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[There are massive proposals on the table to reform the U.N. Security Council. India, Japan, Brazil, Germany, and many other nations are all vying for seats there and some even want to join the permanent five who possess veto power. As all of the world’s problems, from Peak Oil to Global Warming to economic collapse manifest their global nature the neocons appear to be heading off one last possibility – that the U.N. actually might become a semi-effective world body. The chances of this were slim anyway. But what John Bolton and the neocons are doing now is guaranteeing paralysis at the U.N. for the foreseeable, short-term future. Indeed, that’s all the future we have to be concerned with anyway. – MCR]

The Dollar, the U.N., and the U.S.

Right-Wing Populists Still Fear the Wrong Thing

Jamey Hecht

© Copyright 2005, From The Wilderness Publications, All Rights Reserved. This story may NOT be posted on any Internet web site without express written permission. Contact May be circulated, distributed or transmitted for non-profit purposes only.

August 29, 2005 0930 PST (FTW): All the world knows that John Bolton is a creep, a bully, an anti-intellectual fraud of a diplomat whose natural bent is toward confrontation and what child psychologists call “acting out.” After months of symbolic congressional reluctance to confirm him as Ambassador to the U.N., a job for which he is as unqualified as Sasquatch, Bolton was picked up by the scruff of his neck and gently dropped into his post by Mr. Bush. As if retaliating for the delay tactics he endured as a nominee, Bolton has begun a filibuster of his own, as the Center for American Progress shows in “ Bolton Already Obstructing Reform”:

It hasn't taken John Bolton long to undermine U.N. reform efforts. Weeks before world leaders from 170 countries are to gather in New York to discuss "the most sweeping changes at the United Nations in its 60-year history," the U.S. delegation led by Bolton has " thrown the proceedings in turmoil" with demands for a "drastic renegotiation" of the draft reform plan.  Never mind that the current document is the result of " nearly a year of intensive negotiations" in which the United States " has been a regular participant" and so "has had a major impact on the document to date." Bolton has decided to introduce at the last minute more than 750 amendments that would "eliminate new pledges of foreign aid to impoverished nations [and] scrap provisions that call for action to halt climate change and urge nuclear powers to make greater progress in dismantling their nuclear arms."  Bolton was sent to the UN not to reform it, but to weaken it, and he’s already hard at work.

But it’s a mistake to assume that this is just a piece of American nationalism. It may look like disengagement from world affairs, but it’s actually a wager that the nuclear arsenal and the dollar standard will be enough to keep the American-led power block on top of competing power blocks. While the neoliberals including both Clintons epitomize commercial globalization – an economic formation whose future disappeared with $11 / barrel oil – the neoconservatives espouse a form of full-speed global military engagement whose major focus is Eurasia. That includes the fighting of hot wars (what Antonio Gramsci called wars of maneuver), but is also a chessboard strategy of base emplacements (what Gramsci called wars of position). Parts of the Left will regard Bolton’s attack on foreign aid as an attack on the third world; as for what Mr. Bolton think he’s doing, it’s almost unimportant. The aid programs have been disastrous for the indigenous food production sector in the developing countries, and a sudden cancellation of extortion-based loans (they were never gifts outright, remember) may wind up feeding more people than it starves. This is an attack on the U.N.

The dread of a “one-world government” is an old right-wing populist meme that leads nowhere. Its counterparts in the 19 th Century, such as the “Know-Nothing” nativist movement, had the same xenophobia but on a smaller than planetary scale. Similar attitudes sometimes prevail in England: surrounded by open waters, an ethnocentric culture develops imperial ambitions; in response, a small belligerent faction insists that God himself has put the water between them and the rest of the world in order to ensure sovereignty and cultural purity.

Politically important groups in Japan have had the same attitude in certain periods, for the same reason. A figure like Pat Buchanan is the best example of this position – an anti-imperialist whose motivation springs not from decency or nonviolence or sheer economic prudence, but from a sentimental, mentally lazy racism suffused with nostalgia for a pre-capitalist social milieu he never experienced (in short, Little House on the Prairie). His admirers on the right are currently pointing their pitchforks at illegal immigration – and as for economic prudence, at least a billion dollars worth of American peaches have rotted on the trees for lack of the wage-slavery of Mexican laborers.

Clearly, when the farmers themselves have armed standoffs with the INS or the DHS or the Border Patrol (or the increasingly bold, armed vigilantes we’ve heard so much about), their interests are absolutely not aligned with what the right calls American national sovereignty. The farmers want local control, not INS surveillance, so that they can keep employing illegal immigrants without having to deal with archaic national inconveniences like the minimum wage, workmen’s compensation, and the eight hour day. And their ability to so employ undocumented Mexican men – in other words, their de facto ability to define which documents actually count for something – is an inherently international matter. The dichotomy is not between the local and the global, but between the local and the national. Uncle Sam is the enemy of poor white yokels because he takes their money and tells them what to do – and because he occasionally goes to Dixie or Montana and murders them, lest they dream that his wrath is exhausted on the minorities they both despise.

Isolationism was always a red herring. With rare exceptions like Tokugawa Japan, the question has always been what the character of a state’s international behavior would be, not whether its behavior would be international at all. The neocon assault on the U.N. has little to do with American sovereignty. Washington and Wall Street have had a stranglehold on international institutions since the end of the Second World War, as the run-up to the Gulf War made clear. But in the Second Gulf War, Bush could not extort a resolution from the U.N. and went to war anyway, calling that international body “irrelevant” and suggesting it had no “backbone.” Of course its refusal to grant the resolution was a rare instance of precisely that U.N. backbone. Its sources were Germany, France, Russia, and China, and as the U.S. goes for broke we can expect more of it.

John Bolton is the walking embodiment of the Bush / Cheney / Rumsfeld hatred for the rest of the world, their contempt for man’s responsibility to man. That should not please the vast dirt-poor section of the American right, because Bolton is clearing a path for multinational corporations and the free flow of capital – much of which is flowing out of the United States at quite a speed. If you want your outsourced job back, Jim-Bob, try organizing with the working class in Other Countries so that everybody gets a global minimum wage. That way, big business will have no incentive to fire you and send the jobs to Otherstan. It is this sort of measure – and any moves in European and Chinese monetary policy that might have similar effects – that Bolton is out to prevent. Imagine any harm-reducing effort the United Nations might somehow find the strength to make, such as advancing the oil depletion protocol, and ask yourself whether it would diminish the freedom of Exxon, Halliburton, Monsanto, ADM, and Lockheed-Martin.

In the aftermath of World War Two, the exhausted European powers chose cooperation under American hegemony via the IMF and World Bank rather than inter-imperial conflict. Peak Oil and the neocon response to it are bringing that fifty-year-old world order into serious danger, and it seems to be ending in a debacle whose early stages are on us now. When and if there is an inter-imperialist shooting war, the United Nations will be an inconvenient (albeit weak) obstacle to the contenders. But there’s a bigger reason Bolton hates the U.N.

In a way, the dollar is the biggest pillar of American dominance, even bigger than drugs and energy. Drugs, after all, are only a concentrated (interest-free and tax-free) form of the dollar. While Americans do consume far more energy per capita than any other group, that would be impossible without the locked-in dominance of their fiat currency. It has behind it neither gold nor real exports, only the threat of force and one grand, exquisite paradox: other countries have already absorbed so much of our unpayable debt that they cannot dump the dollar without losing the full value of those loans.

In other words, the dollar has become a magic pipe through which the wealth of this planet is siphoned into U.S. hands, maintained by three institutions over whose conduct the U.S. has sole veto power: the WTO, the IMF, and the World Bank. Not the U.N.

America has run historically unprecedented, vast trade deficits since the Vietnam War. We borrow money abroad to fight our wars and buy our consumer goods. Our promise to pay it back comes in the form of U.S. Treasury bills, great mountainous drifts of them, heaped on the central banks of Japan, China, South Korea, and Europe. Super Imperialism author Michael Hudson explained in an interview with Standard Shaefer:

SS: Do you believe the neo-conservatives advising Bush at the moment are more aware of "benefits" of this balance of payments issue, what you call the US treasury standard?

MH: They know it's a rip off, yes. And they absolutely want it to continue. Being Chicago School monetarists, they think that America's financial free ride should be built into the world economy as if it were perfectly natural for the rest of the world to adjust its economies to help the U.S. economy. But among sovereign regional blocs this kind of subservience can only be transitory.

SS: What is the role of militarism at this stage? Can perpetual war be seen as a sort of imperial Works Progress Administration that jumpstarts the domestic economy? At what point does the cycle collapse and can it do so internally, or as you've suggested, does it only stop when Asia, Europe, and the East finally refuse to buy US treasuries?

MH: The US Treasury-bill standard finances the military, but doesn't need imperial war to succeed. So far it's being accepted voluntarily, as other countries have not yet figured out how to extricate themselves from a system that is bleeding them more and more. To date they haven't tried very hard to create an alternative, but now the system could backfire, as Bush's aggressive diplomacy is prompting Europe, Russia and China to stand up for their own self-interest. And that's what they need to do. They didn't stand up for their self-interest when the World Bank and IMF were formed, but now they have to do so.

People are now beginning to raise the question of whether countries really need their central banks, which are essentially lobbyists for the Washington Consensus, as are the World Bank and the IMF. They follow the Chicago School in lobbying for high rates and a large cushion of unemployed so as to maximize financial power relative to labor and the products it produces. Financial exploitation now exceeds the old-fashioned exploitation of labor by actually employing it, albeit for low wages.

Central banks are staffed by Chicago School monetarists, and are allowed to take only a 3% deficit whereas in the US it is limitless. Europe and Asia should abandon the false start with their central banks and should rely on their Treasuries, which are Keynesian or could be Keynesian. The national Treasuries should set up a credit system with bonds and IOUs based on euros and other currencies…

A succinct formulation of this process comes from an review of Hudson’s book, by one Philip Myers:

In his most penetrating analysis, Hudson describes the way the US managed to turn its chronic trade deficits from the Vietnam War era onward into a mechanism of "Super-Imperialism": by unmooring the dollar from the gold standard, the US established a 'debtor imperialism' whereby nations with trade surpluses against the US were forced to buy US Treasury bills in lieu of gold. The rest of the world is thus forced to finance the growing US trade deficit (and thus US military interventions) in perpetuity, or face a meltdown of the current world economic order and a collapse in the value of their own immense dollar holdings.

U.S. domestic oil production peaked when M. King Hubbert predicted it would: in 1971, at the very moment when the gold cost of the Vietnam massacre became unbearable. So the U.S. simply took the dollar off the gold standard and kept burning gasoline, fighting wars, and borrowing money. It is all that “we” remember how to do.

With his usual brilliance Mr. Hudson anticipates an eventual awakening by the Asian and European powers, in which they endure the purgative fires of a recession in order to break the dollar and inflict a depression on their American parasite: “There will be a crisis when Europe, Asia and Latin America finally break away.” Much the same point has been developed into a full length study by William R. Clark, the new Petrodollar Warfare : Oil, Iraq and the Future of the Dollar. It’s based on the recent articles Clark has published on the monetary dynamics of the Iraq War and of the current charade over Iran. There he shares the hope that dollar hegemony, and the violence it finances, will end:

It would seem imperative that our government begins discussions with the G7 nations to reform the global monetary system. We must adapt our economy to accommodate the inevitable ascendance of the euro as an alternative international reserve currency. I concur with those enlightened economists who recommend the U.S. begin the process of convening the next ‘Bretton Woods Conference.’ The U.S. government should compromise and agree to the euro becoming the next international reserve currency. A compromise on the euro/oil issues via a multilateral treaty with a gradual phase-in of a dual-OPEC currency transaction standard seems inevitable. It would also seem prudent to investigate a third ‘ Asia bloc’ of the Yen/Yuan as reserve currency options to give balance to the global monetary system.

Which “basket” of currencies will be the alternative? Can the euro play the role of reserve currency? Will gold anchor the global financial system again? I don’t know the answers to any of those questions. But I suggest that, for all its flaws, the United Nations remains the best venue for the kind of deliberations that would make such a new monetary regime possible over American objections. If the U.S. were to use its veto, the other powers could invoke American disregard for their own opposition to the Iraq War and call it precedent. As for the G-8, the last time it convened to discuss something that everyone but the American delegation wanted – cooperation on climate change – some train cars and a bus blew up and wiped that off the headlines. Although the mandate of the G - 8 includes macro-monetary policy, its only Asian member is Japan. While that country is the largest holder of U.S. Treasury bills – in other words, it’s stuck with the largest dollar risk exposure – the holdings of China and South Korea remain enormous. For the iceberg of reasons whose tip emerged in the congressional hearings on the Unocal / CNOOC matter, the Chinese hand in the fate of the dollar is stronger than anyone else’s.

Let’s return to Mr. Hudson’s remarks where we left off. He explains that American planning elites would like to be completely absolved of the national debt by swapping the U.S. Treasuries from foreign hands and replacing them with IMF credits of some kind:

The U.S. has said it can't pay back its dollar debts and doesn't intend to. As an alternative, it has proposed "funding the US dollar overhang" into the world monetary system. Other countries would get IMF credit equal to their dollar holdings, but these holdings no longer would be US Treasury obligations. The US would wipe its debt to foreign central banks off the hook. This would mean that it would have got all the balance-of-payments deficits for the past 32 years for free, with no quid pro quo.

The US has been proposing this for 30 years whenever Europe raises the issue of payment for its dollar holdings. American diplomats have said that they won't allow central banks to use their dollars to buy US corporations, for instance. When OPEC countries proposed this after 1973, the US Treasury reportedly informed them that this would be considered an act of war. As for Europe, it never has pushed its own self-interest in the World Bank or the IMF.

China ’s attempt to buy Unocal was not just an effort to get that company’s Asian energy reserves; it was also a real step toward unloading China’s massive dollar holdings without triggering a run on the dollar. There is no American gold to be had, but there is still meat on the bone here – plant and equipment, American-held oil and gas reserves abroad, mineral ores (like the “rare earth” that neocon Frank Gaffney was so upset about) and big name brands like Maytag. Just as one might wonder whether the Iraq war was more about the currency pricing of oil than the oil itself, one wonders whether China was as interested in acquiring Unocal as it was in forcing an opening through which it could start draining away the huge economic abscess of its dollar holdings.

Congress prevented China from doing so. Now, as China broadens its economic relationship with Africa, we have to ask whether the motivation is not only West African oil reserves but the opportunity to undermine the IMF and the World Bank, dislodging the United States. The non-Africans who fund and protect African dictators may soon be in Beijing instead of Langley, Virginia. That makes some people at Yale uncomfortable, as you can see from a look at “ Leveraging the Dragon: Toward An Africa That Can Say No,” by Chris Alden:

Cases such as Angola's request to China for a $2 billion loan (which Luanda was reluctant to seek from the International Monetary Fund), which formed a part of China's successful 'dark horse' bid for a share in Angola's oil, serve as an example of Beijing's willingness to overlook poor fiscal management in its pursuit of African resources.

In other words, global monetary policy is slipping out of American control. Whereas the Soviet Union made significant aid loans and grants outside of the World Bank and IMF, it was economically destroyed by the American-engineered Saudi oil price crash that left Soviet petroleum exports languishing in the bargain bin. China, by contrast, is not vulnerable to low prices; it uses its own underpricing (through the weak Yuan, ultra-low wages, and an environmental policy of total oblivion) to crash the domestic manufactures of anybody who can’t resist cheap goods. That includes the outsourced, downsized American worker and her houseful of Chinese plastic. Of course, when there are no domestic goods to buy, the imports are the only choice.

Our moment is the relative calm before a storm of Peak Oil, climate change, and monetary collapse. Much of what looks like business as usual on the news is actually preparation for the next phase of each block’s own strategy for survival and sacrifice. Keep your eyes on small-scale community preparation, be strong and gentle, and shape your choices with information from the bigger picture.

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