America’s Collapse: An Economy Based on Plunder
By Paul
Craig Roberts
August
01, 2019 "Information
Clearing House"
-
Capitalists have claimed responsibility for
America’s past economic success.
Let’s begin by setting the record
straight. American success had little to do with
capitalism. This is not to say that the US would
have had more success with something like Soviet
central planning.
Prior
to 1900 when the frontier was closed, America’s
success was a multi-century long success based
on the plunder of a pristine environment and
abundant natural resources. Individuals and
companies were capitalized simply by occupying
the land and using the resources present.
As the
population grew and resources were depleted, the
per capita resource endowment declined.
America got a second wind from World War I,
which devastated European powers and permitted
the emergence of the US as a budding world
power.
World War II finished off Europe and put
economic and financial supremacy in Washington’s
hands.
The US dollar seized the world reserve
currency role from the British pound, enabling
the US to pay its bills by printing money.
The world currency role of the dollar,
more than nuclear weapons, has been the source
of American power. Russia has equal or greater
nuclear weapons power, but it is the dollar not
the ruble that is the currency in which
international payments are settled.
The world currency role made the US the
financial hegemon.
This power together with the IMF and
World Bank enabled the US to plunder
foreign resources the way vanishing American
resources had been plundered.
We can conclude that plunder of natural
resources and the ability to externalize much of
the cost have been major contributors right
through the present day to the success of
American capitalism.
Michael Hudson has described the plunder
process in his many books and articles (for
example,
http://www.unz.com/mhudson/u-s-economic-warfare-and-likely-foreign-defenses/
), as has John Perkins in Confessions of an
Economic Hit Man.
Essentially, capitalism is a plunder mechanism
that generates short-run profits by
externalizing long-run costs.
It exhausts natural resources, including
air, land, and water, for temporary profits
while imposing most of its costs, such as
pollution, on the environment.
An example is the destruction of the
Amazon rain forest by loggers.
The world loses a massive carbon sink
that stabilizes the global climate, and loggers
gain short-run profits that are a tiny
percentage of the long-run costs.
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This destructive process is amplified by the
inherently short-run time perspective of
capitalist activity which seldom extends beyond
the next quarter.
US
economic success was also a result of a strong
consumer demand fed by rising real wages as
technological advances in manufacturing raised
the productivity of labor and consumer
purchasing power. The middle class became
dominant. When I was an economics student, Paul
Samuelson taught us that American prosperity was
based entirely on the large American consumer
market and had nothing to do with foreign trade.
Indeed, foreign trade was a minor factor
in American GDP.
America had such a large domestic
consumer market that the US did not need foreign
trade to enjoy economics of scale.
All of
this changed with the rise of free market
ideology and the collapse of the Soviet Union.
When I was a student we were taught that boards
of directors and corporate executives had
responsibilities to their employees, their
customers, their communities, and to their
shareholders.
These responsibilities were all equally
valid and needed to be kept in balance.
In response to liberals, who tried to impose
more and more “social responsibilities” on
corporations, free market economists responded
with the argument that, in fact, corporations
only have responsibilities to their owners.
Rightly or wrongly, this reactive argument is
blamed on Milton Friedman.
Conservative foundations set about
teaching jurists and legislators that companies
were only responsible to owners.
Judges
were taught that ownership is specific and
cannot be abridged by government imposing
obligations on the investments of owners for
responsibilities that do not benefit the owners.
This argument was used to terminate all
responsibilities except to shareholders and left
profit maximization as the corporate goal.
Thus,
when the Soviet Union collapsed and China and
India opened their economies to foreign capital,
US corporations were free to desert their work
forces and home towns and use cheaper labor
abroad to produce the goods and services sold to
Americans. This increased their profits and,
thereby, executive bonuses and shareholder
capital gains at the expense of the livelihoods
of their former domestic work force and tax base
of their local communities and states.
The external costs of the larger profits
were born by their former employees and the
impaired financial condition of states and
localities. These costs greatly exceed the
higher profits.
Generally speaking, economists assume away
external costs.
Their mantra is that progress fixes
everything.
But their measures of progress are
deceptive.
Ecological economists, such as Herman
Daly, have raised the issue whether, considering
the neglect of external costs and the inaccurate
way in which GDP is measured, announced
increases in GDP exceed in value the cost of
producing them.
It is entirely possible that GDP growth
is simply an artifact of not counting all of the
costs of production.
As we
approach the end of the second decade of the
21st century, the long history of American
capitalism fed by plunder seems to be coming to
an end simultaneously with the ability of the US
central bank to protect existing financial
wealth by creating ever more money with which to
support stock, bond, and real estate prices.
The US has a long history of overthrowing
reformist governments in Latin America that
threatened American control over their
resources.
Washington’s coups against democracy and
self-determination succeeded until Venezuela.
Washington’s coup against Chavez was
overturned by the Venezuelan people and
military, and so far Washington’s attempt to
overthrow Chavez’s successor, Maduro, has
failed.
Washington’s attempt to overthrow the Syrian
government was prevented by Russia, and most
likely Russia and China will prevent Washington
from overthrowing the government of Iran.
In Africa the Chinese are proving to be
better business partners than the exploitative
American corporations.
To continue feeding the empire with its
heavy costs is becoming more difficult.
Washington’s policy of sanctions is making it
even more difficult. To avoid the arbitrary and
illegal sanctions, other countries are starting
to abandon the US dollar as the currency of
international transactions and arranging to
settle their international accounts in their
domestic currencies. China’s Silk Road
encompasses Russia with much of Asia in a trade
bloc independent of the Western financial
system.
Other countries hoping to escape US
control are turning to Russia and China to
achieve sovereignty from Washington.
These developments will reduce the demand
for dollars and impair US financial hegemony.
Alternatives to the World Bank will
remove areas of the world from the reach of US
plunder.
As plunderable resources diminish, American
capitalism, which is heavily dependent on
plunder, will have one foundation of its success
removed.
As aggregate consumer demand collapses
from the absence of growth in real income,
absence of middle class jobs, and the extreme
polarization of income and wealth in the US,
another pillar of American capitalism
disintegrates.
As business investment has also
collapsed, as indicated by the use of corporate
profits and borrowing to repurchase the
corporations’ equity, thus decapitalizing the
companies, total aggregate demand itself
collapses.
The
absence of growth in aggregate demand will make
the gap between high stock prices and dismal
prospects for corporate profits too great to be
bridged by the Federal Reserve flooding money
into financial assets.
Without the ability to prop up financial
asset prices with money creation, flight from
dollar-denominated assets could bring down the
US dollar.
What is
left will be a ruin.
Dr. Paul Craig Roberts was Assistant Secretary of
the Treasury for Economic Policy and associate
editor of the Wall Street Journal. He was
columnist for Business Week, Scripps Howard News
Service, and Creators Syndicate. He has had many
university appointments. His internet columns
have attracted a worldwide following. Roberts'
latest books are
The Failure of Laissez Faire
Capitalism and Economic Dissolution of the West,
How America Was Lost,
and
The Neoconservative Threat to
World Order.
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The
views expressed in this article are solely those
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