Michael Hudson: A New Bipolar World. US finance Capitalism vs. China's Mixed Public / Private Economy

 

“Michael Hudson: A New Bipolar World. US finance Capitalism vs. China's Mixed Public / Private Economy”, Youtube of a talk by Michael Hudson moderated by Mathew D. Rose, Nov 1, 2022, The video has a duration of 1:09:08, and is available from Helle Panke, posted on Nov 7, 2022, at < https://www.youtube.com/watch?v=E_zY44YClCY >

“Germany’s position in America’s New World Order”, Nov 2, 2022, Michael Hudson, MichaelHudson(dot)com, at                                                                                                           < https://michael-hudson.com/2022/11/germanys-position-in-americas-new-world-order/ >.  This webpage also provides access to the youtube discussion noted in the entry above.

“Michael Hudson – The Euro Without German Industry”, Oct 4, 2022, Michael Hudson, MichaelHudson(dot)com, at                                                                                               < https://michael-hudson.com/2022/10/the-euro-without-german-industry/ >

~~ recommended by dmorista ~~

Introduction:

Posted here are two versions of largely the same material, one version from a video talk (“Michael Hudson: A New Bipolar World. US finance Capitalism vs. China's Mixed Public / Private Economy”. Nov 1, 2022) and one the article the talk was based on, posted on Michael Hudson's website (“Germany’s position in America’s New World Order”, Nov 2, 2022 ).  Also, farther below I posted a somewhat older related article (“Michael Hudson – The Euro Without German Industry”, Oct 4, 2022)  Michael Hudson, the noted leftist economist, analyzed the ongoing struggle of the U.S.-led Finance Capital Bloc and China with what he has defined as a mixed public/ private economy.  He provided this analysis in the context of the sabotage of three of the four pipelines in the Nordstream 1 & 2 Pipeline System that took place on September 26th, of 2022.  He looks at the willingness of the Western European rulers, particularly the German rulers, to impose harsh austerity on their populations and to undergo a severe round of deindustrialization as they are deprived of their largest single energy source. That energy was provided by inexpensive natural gas from Russia until the three explosions on September 26th, 2022.  The German people were beginning to seriously pressure the German rulers about their complete submission to the U.S. / NATO agenda cutting Europe off from Russia Gas and Oil.  The destruction of the Nordstream 1 & 2 pipelines, with salty ocean water rapidly destroying the pipelines from the inside, made the German and other European population's protests and unrest moot.  

Hudson in this talk points out that China, and to a lesser extent Russia, are running economic systems that focus on productive operations and provide subsidies for industries and policies to keep the things that working people depend on such as housing, education, health care, food, and other necessities of life as cheap as possible.  Meanwhile the U.S.-led Western Finance Capital Bloc has allowed the Oligopolists and Corporate interests to maximize their profits and to drive the prices for items like housing, education, health care, food to ruinously high levels.  He has previously pointed out that to a large extent the U.S. used such policies in its domestic economy in the years before Margaret Thatcher and Ronald Reagan imposed Neo-Liberal policies in the U.K.. and the U.S.

Michael Hudson: A New Bipolar World. US finance Capitalism vs. China's Mixed Public / Private Economy

Youtube of a talk by Michael Hudson moderated by Mathew D. Rose, Nov 1, 2022

The video has a duration of 1:09:08, and is available from Helle Panke, posted on Nov 7, 2022, at < https://www.youtube.com/watch?v=E_zY44YClCY >. Posted below is the text of the article on which the talk was based, for our readers who prefer text to video.

Germany’s position in America’s New World Order

By Michael Hudson,  Wednesday, November 2, 2022, USA, Russia, Ukraine           < https://michael-hudson.com/2022/11/germanys-position-in-americas-new-world-order/ >  

 

Germany has become an economic satellite of America’s New Cold War with Russia, China and the rest of Eurasia.

The article this talk was based on:

Germany and other NATO countries have been told to impose trade and investment sanctions upon themselves that will outlast today’s proxy war in Ukraine. U.S. President Biden and his State Department spokesmen have explained that Ukraine is just the opening arena in a much broader dynamic that is splitting the world into two opposing sets of economic alliances. This global fracture promises to be a ten- or twenty-year struggle to determine whether the world economy will be a unipolar U.S.-centered dollarized economy, or a multipolar, multi-currency world centered on the Eurasian heartland with mixed public/private economies.

President Biden has characterized this split as being between democracies and autocracies. The terminology is typical Orwellian double-speak. By “democracies” he means the U.S. and allied Western financial oligarchies. Their aim is to shift economic planning out of the hands of elected governments to Wall Street and other financial centers under U.S. control. U.S. diplomats use the International Monetary Fund and World Bank to demand privatization of the world’s infrastructure and dependency on U.S. technology, oil and food exports.

By “autocracy,” Biden means countries resisting this financialization and privatization takeover. In practice, U.S. rhetoric means promoting its own economic growth and living standards, keeping finance and banking as public utilities. What basically is at issue is whether economies will be planned by banking centers to create financial wealth – by privatizing basic infrastructure, public utilities and social services such as health care into monopolies – or by raising living standards and prosperity by keeping banking and money creation, public health, education, transportation and communications in public hands.

The country suffering the most “collateral damage” in this global fracture is Germany. As Europe’s most advanced industrial economy, German steel, chemicals, machinery, automotives and other consumer goods are the most highly dependent on imports of Russian gas, oil and metals from aluminum to titanium and palladium. Yet despite two Nord Stream pipelines built to provide Germany with low-priced energy, Germany has been told to cut itself off from Russian gas and de-industrialize. This means the end of its economic preeminence. The key to GDP growth in Germany, as in other countries, is energy consumption per worker.

These anti-Russian sanctions make today’s New Cold War inherently anti-German. U.S. Secretary of State Anthony Blinken has said that Germany should replace low-priced Russian pipeline gas with high-priced U.S. LNG gas. To import this gas, Germany will have to spend over $5 billion quickly to build port capacity to handle LNG tankers. The effect will be to make German industry uncompetitive. Bankruptcies will spread, employment will decline, and Germany’s pro-NATO leaders will impose a chronic depression and falling living standards.

Most political theory assumes that nations will act in their own self-interest. Otherwise they are satellite countries, not in control of their own fate. Germany is subordinating its industry and living standards to the dictates of U.S. diplomacy and the self-interest of America’s oil and gas sector. It is doing this voluntarily – not because of military force but out of an ideological belief that the world economy should be run by U.S. Cold War planners.

Sometimes it is easier to understand today’s dynamics by stepping away from one’s own immediate situation to look at historical examples of the kind of political diplomacy that one sees splitting today’s world. The closest parallel that I can find is medieval Europe’s fight by the Roman papacy against German kings – the Holy Roman Emperors – in the 13th century. That conflict split Europe along lines much like those of today. A series of popes excommunicated Frederick II and other German kings and mobilized allies to fight against Germany and its control of southern Italy and Sicily.

Western antagonism against the East was incited by the Crusades (1095-1291), just as today’s Cold War is a crusade against economies threatening U.S. dominance of the world. The medieval war against Germany was over who should control Christian Europe: the papacy, with the popes becoming worldly emperors, or secular rulers of individual kingdoms by claiming the power to morally legitimize and accept them.

Medieval Europe’s analogue to America’s New Cold War against China and Russia was the Great Schism in 1054. Demanding unipolar control over Christendom, Leo IX excommunicated the Orthodox Church centered in Constantinople and the entire Christian population that belonged to it. A single bishopric, Rome, cut itself off from the entire Christian world of the time, including the ancient Patriarchates of Alexandria, Antioch, Constantinople and Jerusalem.

This break-away created a political problem for Roman diplomacy: How to hold all the Western European kingdoms under its control and claim the right for financial subsidy from them. That aim required subordinating secular kings to papal religious authority. In 1074, Gregory VII, Hildebrand, announced 27 Papal Dictates outlining the administrative strategy for Rome to lock in its power over Europe.

These papal demands are in striking parallel to today’s U.S. diplomacy. In both cases military and worldly interests require a sublimation in the form of an ideological crusading spirit to cement the sense of solidarity that any system of imperial domination requires. The logic is timeless and universal.

The Papal Dictates were radical in two major ways. First of all, they elevated the bishop of Rome above all other bishoprics, creating the modern papacy. Clause 3 ruled that the pope alone had the power of investiture to appoint bishops or to depose or reinstate them. Reinforcing this, Clause 25 gave the right of appointing (or deposing) bishops to the pope, not to local rulers. And Clause 12 gave the pope the right to depose emperors, following Clause 9, obliging “all princes to kiss the feet of the Pope alone” in order to be deemed legitimate rulers.

Likewise today, U.S. diplomats claim the right to name who should be recognized as a nation’s head of state. In 1953 they overthrew Iran’s elected leader and replaced him with the Shah’s military dictatorship. That principle gives U.S. diplomats the right to sponsor “color revolutions” for regime-change, such as their sponsorship of Latin American military dictatorships creating client oligarchies to serve U.S. corporate and financial interests. The 2014 coup in Ukraine is just the latest exercise of this U.S. right to appoint and depose leaders.

More recently, U.S. diplomats have appointed Juan Guaidó as Venezuela’s head of state instead of its elected president, and turned over that country’s gold reserves to him. President Biden has insisted that Russia must remove Putin and put a more pro-U.S. leader in his place. This “right” to select heads of state has been a constant in U.S. policy spanning its long history of political meddling in European political affairs since World War II.

The second radical feature of the Papal Dictates was their exclusion of all ideology and policy that diverged from papal authority. Clause 2 stated that only the Pope could be called “Universal.” Any disagreement was, by definition, heretical. Clause 17 stated that no chapter or book could be considered canonical without papal authority.

A similar demand as is being made by today’s U.S.-sponsored ideology of financialized and privatized “free markets,” meaning deregulation of government power to shape economies in interests other than those of U.S.-centered financial and corporate elites.

The demand for universality in today’s New Cold War is cloaked in the language of “democracy.” But the definition of democracy in today’s New Cold War is simply “pro-U.S.,” and specifically neoliberal privatization as the U.S.-sponsored new economic religion. This ethic is deemed to be “science,” as in the quasi-Nobel Memorial Prize in the Economic Sciences. That is the modern euphemism for neoliberal Chicago-School junk economics, IMF austerity programs and tax favoritism for the wealthy.

The Papal Dictates spelt out a strategy for locking in unipolar control over secular realms. They asserted papal precedence over worldly kings, above all over Germany’s Holy Roman Emperors. Clause 26 gave popes authority to excommunicate whomever was “not at peace with the Roman Church.” That principle implied the concluding Clause 27, enabling the pope to “absolve subjects from their fealty to wicked men.” This encouraged the medieval version of “color revolutions” to bring about regime change.

What united countries in this solidarity was an antagonism to societies not subject to centralized papal control – the Moslem Infidels who held Jerusalem, and also the French Cathars and anyone else deemed to be a heretic. Above all there was hostility toward regions strong enough to resist papal demands for financial tribute.

Today’s counterpart to such ideological power to excommunicate heretics resisting demands for obedience and tribute would be the World Trade Organization, World Bank and IMF dictating economic practices and setting “conditionalities” for all member governments to follow, on pain of U.S. sanctions – the modern version of excommunication of countries not accepting U.S. suzerainty. Clause 19 of the Dictates ruled that the pope could be judged by no one – just as today, the United States refuses to subject its actions to rulings by the World Court. Likewise today, U.S. dictates via NATO and other arms (such as the IMF and World Bank) are expected to be followed by U.S. satellites without question. As Margaret Thatcher said of her neoliberal privatization that destroyed Britain’s public sector, There Is No Alternative (TINA).

My point is to emphasize the analogy with today’s U.S. sanctions against all countries not following its own diplomatic demands. Trade sanctions are a form of excommunication. They reverse the 1648 Treaty of Westphalia’s principle that made each country and its rulers independent from foreign meddling. President Biden characterizes U.S. interference as ensuring his new antithesis between “democracy” and “autocracy.” By democracy he means a client oligarchy under U.S. control, creating financial wealth by reducing living standards for labor, as opposed to mixed public/private economies aiming at promoting living standards and social solidarity.

As I have mentioned, by excommunicating the Orthodox Church centered in Constantinople and its Christian population, the Great Schism created the fateful religious dividing line that has split “the West” from the East for the past millennium. That split was so important that Vladimir Putin cited it as part of his September 30, 2022 speech describing today’s break away from the U.S. and NATO centered Western economies.

The 12th and 13th centuries saw Norman conquerors of England, France and other countries, along with German kings, protest repeatedly, be excommunicated repeatedly, yet ultimately succumb to papal demands. It took until the 16th century for Martin Luther, Zwingli and Henry VIII finally to create a Protestant alternative to Rome, making Western Christianity multi-polar.

Why did it take so long? The answer is that the Crusades provided an organizing ideological gravity. That was the medieval analogy to today’s New Cold War between East and West. The Crusades created a spiritual focus of “moral reform” by mobilizing hatred against “the other” – the Moslem East, and increasingly Jews and European Christian dissenters from Roman control. That was the medieval analogy to today’s neoliberal “free market” doctrines of America’s financial oligarchy and its hostility to China, Russia and other nations not following that ideology.

In today’s New Cold War, the West’s neoliberal ideology is mobilizing fear and hatred of “the other,” demonizing nations that follow an independent path as “autocratic regimes.” Outright racism is fostered toward entire peoples, as evident in the Russophobia and Cancel Culture currently sweeping the West.

Just as Western Christianity’s multi-polar transition required the 16th century’s Protestant alternative, the Eurasian heartland’s break from the bank-centered NATO West must be consolidated by an alternative ideology regarding how to organize mixed public/private economies and their financial infrastructure.

Medieval churches in the West were drained of their alms and endowments to contribute Peter’s Pence and other subsidy to the papacy for the wars it was fighting against rulers who resisted papal demands. England played the role of major victim that Germany plays today. Enormous English taxes were levied ostensibly to finance the Crusades were diverted to fight Frederick II, Conrad and Manfred in Sicily. That diversion was financed by papal bankers from northern Italy (Lombards and Cahorsins), and became royal debts passed down throughout the economy.

England’s barons waged a civil war against Henry II in the 1260s, ending his complicity in sacrificing the economy to papal demands.

What ended the papacy’s power over other countries was the ending of its war against the East. When the Crusaders lost Acre, the capital of Jerusalem in 1291, the papacy lost its control over Christendom. There was no more “evil” to fight, and the “good” had lost its center of gravity and coherence. In 1307, France’s Philip IV (“the Fair”) seized the Church’s great military banking order’s wealth, that of the Templars in the Paris Temple. Other rulers also nationalized the Templars, and monetary systems were taken out of the hands of the Church. Without a common enemy defined and mobilized by Rome, the papacy lost its unipolar ideological power over Western Europe.

The modern equivalent to the rejection of the Templars and papal finance would be for countries to withdraw from America’s New Cold War. They would reject the dollar standard and the U.S. banking and financial system that is happening as more and more countries see Russia and China not as adversaries but as presenting great opportunities for mutual economic advantage.

The broken promise of mutual gain between Germany and Russia

The dissolution of the Soviet Union in 1991 promised an end to the Cold War. The Warsaw Pact was disbanded, Germany was reunified, and American diplomats promised an end to NATO, because a Soviet military threat no longer existed. Russian leaders indulged in the hope that, as President Putin expressed it, a new pan-European economy would be created from Lisbon to Vladivostok. Germany in particular was expected to take the lead in investing in Russia and restructuring its industry along more efficient lines. Russia would pay for this technology transfer by supplying gas and oil, along with nickel, aluminium, titanium and palladium.

There was no anticipation that NATO would be expanded to threaten a New Cold War, much less that it would back Ukraine, recognized as the most corrupt kleptocracy in Europe, into being led by extremist parties identifying themselves by German Nazi insignia.

How do we explain why the seemingly logical potential of mutual gain between Western Europe and the former Soviet economies turned into a sponsorship of oligarchic kleptocracies. The Nord Stream pipeline’s destruction capsulizes the dynamics in a nutshell. For almost a decade a constant U.S. demand has been for Germany to reject its reliance on Russian energy. These demands were opposed by Gerhardt Schroeder, Angela Merkel and German business leaders. They pointed to the obvious economic logic of mutual trade of German manufactures for Russian raw materials.

The U.S. problem was how to stop Germany from approving the Nord Stream 2 pipeline.

Victoria Nuland, President Biden and other U.S. diplomats demonstrated that the way to do that was to incite a hatred of Russia. The New Cold War was framed as a new Crusade. That was how George W. Bush had described America’s attack on Iraq to seize its oil wells. The U.S.-sponsored 2014 coup created a puppet Ukrainian regime that has spent eight years bombing of the Russian-speaking Eastern provinces. NATO thus incited a Russian military response. The incitement was successful, and the desired Russian response was duly labeled an unprovoked atrocity. Its protection of civilians was depicted in the NATO-sponsored media as being so offensive as to deserve the trade and investment sanctions that have been imposed since February. That is what a Crusade means.

The result is that the world is splitting in two camps: the U.S.-centered NATO, and the emerging Eurasian coalition. One byproduct of this dynamic has been to leave Germany unable to pursue the economic policy of mutually advantageous trade and investment relations with Russia (and perhaps also China). German Chancellor Olaf Sholz is going to China this week to demand that it dismantle is public sector and stops subsidizing its economy, or else Germany and Europe will impose sanctions on trade with China. There is no way that China could meet this ridiculous demand, any more than the United States or any other industrial economy would stop subsidizing their own computer-chip and other key sectors. The German Council on Foreign Relations is a neoliberal “libertarian” arm of NATO demanding German de-industrialization and dependency on the United States for its trade, excluding China, Russia and their allies. This promises to be the final nail in Germany’s economic coffin.

Another byproduct of America’s New Cold War has been to end any international plan to stem global warming. A keystone of U.S. economic diplomacy is for its oil companies and those of its NATO allies to control the world’s oil and gas supply – that is, to reduce dependence on carbon-based fuels. That is what the NATO war in Iraq, Libya, Syria, Afghanistan and Ukraine was about. It is not as abstract as “Democracies vs. Autocracies.” It is about the U.S. ability to harm other countries by disrupting their access to energy and other basic needs.

Without the New Cold War’s “good vs. evil” narrative, U.S. sanctions will lose their raison d’etre in this U.S. attack on environmental protection, and on mutual trade between Western Europe and Russia and China. That is the context for today’s fight in Ukraine, which is to be merely the first step in the anticipated 20 year fight by the US to prevent the world from becoming multipolar. This process will lock Germany and Europe into dependence on the U.S. supplies of LNG.

The trick is to try and convince Germany that it is dependent on the United States for its military security. What Germany really needs protection from is the U.S. war against China and Russia that is marginalizing and “Ukrainianizing” Europe.

There have been no calls by Western governments for a negotiated end to this war, because no war has been declared in Ukraine. The United States does not declare war anywhere, because that would require a Congressional declaration under the U.S. Constitution. So U.S. and NATO armies bomb, organize color revolutions, meddle in domestic politics (rendering the 1648 Westphalia agreements obsolete), and impose the sanctions that are tearing Germany and its European neighbors apart.

How can negotiations “end” a war that either has no declaration of war, or is a long-term strategy of total unipolar world domination?

The answer is that no ending can come until an alternative to the present U.S.-centered set of international institutions is replaced. That requires the creation of new institutions reflecting an alternative to the neoliberal bank-centered view that economies should be privatized with central planning by financial centers. Rosa Luxemburg characterized the choice as being between socialism and barbarism. I have sketched out the political dynamics of an alternative in my recent book, The Destiny of Civilization.

This paper was presented on November 1, 2022 on the German e-site 
https://braveneweurope.com/michael-hudson-germanys-position-in-americas-new-world-order. A video of my talk will be available on YouTube in about ten days.

Photo by Dushawn Jovic on Unsplash

Michael Hudson – The Euro Without German Industry

October 4, 2022, Michael Hudson, at < https://michael-hudson.com/2022/10/the-euro-without-german-industry/ >

Despite being an act of violence, sabotaging the Nordstream pipelines has restored calm to US/NATO diplomatic relations.

The reaction to the sabotage of three of the four Nord Stream 1 and 2 pipelines in four places on Monday, September 26, has focused on speculations about who did it and whether NATO will make a serious attempt to discover the answer. Yet instead of panic, there has been a great sigh of diplomatic relief, even calm. Disabling these pipelines ends the uncertainty and worries on the part of US/NATO diplomats that nearly reached a crisis proportion the previous week, when large demonstrations took place in Germany calling for the sanctions to end and to commission Nord Stream 2 to resolve the energy shortage. 

The German public was coming to understand what it will mean if their steel companies, fertilizer companies, glass companies and toilet-paper companies were shutting down. These companies were forecasting that they would have to go out of business entirely – or shift operations to the United States – if Germany did not withdraw from the trade and currency sanctions against Russia and permit Russian gas and oil imports to resume, and presumably to fall back from their astronomical eight to tenfold price increase.

Yet State Department hawk Victoria Nuland already had stated in January that “one way or another Nord Stream 2 will not move forward” if Russia responded to the accelerating Ukrainian military attacks on the Russian-speaking eastern oblasts. President Biden backed up U.S. insistence on February 7, promising that “there will be no longer a Nord Stream 2. We will bring an end to it. … I promise you, we will be able to do it.”

Most observers simply assumed that these statements reflected the obvious fact that German politicians were fully in the US/NATO pocket. Germany’s politicians held fast in refusing to authorize Nord Stream 2, and Canada soon seized the Siemens turbines needed to send gas through Nord Stream 1. That seemed to settle matters until German industry – and a rising number of voters – finally began to calculate just what blocking Russian gas would mean for Germany’s industrial firms, and hence domestic employment.

Germany’s willingness to self-impose an economic depression was wavering – although not its politicians or the EU bureaucracy. If policymakers were to put German business interests and living standards first, NATO’s common sanctions and New Cold War front would be broken. Italy and France might follow suit. That prospect made it urgent to take the anti-Russian sanctions out of the hands of democratic politics.

Despite being an act of violence, sabotaging the pipelines has restored calm to US/NATO diplomatic relations. There is no more uncertainty about whether Europe may break away from U.S. diplomacy by restoring mutual trade and investment with Russia. The threat of Europe breaking away from the US/NATO trade and financial sanctions against Russia has been solved, seemingly for the foreseeable future. Russia has announced that the gas pressure is falling in three of the four pipelines, and the infusion of salt water will irreversibly corrode the pipes. (Tagesspiegel, September 28.)

Where do the euro and dollar go from here?

Looking at how this will reshape the relationship between the U.S. dollar and the euro, one can understand why the seemingly obvious consequences of Germany, Italy and other European economies severing trade ties with Russia have not been discussed openly. The solution is a German and indeed Europe-wide economic crash. The next decade will be a disaster. There may be recriminations against the price paid for letting Europe’s trade diplomacy be dictated by NATO, but there is nothing that Europe can do about it. Nobody (yet) expects it to join the Shanghai Cooperation Organization. What is expected is for its living standards to plunge.

German industrial exports and attraction of foreign investment inflows were major factors supporting the euro’s exchange rate. To Germany, the great attraction in moving from the deutsche mark to the euro was to avoid its export surplus pushing up the D-mark’s exchange rate and pricing German products out of world markets. Expanding the eurozone to include Greece, Italy, Portugal, Spain and other countries running balance-of-payments deficits prevented the euro from soaring. That protected the competitiveness of German industry.

After its introduction in 1999 at $1.12, the euro sank to $0.85 by July 2001, but recovered and indeed rose to $1.58 in April 2008. It has been drifting down steadily since then, and since February of this year the sanctions have driven the euro’s exchange rate below parity with the dollar, to $0.97 this week.

The major deficit problem has been rising prices for imported gas and oil, and products such as aluminum and fertilizer requiring heavy energy inputs for their production. And as the euro’s exchange rate declines against the dollar, the cost of carrying Europe’s US-dollar debt – the normal condition for affiliates of U.S. multinationals –rises, squeezing profits.

This is not the kind of depression in which “automatic stabilizers” can work to restore economic balance. Energy dependency is structural. To make matters worse, the eurozone’s economic rules limit its budget deficits to just 3% of GDP. This prevents its national governments supporting the economy by deficit spending. Higher energy and food prices – and dollar-debt service – will leave much less income to be spent on goods and services.

As a final kicker, pointed out by Pepe Escobar on September 28 that “Germany is contractually obligated to purchase at least 40 billion cubic meters of Russian gas a year until 2030. … Gazprom is legally entitled to get paid even without shipping gas. … Berlin does not get all the gas it needs but still needs to pay.” A long court battle can be expected before money will change hands. And Germany’s ultimate ability to pay will be steadily weakening.

It seems curious that the U.S. stock market soared over 500 points for the Dow Jones Industrial Average on Wednesday. Maybe the Plunge Protection Team was intervening to try and reassure the world that everything was going to be all right. But the stock market gave back most of these gains on Thursday as reality no longer could be brushed aside.

German industrial competition with United States is ending, helping the U.S. trade balance. But on capital account the euro’s depreciation will reduce the value of U.S. investments in Europe and the dollar-value of any profits they may still earn as the European economy shrinks. Reported global earnings by U.S. multinationals will fall.

The effect of U.S. sanctions and the New Cold War outside of Europe

The ability of many countries to pay their foreign and domestic debts already was reaching the breaking point before the anti-Russian sanctions raised world energy and food prices. The sanctions-driven price increases have been compounded by the dollar’s rising exchange rate against nearly all currencies (ironically, except against the ruble, whose rate has soared instead of collapsing as U.S. strategists tried in vain to make happen). International raw materials are still priced mainly in dollars, so the dollar’s currency appreciation is further raising import prices for most countries.

The rising dollar also raises the local currency cost of servicing foreign debts denominated in dollars. Many European and Global South countries already have reached the limit of their ability to service their dollar-denominated debts, and are still coping with the impact of the Covid pandemic. Now that US/NATO sanctions have driven up world prices for gas, oil and grain – and with the dollar’s appreciation raising the cost of servicing dollar-denominated debts – these countries cannot afford to import the energy and food that they need to live if they have to pay their foreign debts. Something has to give.

On Tuesday, September 27, U.S. Secretary of State Antony Blinken shed crocodile tears and said that attacking Russian pipelines was “in no one’s interest.” But if that really were the case, no one would have attacked the gas lines. What Mr. Blinken really was saying was “Don’t ask Cui bono.” I don’t expect NATO investigators to go beyond accusing the usual suspects that U.S. officials automatically blame.

U.S. strategists must have a game plan for how to proceed from here. They will try to maintain a neoliberalized global economy for as long as they can. They will use the usual ploy for countries unable to pay their foreign debts: The IMF will lend them the money to pay – on the condition that they raise the foreign exchange to repay by privatizing what remains of their public domain, natural-resource patrimony and other assets, selling them to U.S. financial investors and their allies.

Will it work? Or will debtor countries band together and work out ways to restore the world of affordable oil and gas prices, fertilizer prices, grain and other food prices, metals and raw materials supplied by Russia, China and their allied Eurasian neighbors, without U.S. “conditionalities” such as have ended European prosperity?

An alternative to the U.S.-designed neoliberal order is the great worry for U.S. strategists. They cannot solve the problem as easily as sabotaging Nord Stream 1 and 2. Their solution probably will be the usual U.S. approach: military intervention and new color revolutions hoping to gain the same power over Global South and Eurasia that America’s diplomacy via NATO wielded over Germany and other European countries.

The fact that U.S. expectations for how anti-Russian sanctions would work out against Russia have been just the reverse of what actually has happened gives hope for the world’s future. The opposition and even contempt by U.S. diplomats toward other countries acting in their own economic interest deems it a waste of time (and indeed, to be unpatriotic) to contemplate how foreign countries might develop their own alternative to the U.S. plans. The assumption underlying this U.S. tunnel vision is that There Is No Alternative – and that if they don’t think about such a prospect, it will remain unthinkable.

But unless other countries work together to create an alternative to the IMF, World Bank, International Court, World Trade Organization and the numerous UN agencies now biased toward the U.S/NATO by U.S. diplomats and their proxies, the coming decades will see the U.S. economic strategy of financial and military dominance unfold along the lines that Washington has planned. The question is whether these countries can develop an alternative new economic order to protect themselves from a fate like that which Europe this year has imposed upon itself for the next decade.