the ones who will suffer most in this scenario. And they are the ones who can stop the madness by living peacefully with Russia and China rather than serving as cannon fodder for the U.S. There are clear signs of dissent from the European “allies” of the U.S., especially Germany but the influence of the U.S. remains powerful. Germany and many other countries are after all occupied by tens of thousands of U.S. troops, their media heavily influenced by the U.S. and with the organization that commands European troops, NATO, under U.S. command. Which way will it go?

In East Asia the situation is the same. Japan is the key but the hatred of China among the Elite is intense. Will the Japanese people and the other peoples of East Asia be able to put the brakes on the drive to war?

Some say that a two-front conflict like this is U.S. overreach. But certainly, if war is raging on or near the territories of both Russia and China, there is little likelihood that one can aid the other.

Given the power of modern weaponry, this impending world war will be much more damaging than WWII by far. The criminality that is on the way to unleashing it is almost beyond comprehension.

John V. Walsh, until recently a Professor of Physiology and Neuroscience at the University of Massachusetts Chan Medical School, has written on issues of peace and health care for Asia Times, San Francisco Chronicle, East Bay Times/San Jose Mercury News, LA Progressive, Antiwar.com, CounterPunch and others.

View of the world

Ukraine – what you’re not told

Bob Dylan, Masters of War and the Ukraine Crisis

Ukrainian servicemen on patrol

Ukrainian servicemen on patrol

View of the world

Ukraine – what you’re not told

Bob Dylan, Masters of War and the Ukraine Crisis

[The article below was first published on the Common Dreams website on 22nd February 2022. It’s reproduced here as part of the anti-war campaign that must develop to prevent matters getting out of hand. This in no way means support for Putin’s actions (although there is an understanding of the threat the Russians feel from expansive NATO) but also highlights the overwhelming hypocrisy and lies that are emanating from both the Americans and the British.]

Bob Dylan, Masters of War and the Ukraine Crisis

by Norman Solomon

Red-white-and-blue chauvinism is running wild. Yet there are real diplomatic alternatives to the collision course for war.

Fifty-nine years ago, Bob Dylan recorded “With God on Our Side.” You probably haven’t heard it on the radio for a very long time, if ever, but right now you could listen to it as his most evergreen of topical songs:

I’ve learned to hate the Russians
All through my whole life
If another war comes
It’s them we must fight
To hate them and fear them
To run and to hide
And accept it all bravely
With God on my side

In recent days, media coverage of a possible summit between Joe Biden and Vladimir Putin has taken on almost wistful qualities, as though the horsemen of the apocalypse are already out of the barn.

Fatalism is easy for the laptop warriors and blow-dried studio pundits who keep insisting on the need to get tough with “the Russians,” by which they mean the Russian government. Actual people who suffer and die in war easily become faraway abstractions. “And you never ask questions / When God’s on your side.”

During the last six decades, the religiosity of U.S. militarism has faded into a more generalized set of assumptions—shared, in the current crisis, across traditional political spectrums. Ignorance about NATO’s history feeds into the good vs. evil bromides that are so easy to ingest and internalize.

On Capitol Hill, it’s hard to find a single member of Congress willing to call NATO what it has long been: an alliance for war (Kosovo, Afghanistan, Libya) with virtually nothing to do with “defense” other than the defense of vast weapons sales and, at times, even fantasies of regime change in Russia.

The reverence and adulation gushing from the Capitol and corporate media (including NPR and PBS) toward NATO and its U.S. leadership are wonders of thinly veiled jingoism. About other societies, reviled ones, we would hear labels like “propaganda.” Here the supposed truisms are laundered and flat-ironed as common sense.

Glimmers of inconvenient truth have flickered only rarely in mainstream U.S. media outlets, while a bit more likely in Europe. “Biden has said repeatedly that the U.S. is open to diplomacy with Russia, but on the issue that Moscow has most emphasized—NATO enlargement—there has been no American diplomacy at all,” Jeffrey Sachs wrote in the Financial Times as this week began. “Putin has repeatedly demanded that the U.S. forswear NATO’s enlargement into Ukraine, while Biden has repeatedly asserted that membership of the alliance is Ukraine’s choice.”

As Sachs noted, “Many insist that NATO enlargement is not the real issue for Putin and that he wants to recreate the Russian empire, pure and simple. Everything else, including NATO enlargement, they claim, is a mere distraction. This is utterly mistaken. Russia has adamantly opposed NATO expansion towards the east for 30 years, first under Boris Yeltsin and now Putin…. Neither the U.S. nor Russia wants the other’s military on their doorstep. Pledging no NATO enlargement is not appeasement. It does not cede Ukrainian territory. It does not undermine Ukraine’s sovereignty.”

Whether or not they know much about such history, American media elites and members of Congress don’t seem to care about it. Red-white-and-blue chauvinism is running wild. Yet there are real diplomatic alternatives to the collision course for war.

Speaking Monday on Democracy Now!, Katrina vanden Heuvel—editorial director of The Nation and a longtime Russia expert—said that implementing the Minsk accords could be a path toward peace in Ukraine. Also, she pointed out, “there is talk now not just of the NATO issue, which is so key, but also a new security architecture in Europe.”

Desperately needed is a new European security framework, to demilitarize and defuse conflicts between Russia and U.S. allies. But the same approach that for three decades pushed to expand NATO to Russia’s borders is now gung-ho to keep upping the ante, no matter how much doing so increases the chances of a direct clash between the world’s two nuclear-weapons superpowers.

The last U.S. ambassador to the Soviet Union before it collapsed, Jack Matlock, wrote last week: “Since President Putin’s major demand is an assurance that NATO will take no further members, and specifically not Ukraine or Georgia, obviously there would have been no basis for the present crisis if there had been no expansion of the alliance following the end of the Cold War, or if the expansion had occurred in harmony with building a security structure in Europe that included Russia.”

But excluding Russia from security structures, while encircling it with armed-to-the-teeth adversaries, was a clear goal of NATO’s expansion. Less obvious was the realized goal of turning Eastern European nations into customers for vast arms sales.

A gripping chapter in “The Spoils of War,” a new book by Andrew Cockburn, spells out the mega-corporate zeal behind the massive campaigns to expand NATO beginning in the 1990s. Huge Pentagon contractors like Lockheed Martin were downcast about the dissolution of the USSR and feared that military sales would keep slumping. But there were some potential big new markets on the horizon.

“One especially promising market was among the former members of the defunct Warsaw Pact,” Cockburn wrote. “Were they to join NATO, they would be natural customers for products such as the F-16 fighter that Lockheed had inherited from General Dynamics. There was one minor impediment: the [George H. W.] Bush administration had already promised Moscow that NATO would not move east, a pledge that was part of the settlement ending the Cold War.”

By the time legendary foreign-policy sage George F. Kennan issued his unequivocal warning in 1997—“expanding NATO would be the most fateful error of American policy in the post-Cold War era”—the expansion was already happening.

As Cockburn notes, “By 2014, the 12 new members had purchased close to $17 billion worth of American weapons.”

If you think those weapons transactions were about keeping up with the Russians, you’ve been trusting way too much U.S. corporate media. “As of late 2020,” Cockburn’s book explains, NATO’s collective military spending “had hit $1.03 trillion, or roughly 20 times Russia’s military budget.”

Let’s leave the last words here to Bob Dylan, from another song that isn’t on radio playlists. “Masters of War.”

Let me ask you one question
Is your money that good?
Will it buy you forgiveness
Do you think that it could?

Norman Solomon is co-founder and national coordinator of RootsAction.org. His books include War Made Easy: How Presidents and Pundits Keep Spinning Us to Death (2006) and Made Love, Got War: Close Encounters with America’s Warfare State” (2007).

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View of the world

Ukraine – what you’re not told

America’s real adversaries are its European and other allies

Joe Biden and Angela Merkel in the Oval Office

Joe Biden and Angela Merkel in the Oval Office

View of the world

Ukraine – what you’re not told

America’s real adversaries are its European and other allies

[The article below was first published on the CounterPunch website on 11th February 2022. It is being reproduced here to help explain why the United States is so concerned (and heavily involved) in what is happening in Ukraine at the moment. As with all US involvement in another country there is no concern for the local population but for the greater interests of the US financial, industrial and military complex. The United States is panicking that it will lose its worldwide clout but a frightened beast can be the more dangerous.]

America’s real adversaries are its European and other allies

by Michael Hudson

The U.S. aim is to keep them from trading with China and Russia

The Iron Curtain of the 1940s and ‘50s was ostensibly designed to isolate Russia from Western Europe – to keep out Communist ideology and military penetration. Today’s sanctions regime is aimed inward, to prevent America’s NATO and other Western allies from opening up more trade and investment with Russia and China. The aim is not so much to isolate Russia and China as to hold these allies firmly within America’s own economic orbit. Allies are to forego the benefits of importing Russian gas and Chinese products, buying much higher-priced U.S. LNG and other exports, capped by more U.S. arms.

The sanctions that U.S. diplomats are insisting that their allies impose against trade with Russia and China are aimed ostensibly at deterring a military buildup. But such a buildup cannot really be the main Russian and Chinese concern. They have much more to gain by offering mutual economic benefits to the West. So the underlying question is whether Europe will find its advantage in replacing U.S. exports with Russian and Chinese supplies and the associated mutual economic linkages.

What worries American diplomats is that Germany, other NATO nations and countries along the Belt and Road route understand the gains that can be made by opening up peaceful trade and investment. If there is no Russian or Chinese plan to invade or bomb them, what is the need for NATO? What is the need for such heavy purchases of U.S. military hardware by America’s affluent allies? And if there is no inherently adversarial relationship, why do foreign countries need to sacrifice their own trade and financial interests by relying exclusively on U.S. exporters and investors?

These are the concerns that have prompted French Prime Minister Macron to call forth the ghost of Charles de Gaulle and urge Europe to turn away from what he calls NATO’s “brain-dead” Cold War and beak with the pro-U.S. trade arrangements that are imposing rising costs on Europe while denying it potential gains from trade with Eurasia. Even Germany is balking at demands that it freeze by this coming March by going without Russian gas.

Instead of a real military threat from Russia and China, the problem for American strategists is the absence of such a threat. All countries have come to realize that the world has reached a point at which no industrial economy has the manpower and political ability to mobilize a standing army of the size that would be needed to invade or even wage a major battle with a significant adversary. That political cost makes it uneconomic for Russia to retaliate against NATO adventurism prodding at its western border trying to incite a military response. It’s just not worth taking over Ukraine.

America’s rising pressure on its allies threatens to drive them out of the U.S. orbit. For over 75 years they had little practical alternative to U.S. hegemony. But that is now changing. America no longer has the monetary power and seemingly chronic trade and balance-of-payments surplus that enabled it to draw up the world’s trade and investment rules in 1944-45. The threat to U.S. dominance is that China, Russia and Mackinder’s Eurasian World Island heartland are offering better trade and investment opportunities than are available from the United States with its increasingly desperate demand for sacrifices from its NATO and other allies.

The most glaring example is the U.S. drive to block Germany from authorizing the Nord Stream 2 pipeline to obtain Russian gas for the coming cold weather. Angela Merkel agreed with Donald Trump to spend $1 billion building a new LNG port to become more dependent on highly priced U.S. LNG. (The plan was cancelled after the U.S. and German elections changed both leaders.) But Germany has no other way of heating many of its houses and office buildings (or supplying its fertilizer companies) than with Russian gas.

The only way left for U.S. diplomats to block European purchases is to goad Russia into a military response and then claim that avenging this response outweighs any purely national economic interest. As hawkish Under-Secretary of State for Political Affairs, Victoria Nuland, explained in a State Department press briefing on January 27: “If Russia invades Ukraine one way or another Nord Stream 2 will not move forward.”[1] The problem is to create a suitably offensive incident and depict Russia as the aggressor.

Nuland expressed who was dictating the policies of NATO members succinctly in 2014: “Fuck the EU.” That was said as she told the U.S. ambassador to Ukraine that the State Department was backing the puppet Arseniy Yatsenyuk as Ukrainian prime minister (removed after two years in a corruption scandal), and U.S. political agencies backed the bloody Maidan massacre that ushered in what are now eight years of civil war. The result devastated Ukraine much as U.S. violence had done in Syria, Iraq and Afghanistan. This is not a policy of world peace or democracy that European voters endorse.

U.S. trade sanctions imposed on its NATO allies extend across the trade spectrum. Austerity-ridden Lithuania gave up its cheese and agricultural market in Russia, and is blocking its state-owned railroad from carrying Belarus potash to the Baltic port of Klaipeda. The port’s majority owner complained that “Lithuania will lose hundreds of millions of dollars from halting Belarus exports through Klaipeda,” and “could face legal claims of $15 billion over broken contracts.”[2] Lithuania has even agreed to U.S. prompting to recognize Taiwan, resulting in China refusing to import German or other products that include Lithuanian-made components.

Europe is to impose sanctions at the cost of rising energy and agricultural prices by giving priority to imports from the United States and foregoing Russian, Belarusian and other linkages outside of the Dollar Area. As Sergey Lavrov put matters: “When the United States thinks that something suits its interests, it can betray those with whom it was friendly, with whom it cooperated and who catered to its positions around the world.”[3]

America’s sanctions on its allies hurt their economies, not those of Russia and China

What seems ironic is that such sanctions against Russia and China have ended up helping rather than hurting them. But the primary aim was not to hurt nor to help the Russian and Chinese economies. After all, it is axiomatic that sanctions force the targeted countries to become more self-reliant. Deprived of Lithuanian cheese, Russian producers have produced their own, and no longer need to import it from the Baltic states. America’s underlying economic rivalry is aimed at keeping European and its allied Asian countries in its own increasingly protected economic orbit. Germany, Lithuania and other allies are told to impose sanctions directed against their own economic welfare by not trading with countries outside the U.S. dollar-area orbit.

Quite apart from the threat of actual war resulting from U.S. bellicosity, the cost to America’s allies of surrendering to U.S. trade and investment demands is becoming so high as to be politically unaffordable. For nearly a century there has been little alternative but to agree to trade and investment rules favoring the U.S. economy as the price of receiving U.S. financial and trade support and even military security. But an alternative is now threatening to emerge – one offering benefits from China’s Belt and Road initiative, and from Russia’s desire for foreign investment to help modernize its industrial organization, as seemed to be promised thirty years ago in 1991.

Ever since the closing years of World War II, U.S. diplomacy has aimed at locking Britain, France, and especially defeated Germany and Japan, into becoming U.S. economic and military dependencies. As I documented in Super Imperialism, American diplomats broke up the British Empire and absorbed its Sterling Area by the onerous terms imposed first by Lend-Lease and then the Anglo-American Loan Agreement of 1946. The latter’s terms obliged Britain to give up its Imperial Preference policy and unblock the sterling balances that India and other colonies had accumulated for their raw-materials exports during the war, thus opening the British Commonwealth to U.S. exports.

Britain committed itself not to recover its prewar markets by devaluing sterling. U.S. diplomats then created the IMF and World Bank on terms that promoted U.S. export markets and deterred competition from Britain and other former rivals. Debates in the House of Lords and the House of Commons showed that British politicians recognized that they were being consigned to a subservient economic position, but felt that they had no alternative. And once they gave up, U.S. diplomats had a free hand in confronting the rest of Europe.

Financial power has enabled America to continue dominating Western diplomacy despite being forced off gold in 1971 as a result of the balance-of-payments costs of its overseas military spending. For the past half-century, foreign countries have kept their international monetary reserves in U.S. dollars – mainly in U.S. Treasury securities, U.S. bank accounts and other financial investments in the U.S. economy. The Treasury-bill standard obliges foreign central banks to finance America’s military-based balance-of-payments deficit – and in the process, the domestic government budget deficit.

The United States does not need this recycling to create money. The government can simply print money, as MMT has demonstrated. But the United States does need this foreign central bank dollar recycling to balance its international payments and support the dollar’s exchange rate. If the dollar were to decline, foreign countries would find it much easier to pay international dollar-debts in their own currencies. U.S. import prices would rise, and it would be more costly for U.S. investors to buy foreign assets. And foreigners would lose money on U.S. stocks and bonds as denominated in their own currencies, and would drop them. Central banks in particular would take a loss on the Treasury’s dollar bonds that they hold in their monetary reserves – and would find their interest to lie in moving out of the dollar. So the U.S. balance of payments and exchange rate are both threatened by U.S. belligerency and military spending throughout the world – yet its diplomats are trying to stabilize matters by ramping up the military threat to crisis levels.

U.S. drives to keep its European and East Asian protectorates locked into its own sphere of influence is threatened by the emergence of China and Russia independently of the United States while the U.S. economy is de-industrializing as a result of its own deliberate policy choices. The industrial dynamic that made the United States so dominant from the late 19th century up to the 1970s has given way to an evangelistic neoliberal financialization. That is why U.S. diplomats need to arm-twist their allies to block their economic relations with post-Soviet Russia and socialist China, whose growth is outstripping that of the United States and whose trade arrangements offer more opportunities for mutual gain.

At issue is how long the United States can block its allies from taking advantage of China’s economic growth. Will Germany, France and other NATO countries seek prosperity for themselves instead of letting the U.S. dollar standard and trade preferences siphon off their economic surplus?

Oil diplomacy and America’s dream for post-Soviet Russia

The expectation of Gorbachev and other Russian officials in 1991 was that their economy would turn to the West for reorganization along the lines that had made the U.S., German and other economies so prosperous. The mutual expectation in Russia and Western Europe was for German, French and other investors to restructure the post-Soviet economy along more efficient lines.

That was not the U.S. plan. When Senator John McCain called Russia “a gas station with atom bombs,” that was America’s dream for what they wanted Russia to be – with Russia’s gas companies passing into control by U.S. stockholders, starting with the planned buyout of Yukos as arranged with Mikhail Khordokovsky. The last thing that U.S. strategists wanted to see was a thriving revived Russia. U.S. advisors sought to privatize Russia’s natural resources and other non-industrial assets, by turning them over to kleptocrats who could “cash out” on the value of what they had privatized only by selling to U.S. and other foreign investors for hard currency. The result was a neoliberal economic and demographic collapse throughout the post-Soviet states.

In some ways, America has been turning itself into its own version of a gas station with atom bombs (and arms exports). U.S. oil diplomacy aims to control the world’s oil trade so that its enormous profits will accrue to the major U.S. oil companies. It was to keep Iranian oil in the hands of British Petroleum that the CIA’s Kermit Roosevelt worked with British Petroleum’s Anglo-Persian Oil Company to overthrow Iran’s elected leader Mohammed Mossadegh in 1954 when he sought to nationalize the company after it refused decade after decade to perform its promised contributions to the economy. After installing the Shah whose democracy was based on a vicious police state, Iran threatened once again to act as the master of its own oil resources. So it was once again confronted with U.S.-sponsored sanctions, which remain in effect today. The aim of such sanctions is to keep the world oil trade firmly under U.S. control, because oil is energy and energy is the key to productivity and real GDP.

In cases where foreign governments such as Saudi Arabia and neighboring Arab petrostates have taken control, the export earnings of their oil are to be deposited in U.S. financial markets to support the dollar’s exchange rate and U.S. financial domination. When they quadrupled their oil prices in 1973-74 (in response to the U.S. quadrupling of its grain-export prices), the U.S. State Department laid down the law and told Saudi Arabia that it could charge as much as it wanted for its oil (thereby raising the price umbrella for U.S. oil producers), but it had to recycle its oil-export earnings to the United States in dollar-denominated securities – mainly in U.S. Treasury securities and U.S. bank accounts, along with some minority holdings of U.S. stocks and bonds (but only as passive investors, not using this financial power to control corporate policy).

The second mode of recycling oil-export earnings was to buy U.S. arms exports, with Saudi Arabia becoming one of the military-industrial complex’s largest customers. U.S. arms production actually is not primarily military in character. As the world is now seeing in the kerfuffle over Ukraine, America does not have a fighting army. What it has is what used to be called an “eating army.” U.S. arms production employs labor and produces weaponry as a kind of prestige good for governments to show off, not for actual fighting. Like most luxury goods, the markup is very high. That is the essence of high fashion and style, after all. The MIC uses its profits to subsidize U.S. civilian production in a way that does not violate the letter of international trade laws against government subsidy.

Sometimes, of course, military force is indeed used. In Iraq, first George W. Bush and then Barack Obama used the military to seize the country’ oil reserves, along with those of Syria and Libya. Control of world oil has been the buttress of America’s balance of payments. Despite the global drive to slow the planet’s warming, U.S. officials continue to view oil as the key to America’s economic supremacy. That is why the U.S. military is still refusing to obey Iraq’s orders to leave their country, keeping its troops in control of Iraqi oil, and why it agreed with the French to destroy Libya and still has troops in the oilfields of Syria. Closer to home, President Biden has approved offshore drilling and supports Canada’s expansion of its Athabasca tar sands, environmentally the dirtiest oil in the world.

Along with oil and food exports, arms exports support the Treasury-bill standard’s financing of America’s overseas military spending on its 750 bases abroad. But without a standing enemy constantly threatening at the gates, NATO’s existence falls apart. What would be the need for countries to buy submarines, aircraft carriers, airplanes, tanks, missiles and other arms?

As the United States has de-industrialized, its trade and balance-of-payments deficit is becoming more problematic. It needs arms export sales to help reduce its widening trade deficit and also to subsidize its commercial aircraft and related civilian sectors. The challenge is how to maintain its prosperity and world dominance as it de-industrializes while economic growth is surging ahead in China and now even Russia.

America has lost its industrial cost advantage by the sharp rise in its cost of living and doing business in its financialized post-industrial rentier economy. Additionally, as Seymour Melman explained in the 1970s, Pentagon capitalism is based on cost-plus contracts: The higher military hardware costs, the more profit its manufacturers receive. So U.S. arms are over-engineered – hence, the $500 toilet seats instead of a $50 model. The main attractiveness of luxury goods after all, including military hardware, is their high price.

This is the background for U.S. fury at its failure to seize Russia’s oil resources – and at seeing Russia also break free militarily to create its own arms exports, which now are typically better and much less costly than those of the U.S. Today Russia is in the position of Iran in 1954 and again in 1979. Not only do its oil sales rival those of U.S. LNG, but Russia keeps its oil-export earnings at home to finance its re-industrialization, so as to rebuild the economy that was destroyed by the U.S.-sponsored shock “therapy” of the 1990s.

The line of least resistance for U.S. strategy seeking to maintain control of the world’s oil supply while maintaining its luxury-arms export market via NATO is to Cry Wolf and insist that Russia is on the verge of invading Ukraine – as if Russia had anything to gain by quagmire warfare over Europe’s poorest and least productive economy. The winter of 2021-22 has seen a long attempt at U.S. prodding of NATO and Russia to fight – without success.

U.S. dreams of a neoliberalized China as a U.S. corporate affiliate

America has de-industrialized as a deliberate policy of slashing production costs as its manufacturing companies have sought low-wage labor abroad, most notably in China. This shift was not a rivalry with China, but was viewed as mutual gain. American banks and investors were expected to secure control and the profits of Chinese industry as it was marketized. The rivalry was between U.S. employers and U.S. labor, and the class-war weapon was offshoring and, in the process, cutting back government social spending.

Similar to the Russian pursuit of oil, arms and agricultural trade independent of U.S. control, China’s offense is keeping the profits of its industrialization at home, retaining state ownership of significant corporations and, most of all, keeping money creation and the Bank of China as a public utility to fund its own capital formation instead of letting U.S. banks and brokerage houses provide its financing and siphon off its surplus in the form of interest, dividends and management fees. The one saving grace to U.S. corporate planners has been China’s role in deterring U.S. wages from rising by providing a source of low-priced labor to enable American manufacturers to offshore and outsource their production.

The Democratic Party’s class war against unionized labor started in the Carter Administration and greatly accelerated when Bill Clinton opened the southern border with NAFTA. A string of maquiladoras were established along the border to supply low-priced handicraft labor. This became so successful a corporate profit center that Clinton pressed to admit China into the World Trade Organization in December 2001, in the closing month of his administration. The dream was for it to become a profit center for U.S. investors, producing for U.S. companies and financing its capital investment (and housing and government spending too, it was hoped) by borrowing U.S. dollars and organizing its industry in a stock market that, like that of Russia in 1994-96, would become a leading provider of finance-capital gains for U.S. and other foreign investors.

Walmart, Apple and many other U.S. companies organized production facilities in China, which necessarily involved technology transfers and creation of an efficient infrastructure for export trade. Goldman Sachs led the financial incursion, and helped China’s stock market soar. All this was what America had been urging.

Where did America’s neoliberal Cold War dream go wrong? For starters, China did not follow the World Bank’s policy of steering governments to borrow in dollars to hire U.S. engineering firms to provide export infrastructure. It industrialized in much the same way that the United States and Germany did in the late 19th century: By heavy public investment in infrastructure to provide basic needs at subsidized prices or freely, from health care and education to transportation and communications, in order to minimize the cost of living that employers and exporters had to pay. Most important, China avoided foreign debt service by creating its own money and keeping the most important production facilities in its own hands.

U.S. demands are driving its allies out of the dollar-NATO trade and monetary orbit

As in a classical Greek tragedy, U.S. foreign policy is bringing about precisely the outcome that it most fears. Overplaying their hand with their own NATO allies, U.S. diplomats are bringing about Kissinger’s nightmare scenario, driving Russia and China together. While America’s allies are told to bear the costs of U.S. sanctions, Russia and China are benefiting by being obliged to diversify and make their own economies independent of reliance on U.S. suppliers of food and other basic needs. Above all, these two countries are creating their own de-dollarized credit and bank-clearing systems, and holding their international monetary reserves in the form of gold, euros and each other’s currencies to conduct their mutual trade and investment.

This de-dollarization provides an alternative to the unipolar U.S. ability to gain free foreign credit via the U.S. Treasury-bill standard for world monetary reserves. As foreign countries and their central banks de-dollarize, what will support the dollar? Without the free line of credit provided by central banks automatically recycling America’s foreign military and other overseas spending back to the U.S. economy (with only a minimal return), how can the United States balance its international payments in the face of its de-industrialization?

The United States cannot simply reverse its de-industrialization and dependence on Chinese and other Asian labor by bringing production back home. It has built too high a rentier overhead into its economy for its labor to be able to compete internationally, given the U.S. wage-earner’s budgetary demands to pay high and rising housing and education costs, debt service and health insurance, and for privatized infrastructure services.

The only way for the United States to sustain its international financial balance is by monopoly pricing of its arms, patented pharmaceutical and information-technology exports, and by buying control of the most lucrative production and potentially rent-extracting sectors abroad – in other words, by spreading neoliberal economic policy throughout the world in a way that obliges other countries to depend on U.S. loans and investment.

That is not a way for national economies to grow. The alternative to neoliberal doctrine is China’s growth policies that follow the same basic industrial logic by which Britain, the United States, Germany and France rose to industrial power during their own industrial takeoffs with strong government support and social spending programs.

The United States has abandoned this traditional industrial policy since the 1980s. It is imposing on its own economy the neoliberal policies that de-industrialized Pinochetista Chile, Thatcherite Britain and the post-industrial former Soviet republics, the Baltics and Ukraine since 1991. Its highly polarized and debt-leveraged prosperity is based on inflating real estate and securities prices and privatizing infrastructure.

This neoliberalism has been a path to becoming a failed economy and indeed, a failed state, obliged to suffer debt deflation, rising housing prices and rents as owner-occupancy rates decline, as well as exorbitant medical and other costs resulting from privatizing what other countries provide freely or at subsidized prices as human rights – health care, education, medical insurance and pensions.

The success of China’s industrial policy with a mixed economy and state control of the monetary and credit system has led U.S. strategists to fear that Western European and Asian economies may find their advantage to lie in integrating more closely with China and Russia. The U.S. seems to have no response to such a global rapprochement with China and Russia except economic sanctions and military belligerence. That New Cold War stance is expensive, and other countries are balking at bearing the cost of a conflict that has no benefit for themselves and indeed, threatens to destabilize their own economic growth and political independence.

Without subsidy from these countries, especially as China, Russia and their neighbors de-dollarize their economies, how can the United States maintain the balance-of-payments costs of its overseas military spending? Cutting back that spending, and indeed recovering industrial self-reliance and competitive economic power, would require a transformation of American politics. Such a change seems unlikely, but without it, how long can America’s post-industrial rentier economy manage to force other countries to provide it with the economic affluence (literally a flowing-in) that it is no longer producing at home?

Notes.

[1] Department [of State] Press Briefing – January 27, 2022. Dismissing reporters’ comments that “what the Germans have said publicly doesn’t match with what you’re saying exactly,” she explained the U.S. tactics to stall Nord Stream 2. Countering a reporter’s point that “all they have to do is turn it on,” she said: “As Senator Cruz likes to say … it is currently a hunk of metal at the bottom of the ocean. It needs to be tested. It needs to be certified. It needs to have regulatory approval.” For a recent review of the increasingly tense geopolitics at work, see John Foster, “Pipeline Politics hits Multipolar Realities: Nord Stream 2 and the Ukraine Crisis,” Counterpunch, February 3, 2022.

[2] Andrew Higgins, “Fueling a Geopolitical Tussle in Eastern Europe: Fertilizer,” The New York Times, January 31, 2022. The owner plans to sue Lithuania’s government for hefty damages.

[3] Russian Foreign Affairs Ministry, “Foreign Minister Sergey Lavrov’s answers to questions from Channel One’s Voskresnoye Vremya programme,” Moscow, January 30, 2022. Johnson’s Russia List, January 31, 2022, #9.

Michael Hudson is the author of Killing the Host (published in e-format by CounterPunch Books and in print by Islet). His new book is J is For Junk Economics. He can be reached at mh@michael-hudson.com

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