America First Deepens World Stagnation

By Jomo Kwame Sundaram

KUALA LUMPUR, Malaysia, Feb 25 2025 (IPS) - Donald Trump’s Make America Great Again (MAGA) appeal captured US mass discontent against globalisation. In recent decades, variations of America First have reflected growing ethnonationalism in the world’s presumptive hegemon.

Deglobalisation?

Trade liberalisation probably peaked at the end of the 20th century with the creation of the multilateral World Trade Organization (WTO), which the West kept outside the UN system.

With deindustrialisation in the North blamed on globalisation, their governments gradually abandoned trade liberalisation, especially after the 2008 global financial crisis.

Free trade mahaguru Jagdish Bhagwati has long complained of the weak commitment to multilateral trade liberalisation. Most recent supposed free trade agreements (FTAs) have been plurilateral or bilateral, undermining multilateralism while promoting non-trade measures.

The new geoeconomics and geopolitics have undermined the rules and norms supporting multilateralism. This has undermined confidence in the rules of the game, encouraging individualistic opportunism and subverting collective action.

Policymaking has become more problematic as it can no longer count on agreed-shared rules and norms, undermining sustained international cooperation. Biased and often inappropriate economic policies and institutions have only made things worse.

Successive Washington administrations’ unilateral changes in policies, rules and conventions have also undermined confidence in US-dominated international economic arrangements, including the Bretton Woods institutions.

Deliberate contraction

Although recent inflation has been mainly due to supply-side disruptions, Western central banks have imposed contractionary demand-side macroeconomic policies by raising interest rates and pursuing fiscal austerity.

US Federal Reserve interest rate hikes from early 2022 have been unnecessary and inappropriate. Squeezing consumption and investment demand with higher interest rates cannot and does not address supply-side disruptions and contractions.

After earlier ‘quantitative easing’ encouraged much more commercial borrowing, higher Western central bank interest rates were contractionary and regressive. Hence, much of world economic stagnation now is due to Western policies.

Developing countries have long known that international economic institutions and arrangements are biased against them. Believing they have no opportunity for wide-ranging reform, most authorities are resigned to only using available macroeconomic policy space.

Nevertheless, national authorities have become more willing to undertake previously unacceptable measures. For example, several conservative central banks deployed ‘monetary financing’ of government spending to cope with the pandemic, lending directly to government treasuries without market intermediation.

More recently, central banks in Japan, China, and some Southeast Asian countries refused to raise interest rates in concert with the West. Instead, they sought and found new policy space, helping to mitigate contractionary international economic pressures.

Nonetheless, many economists piously urged central banks worldwide to raise interest rates until mid-2024. Meanwhile, policy pressures for fiscal austerity continue, worsening conditions for billions.

Neoliberal?

To secure support for neoliberal reforms from the late 20th century, the Global North promised developing countries greater market access and export opportunities.

However, trade liberalisation has slowly reversed since the World Trade Organization (WTO) creation in 1995. Policy reversals have become more blatant since the 2008 global financial crisis with geopolitically driven sanctions and weaponisation of trade.

But ‘neoliberal’ globalisation was a misnomer, as there was little liberal about it beyond selective trade liberalisation.

Instead, FTAs have mainly strengthened and extended property and contract rights, i.e., selectively interpreting and enforcing international law.

Trade liberalisation undermined earlier selective protectionism, which promoted food security and industrialisation in developing countries. Tariffs have also been crucial revenue sources, especially for the poorest countries.

Intellectual property

Strengthening the rule of law has rarely fostered liberal markets. Even 19th-century economic liberals recognise the inevitable wealth concentration due to selective and partial neoliberalism.

Property rights invariably strengthen monopoly privileges under various pretexts. Global North governments now believe control of technology is key to world dominance. The WTO’s trade-related intellectual property rights (TRIPS) have greatly strengthened IP enforcement.

With IP more lucrative, corporations have less incentive to share or transfer technology. With TRIPS enforced from 1995, technology transfer to developing countries has declined, further undermining development prospects.

The 2001 public health exception to TRIPS could not overcome IP obstacles to ensure affordable COVID-19 tests, protective equipment, vaccines and therapies during the COVID-19 pandemic, even triggering criticisms of ‘vaccine apartheid’.

Weaponising economics

The West has increasingly deployed economic sanctions, which are illegal without UN Security Council mandates. Meanwhile, access to trade, investment, finance and technology has become increasingly weaponised.

Foreign direct investment was supposed to sustain growth in developing countries. Intensifying Obama-initiated efforts to undermine China, then-President Trump and Japanese Prime Minister Abe Shinzo urged ‘reshoring’, i.e., investing in investors’ own countries instead.

Initial attempts to invest in their own economies instead of China largely failed. However, later efforts to undermine China have been more successful, notably ‘friend-shoring’, which urges companies to invest in politically allied or friendly countries instead.

With more economic stagnation, geopolitical strategic considerations and weaponisation of economic policies, cooperation and institutions, fewer resources are available for growth, equity and sustainability. Thus, the new geopolitics has jeopardised prospects for sustainable development.

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Available online here: America First Deepens World Stagnation

Imperialism (Still) Rules

By Jomo Kwame Sundaram

HARARE, Zimbabwe, Feb 11 2025 (IPS) - Many in the West, of the political right and left, now deny imperialism. For Josef Schumpeter, empires were pre-capitalist atavisms that would not survive the spread of capitalism. But even the conservative Economist notes President Trump’s revival of this US legacy.

Economic liberalism challenged

Major liberal economic thinkers of the 19th century noted capitalism was undermining economic liberalism. John Stuart Mill and others acknowledged the difficulties of keeping capitalism competitive. In 2014, billionaire Peter Thiel declared competition is for losers.

A century and a half ago, Dadabhai Naoroji, from India, became a Liberal Party Member of the UK Parliament. In his drainage theory, colonialism and imperial power enabled surplus extraction.

As the Anglo-Boer war drew to a close in 1902, another English liberal, John Hobson, published his study of economic imperialism, drawing heavily on the South African experience.

Later, Vladimir Ilyich Lenin cited Hobson, his comrade Nikolai Bukharin and Rudolf Hilferding’s Finance Capital for his famous 1916 imperialism booklet urging comrades not to take sides in the European inter-imperialist First World War (WW1).

Three pre-capitalist empires – Russian, Austro-Hungarian and Ottoman – ended at the start of the 20th century. Their collapse spawned new Western nationalisms, which contributed to both world wars.

Germany lost its empire at Versailles after WW1, while Italian forays into Africa were successfully rebuffed. Western powers did little to check Japanese militaristic expansion from the late 19th century until the outbreak of World War Two (WW2) in Europe.

Imperialism and capitalism

Economists Utsa and Prabhat Patnaik argue that the primary accumulation of economic surplus – not involving the exploitation of free wage labour – was necessary for capitalism’s emergence.

Drawing on economic history, they clarify that primary accumulation has been crucial for capitalism’s ascendance.

Thus, imperialism was a condition for capitalism’s emergence and rapid early development. Ensuring continued imperial dominance has sustained capitalist accumulation since.

The 1910s and 1920s debates between the Second and Third Internationals of Social Democrats and allied movements in Europe and beyond involved contrasting positions on WW1 and imperialism.

For most of humanity in emerging nations, now termed developing countries, imperialism and capital accumulation did not ‘generalise’ the exploitation of free wage labour, spreading capitalist relations of production, as in ‘developed’ Western economies.

Due to capitalism’s uneven development worldwide, the Third International maintained the struggle against imperialism was foremost for the Global South or Third World of ‘emerging nations’, not the class struggle against capitalism, as in developed capitalist economies.

After decades of uneven international economic integration, including globalisation, the struggle against imperialism continues to be foremost a century later. Imperialism has reshaped colonial and now national economies but has also united the Global South, even if only in opposition to it.

Blinkers at Versailles

After observing the peace negotiations after WWI, John Maynard Keynes presciently criticised the terms of the Treaty of Versailles, warning of likely consequences. In The Economic Consequences of the Peace, he warned that its treatment of the defeated Germany would have dangerous consequences.

But Keynes failed to consider some of the Treaty’s other consequences. Newly Republican China had contributed the most troops to the Allied forces in WW1, as India did in WW2.

Germany was forced to surrender the Shantung peninsula, which it had dominated since before WW1. But instead of China’s significant contributions to the war effort being appreciated at Versailles with the peninsula’s return, Shantung was given to imperial Japan!

Unsurprisingly, the Versailles Treaty’s terms triggered the May Fourth movement against imperialism in China, culminating in the communist-led revolution that eventually took over most of China in October 1949.

Even today, popular culture, especially Western narratives, largely ignores the role and effects of war on these ‘coloured peoples’. By contrast, understating the Soviet contributions to and sacrifices in WW2 was probably primarily politically motivated.

Another counter-revolution

Franklin Delano Roosevelt was elected US president in 1932. He announced the New Deal in early 1933, years before Keynes published his General Theory in 1936.

Many policies have been introduced and implemented well before they were theorised. Unsurprisingly, it is often joked that economic theory rationalises actual economic conditions and policies already implemented.

Keynesian economic thinking inspired much economic policymaking before, during, and after WW2. Both Allied and Axis powers adopted various state-led policies. Keynesian economics remained influential worldwide until the 1960s and arguably to this day.

The counter-revolution against Keynesian economics from the late 1970s saw a parallel opposition movement against development economics, which had legitimised more pragmatic and unconventional policy thinking. From the 1980s, neoliberal economics spread with a vengeance and much encouragement from Washington, DC.

This Washington Consensus – the shared ‘neoliberal’ views of the US capital’s economic establishment, including its Treasury, the World Bank, and the International Monetary Fund – has since been replaced by brazenly ethno-nationalist ‘geoeconomic’ and ‘geopolitical’ responses to unipolar globalisation.

Related IPS Articles:

• Imperialism, Globalisation and Its Discontents*

• Africa Struggles with Neo-Colonialism

• Africa Taken for ‘Neo-Colonial’ Ride

• Ignorance-Inspired Brexit Imperial Nostalgia

• Globalization, Inequality, Convergence, Divergence

Available here online: Imperialism (Still) Rules

An ‘Exorbitant Privilege’ for All?

By Ndongo Samba Sylla and Jomo Kwame Sundaram

DAKAR, Senegal / KUALA LUMPUR, Malaysia, Jan 29 2025 (IPS) - Ending US dollar dominance alone will not end monetary imperialism. Only much better multilateral arrangements to clear international payments can meet the Global South’s aspirations for sustainable development.

De Gaulle v US dollar

Challenges to US dollar hegemony did not begin with the BRICS. French President Charles de Gaulle famously dissented in the 1960s.

Valéry Giscard d’Estaing, his Minister of Finance and Economic Affairs between 1962 and 1966, coined the phrase ‘exorbitant privilege’ to complain of US dollar dominance.

With the dollar’s status as the global reserve currency, the US can buy foreign goods, services, and assets on credit. It also enables the US to spend much more on foreign military bases and wars.

The privilege allows such extravagance with limited adverse effects on its balance of payments and the US dollar’s exchange rate. French economist Jacques Rueff noted the US could thus maintain external deficits “without tears”.

De Gaulle demanded the US Federal Reserve Bank convert France’s surplus ‘Eurodollars’ into monetary gold. The French challenge called the US bluff, forcing it to end dollar-gold convertibility at the heart of the 1944 Bretton Woods arrangement in 1971.

To gain some economic advantage in a system otherwise dominated by the dollar, post-war France imposed a monetary arrangement on most of its former African colonies, giving it a neocolonial privilege similar to the US’s worldwide.

With the CFA franc zone, France gained two advantages. First, it did not need to hold dollars to buy goods and services from territories it dominated. Second, it had complete discretionary control over the zone’s dollar earnings.

Replacing the French franc with the euro in 1999 did not end this monetary imperialism. Now, 14 Sub-Saharan African countries with over 200 million people still use the CFA franc.

Created in 1945, this currency arrangement helped rebuild and use its colonies to accelerate post-war reconstruction of the French economy. It remains under the legal custodianship of the French Treasury.

France benefiting from its currency relations with its former colonies imply that the US’s rivals can also benefit from monetary hegemony if they succeed in displacing dollar dominance without subverting monetary imperialism.

De-dollarization

The term de-dollarization currently refers to the development of alternative bilateral and plurilateral payments initiatives reducing the role of the dollar and dollar-based financial arrangements in settling international economic obligations and managing foreign exchange transactions.

This has been growing. In 2022, international trade worldwide was estimated at $46 trillion, with over half invoiced in currencies other than the US dollar. More countries are trading with one another and settling in currencies other than the greenback.

Although this trend has eroded the dollar’s share of total official foreign currency reserves, this is not about to dethrone the dollar’s status as the global reserve currency.

Indeed, international trade is only the tip of the iceberg of international financial transactions, which are still mainly denominated in US dollars.

The current challenge to dollar hegemony has much to do with the unilateral financial sanctions by the US and its mainly European allies on several nations, including Russia, Iran and Venezuela.

These countries have been expelled from the SWIFT messaging system and/or have seen their assets abroad, especially dollar, euro, or gold reserves, unilaterally confiscated on various pretexts.

Facing such sanctions, more countries want to develop alternative payment systems, reduce their dollar and euro reserves, and find more secure ways to store their external surpluses.

A recent report by the Russian government for the BRICS criticised the West’s weaponisation of international payments arrangements. It called for an international monetary and financial system consistent with the principles of security, independence, inclusion, and sustainability.

Resource-rich countries with significant foreign exchange surpluses are understandably concerned with this threat. But the report did not address the problems and needs of deficit countries constituting much of the Global South.

International clearing union

A fundamental problem of the existing international monetary and financial system is that a national currency – the US dollar – functions as a reserve asset for the rest of the world.

This obliges most nations, especially in the Global South, to accumulate US dollars to meet their external obligations. Struggling to secure enough US dollars, such countries are especially vulnerable to external debt crises.

Their problems will not be addressed if US dollar dominance is no longer unrivalled, and its privilege has to be shared with other international reserve currencies.

A fair international monetary and financial system supportive of sustainable development should eliminate the obligation to accumulate foreign exchange reserves, e.g., if every country can pay for imports with its currency, which is technically possible.

With an International Clearing Union, Ernst Friedrich Schumacher noted “every national currency is made into a world currency, whereby the creation of a new world currency becomes unnecessary”.

Such arrangements would address the Global South’s financial, debt, and climate crises. However, there have not been renewed efforts since 1944 to secure the multilateral consensus necessary for such a transformation.

Related IPS Articles

• Government Debt Is Symptom, Not Cause

• Developing Countries’ Government Debt Crises Loom Larger

• Open Veins of Africa Bleeding Heavily

• Developing Countries Need Monetary Financing

• How France Underdevelops Africa

Available online here: An 'Exorbitant Privilege' For All?