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The Invisible Hand of the American Empire

Published online by Cambridge University Press:  28 September 2012

Robert Hunter Wade
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Abstract

In the field of interstate military affairs it makes sense to talk of an American empire; but not in interstate economic affairs where the world remains thoroughly multipolar. So says Joseph Nye. This essay disagrees with the second part. It proceeds by way of a thought experiment. Imagine you are an aspiring modern-day emperor in a world of sovereign capitalist states. What sort of framework do you create such that (a) it sets the context in which all states and firms have to operate if they are not to exclude themselves from the world economy; (b) it channels normal market competition so as to benefit your firms and citizens disproportionately; and (c) it allows your economic statescraft to operate with fewer constraints than it imposes on everyone else's? The essay argues that the United States has indeed created such a framework since the 1970s, based on dollar dominance and American-centered private (not public) international financial relations. The framework allows the United States to keep spending far more abroad than it earns there–to have more butter and more guns (including military bases)–to a degree that other states cannot; and allows the United States to make the dollar swing high or low in accordance with American conditions, regardless of the costs inflicted on others. This is the paradox of economic globalization: it looks like the “powerless” expansion of communications and markets, but works to enhance the ability of the United States to harness the rest of the world to its rhythms and fortify its empire-like power. Concerted action between Europe and China and the East Asia countries is a vent for hope.

Type
Articles
Information
Ethics & International Affairs , Volume 17 , Issue 2 , September 2003 , pp. 77 - 88
Copyright
Copyright © Carnegie Council for Ethics in International Affairs 2003

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References

1 This is Joshua Cooper Ramo's statement of the core economic value of Alan Greenspan, chairman of the U.S. Federal Reserve, in “The Three Marketeers,”Time, February 15, 1999, pp. 34–42. For an astonishing illustration of this belief in action, see John Poindexter's scheme to create a futures market in political events such as terrorist attacks, assassinations, and coups. Hulse, CarlPentagon Prepares a Futures Market on Terror Attacks New York Times, July 29, 2003p.A1Google Scholar.

2 Gisselquist, DavidOil Prices and Trade Deficits: U.S. Conflicts with Japan and West Germany New YorkPraeger, 1979)Google Scholar argues that the United States ensured the primary role for the dollar by getting OPEC to agree to accept payments for oil in dollars.

3 Wade, Robert Hunter “What Strategies Are Viable for Developing Countries Today? The WTO and the Shrinking of ‘Development Space,’” Review of International Political Economy 10 no. 4 September (2003) forthcomingCrossRefGoogle Scholar. For the crucial role of counterfeiting in East Asia's development, see Wade, Robert HunterGoverning the Market (PrincetonPrinceton University Press, 2003 [1990]) pp. 268,294Google Scholar

4 Summers, Lawrence “America's Role in Global Economic Integration” (speech given at the Brookings conference, “Integrating National Economies: The Next Step,” Washington, D.C., January 9” 1996Google Scholar); available at http://www.ustreas.gov/press/releases/pr9/01091.htm.

5 For the rest of the story, see Robert Hunter Wade, “Capital and Revenge: the IMF and Ethiopia,”Challenge (September/October 2001), pp. 67–75Google Scholar.

6 Michel Camdessus,“Governments and Economic Development in a Globalized World” (speech given at 32nd International General Meeting of Pacific Basin Economic Council, Hong Kong, May 17, 1999); available at http://www.imf.org/external/np/speeches/1999/051799.HTM. The IMF has softened its insistence on capital-account liberalization since Camdessus left in 2000. A recent paper co-authored by IMF chief economist Kenneth Rogoff admits, “it is difficult to establish a robust causal relationship between the degree of financial integration and output growth performance … there is evidence that some countries may have experienced greater consumption volatility [hence welfare volatility] as a result [of financial integration].” Eswar Prasad, Kenneth Rogoff, Shang-Jin Wei, and M. Ayhan Kose, “Effects of Financial Globalization on Developing Countries: Some Empirical Evidence,” IMF, March 17, 2003, p. 6; available at http://www.imf.org/external/np/res/docs/2003/031703.htm.

7 John Taylor, Under Secretary of the Treasury, testimony before the Subcommittee on Domestic and International Monetary Policy, Trade and Technology Committee on Financial Services, U.S. House of Representatives, April 1, 2003; available at http://www.ustreas.gov/press/releases/js149.htm.

8 Quoted in Pauly, LouisWho Elected the Bankers (IthacaCornell University Press, 1997), p.94Google Scholar.

9 Nye, Joseph S Jr.A whole new ball game Financial TimesDecember 28/29, 2002, p.1Google Scholar.

10 Wolf, Martin “Asia is footing the bill for American guns and butter” Financial Times February 19, 2003p.17Google Scholar.

11 See Gowan, Peter “Explaining the American Boom: The Roles of ‘Globalisation’ and United States Global Power” New Political Economy 6 no. 3 (2001) 359–74CrossRefGoogle Scholar; Gowan, PeterThe Global Gamble: Washington's Faustian Bid for World Dominance (New YorkVerso 1999Google Scholar); and Duncan, RichardThe Dollar Crisis: Causes, Consequences, Cures (SingaporeWiley, 2003)Google Scholar).

12 Hunter Wade, RobertIs Globalization Reducing Poverty and Inequality World DevelopmentforthcomingGoogle Scholar.

13 Ross, RobertChan, Anita From North-South to South-South: The True Face of Global Competition Foreign Affairs (September/October 2002) 8–13Google Scholar.

14 Robert Hunter Wade, “Creating Capitalisms: Introduction to the 2003 Printing,” in Governing the Market.