Super Imperialism Abridged for Today's Reality

Michael Hudson updates his magnum opus for today's conditions

On 18 September at the outset of Nima’s Dialog Works program with Richard Wolff and Michael Hudson, Nima asks Dr. Hudson to explain the importance he saw in comments made by Scott Ritter during a previous edition of Dialog Works. What Hudson provides in his answer is an abridgement of the major point he described in his magnum opus, Super Imperialism: The Economic Strategy of American Empire, and how that now operates in today’s environment. What follows is just that portion of the transcript with the remainder available at the above link which also links to the video. The entire transcript/video is worth reading/seeing as much more is discussed about the dynamic explained below, which is why dedollarization is as important as it is, and is also why that reason is never told to the American public.

NIMA ALKHORSHID: Michael, you told me that you watched my talk with Scott Ritter about the defense budget, and all of that. What’s your point on that?

⁣MICHAEL HUDSON: Well, he picked up on my point that I’ve been making fifty years ago, that there’s a great difference between the balance of payments effect of America’s military spending and other countries.

Ever since the Korean War broke out in 1950, the entire balance of payments deficit for the United States, from the 50s, 60s, and the 70s, has been military spending abroad. The private sector trade and investment are exactly in balance over all these years. I published all of these statistics first for Arthur Andersen and then in my book Super Imperialism. And immediately, when my book Super Imperialism came out, Herman Kahn hired me for the Hudson Institute and said the largest buyers of the book were the State Department and the military — the CIA and the military. Immediately, the military gave a contract to the Hudson Institute for me to explain how going off the gold standard essentially enabled the United States to fund its balance-of-payments deficit, meaning its military spending abroad, by pumping dollars into the global economy and having these dollars end up in foreign central banks and be recycled.

Well, what that means is that America’s whole military spending for the last fifty years depends upon the dollarization system in other countries, using dollars as their monetary reserves in place of gold, and instead of their own currencies. That means that, as they move away from the dollars, there’s no way that the United States can finance its eight hundred military bases abroad and its military spending. Russia doesn’t have this problem. The [US] military generals don’t study the balance of payments. And many of them are right-wingers that have a sort of crude monetarist Chicago School neoliberal view of money, without understanding that money is debt. And, specifically, monetary reserves are not only America’s treasury debt, but the monetization of America’s military spending.

Now, what Scott pointed out is that Russia doesn’t have this problem. China doesn’t have this problem because they’re not trying to create a foreign empire. They’re not trying to put military bases in other countries where they have to somehow spend their domestic currency, and buying local currencies, to do whatever military operations do there. So they don’t have the constraints that the United States have. And that’s what’s essentially leading the United States to say: we’re not only at war with Russia and China militarily, we’re at war with them financially. We don’t want the BRICS — China, Russia, Iran, and their other countries — to have an alternative of not using the dollar so that the dollars that we spend abroad for all these military operations are going to be somehow recycled to the United States.

That’s why you’re having Trump try to browbeat India, Japan, Korea, and Europe into somehow promising to recycle all the dollars to the United States. Why is he doing this? It’s not simply to pay tariffs so that the Treasury will have more money and can cut taxes on the wealthy even more. It’s so that the dollar will not be forced down so that there will be a huge inflow to support the dollar, basically, despite Trump’s hope of devaluing the dollar slightly, slowly downwards — as if that’s going to make American exports more competitive. The whole fight over the dollar isn’t really about U.S. exports being more competitive because the United States doesn’t have much industry to export. It’s really about the balance of payments, which is primarily military in character — not the trade deficit, not the investment deficit.

The government used to realize that. But again, Trump and his team just think of sort of running a protection racket: Either you spend your money to the United States — $350 billion from you, Japan, you promise to send here to invest — another $350 billion from you, Korea — or we’re just going to raise tariffs and deny you the U.S. market. The American strategy — and it’s a military strategy as well as an economic strategy — imagines that other countries need the American market, and they don’t have a choice but to support the dollar, and by supporting the dollar, supporting America’s ability to wage war and have military operations abroad.

They don’t realize that this is the whole thing. And yet this protection racket has essentially overplayed its hand. And last week, Korea said: Wait a minute. You just told Japan to pay you $350 billion, and you get all the profits from what they spend in — you get 90% of the profits and give us 10% — if there are any profits at all, you know, from the way you arrange it with your Hollywood-Pentagon bookkeeping.

[Trump says] You need America’s market; we can deny it, and that’s chaos for you.

Well, it’s not really chaos. They tried the same thing with China last week, and China protested and said — I’m sorry, they tried it with Korea last week — Korea protested and they said: We’re not Japan. We don’t have $350 billion. We’re much smaller. And you’re blocking our automobile exports from the U.S. market. We just can’t pay.

And then, Howard Lutnick, the Commerce Secretary, said: The Koreans either accept the deal, or pay the tariffs. Black and white: pay the tariffs, or accept the deal.

Well, yesterday, Korea’s foreign minister went to China. And there’s not a word in the paper about what they’re discussing. But you can just imagine. Korea realizes that Trump is going to insist: We need your money to continue our military spending abroad and to finance our budget deficit. We’re going to close the market to you. And Korea finally is saying, well — for Hyundai and for Samsung, all of its computer industries — what if we don’t have the U.S. market? Do we have a Plan B? And I suspect they’re talking about China. And they’re talking to China. And they’re saying, well, you know, if we walk away from the U.S. market, we’ll walk away from that factory in Georgia. Obviously, there’s such a reaction in Korea that we can’t afford it. If we walk away, can you figure out a way that we can work our industrial capacity in partnership with you as part of your Chinese new prosperity sphere?

And by the way, if we do that, will you help back us up when we tell the Americans to leave their military bases here? We don’t want their military bases if they’re going to hold us up and essentially declare: We’re treating you like a defeated power. Like we defeated you in 1951. There’s never really been an end to the Korean War. We’re still fighting you, just like we’re still fighting World War II against Japan. You don’t have a choice.

If Korea and Japan, and India all make a choice to say, well, we cannot afford access to the U.S. market on these terms. We can use the $350 billion — or Japan can use the same amount — we can use that $350 billion to subsidize our own industry and keep our employment and support our workforce, while we transition radical change, from orienting our trade with the United States and Europe, to orienting it with our new Asian partners.

That’s what it all is. And that commercial balance-of-payments consideration is a fundamental military consideration at the root. And that’s what really frightens the United States. It was the Vietnam War that forced the United States off gold in 1971. Its spending in Vietnam depleted the gold stock by spending so many dollars abroad that General de Gaulle, in France, and Germany, just cashed them in for gold. And America finally just stopped the drain.

Well, now it’s other countries that are preventing the United States from solving this drain problem by saying we’re not going to accept any dollars that are just the monetization of your military spending to surround us with military bases. We’re going to stop the financial bloodstream that’s funding your whole new Cold War. And this goes beyond the investment in missiles and the investment in boats. Other countries are not going to fight a war by invading any other country. And America cannot control another country, not even Ukraine, without troops invading it. And the cost of a military invasion, an infantry invasion, is very different from the domestic cost of sending missiles. China and Russia, Iran have no intention or ability to mount an army to send into other countries. All they have is missiles, basically. And that’s what the next few years of war are going to be all about. [My Emphasis]

Russia’s military situation is such that it needs a substantial standing army, not just to deal with NATO in Ukraine but to defend its great exposure to NATO at its borders. It must be stated that Ukraine is de facto NATO—look who started the war and has armed and prosecuted the war ever since 2014: NATO headed by the Outlaw US Empire. And Trump’s doubletalk about NATO taking over the war from the Empire is a very Big Lie since who heads NATO? As the world dedollarizes, the Empire must fund its overseas empire of bases from its own budget, which is something it can do if it doesn’t care how much and rapidly the deficit will rise along with the interest on that debt. But it gave trillions in tax breaks to the already filthy rich that resulted in the government shutdown that began today. There’s some very dark humor present with an Empire that’s getting ready to wage war on Iran again and invade Venezuela, yet it’s broke to the point where the pentagon must shut down for lack of funding. It acts like a consumer with a credit card whose bank doesn’t care how much it goes over its spending limit and won’t place a hold on the account.

I know there’s a lot happening in our world that goes well beyond my ability to report on it all. That said, there are some news chat programs that have the resources and time to dig into and inform people. One is Nima’s Dialog Works and whose chats today with Max Blumenthal and Colonel Wilkerson are both indispensable must watches. And of course, the weekly chat with Drs. Hudson and Wolff with Nima on Thursdays educate us along different lines so the entire Big Picture can be understood.

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