Wednesday, October 7, 2009

Review - David Harvey's The New Imperialism

David Harvey's The New Imperialism

Perhaps it is a little strange to review the work of a historical materialist on a blog focusing on Catholic culture. David Harvey, although a Marxist, is one of the most important contemporary social theorists and has written The Limits to Capital, The Condition of Postmodernity, A Brief History of Neoliberalism, and all of these books are thoughtful, well-written, and interesting. The New Imperialism is a brief historical account of U.S. foreign policies leading to the 1973 economic crisis that started the long-term decline of the U.S. and resulting in neoliberal policies that sought to preserve hegemony by turning to financial capital. While the U.S. was focused on destroying unions at home, it engaged in an expansion of an ideological form of free market capitalism that sought to get emerging market (3rd world) states to privatize, eliminate trade barriers, open domestic market to foreign banks, and give foreign corporations full ownership and repatriation rights. Within the U.S. there is broad support for these policies and the poor states were forced to adopt provisions when they were most vulnerable through the IMF and the World Bank. How did the U.S. use these institutions to increase their global wealth?

The answer, Harvey notes, is found in the U.S. transition from manufacturing to financial wealth that took place at this time. We have to contrast this time-frame with the years following the Bretton Woods summit when the gold-standard foreign exchange system was in place. At this time, individuals could hold their savings in local currencies without fearing a total loss because their currency could always be exchanged for a fixed amount of U.S. dollars and dollars were exchangeable for a fixed amount of gold. This allowed emerging market countries to all have a growing, even if small, local economy. After Nixon ended the gold standard and the dollar was not tied to any currency or precious metal, a series of crises started to emerge in the third world. The small domestic economies of emerging market states all became vulnerable in this move because individuals and families could no longer place their savings in local banks where inflation could destroy their value at any time. Where did these savings go? The primary beneficiary to the post-gold standard era was New York City which became entrenched as the financial center of the global economy. The financial instability of currencies served to strengthen NYC and help preserve the U.S. position as a hegemonic power. It also did this by starving small manufacturing firms in most of the third world by moving local money to foreign banks. If you have ever traveled through these countries, you frequently come to small manufacturing towns that are dead and abandoned. Many jobs were lost in foreign countries as a result of this switch to financial power.

Tragically, this account tells only half of the story. Within the Third World this economic downturn slowly started to cause local currency crisis and the IMF would step in to lend money if the receiving state would make economic changes. The first change was that they needed to float their currency and this would inevitably devalue it. At this point, U.S. enterprises would come and purchase the local businesses for a mere fraction of their worth. These currency devaluations could be so severe that foreign enterprises could not but purchase financial enterprises. David Harvey calls this process “Accumulation by Dispossession” and he explains how the U.S. was able to maintain its economic hegemony by diverting funds from poor countries. NYC also played an important role in this process because if a state did not adopt recommended neoliberal modifications, it would give the country a lower financial rating and the flow of funds would come to a halt. This is problematic for a state where its own citizens are providing funds to the very banks that now refuse to lend to it. If a state refused to open its market to the U.S. there were other means employed to get the poor country to cooperate. A financial crisis could be triggered by financial institutions in NYC that would force the IMF to step-in and get the country to open itself to U.S. enterprises.

The title of this book accuses the U.S. of engaging in imperialistic practices with these methods. If Harvey is right, and there is much evidence that he is, then the U.S. economy has survived since the 1980s by causing economic crises in poor states and then using this opportunity to buy up local property. Also, our banks gained vast deposits through savings accounts sent by families in vulnerable states that simply wished to preserve their wealth. Poor countries throughout the world have been subsidizing the U.S. by filling our banks and by seeing their domestic profits also sent there. In other words, our economy has avoided crisis by keeping poor states in a subservient position where we drained their wealth and preserved our place in the international system.

This work provides some insight into the negative consequences of U.S. foreign policy that have made the lives of the poorest families more difficult. Harvey is a materialist and there are philosophic weaknesses in his assumptions about the human person. Although he does not believe in justice, this work reveals a fundamental distinction between the way the U.S. regards its own citizens and individuals and families in poor countries. We preserve our standard of living by exploiting the vulnerable and weak. The tragic irony is that our policies may be used against us in the current economic downturn. If so, I wonder if we will be as silent when we are the ones suffering injustice.

Income concentration: Top heavy | The Economist

No comments: