Empires Apart (78 page)

The American empire developed in the same way but with one important difference: having become a net exporter of capital on the British model after the First World War, once it had achieved global domination it moved off in a new and different direction, but one that in many ways parallels Bagchi's interpretation of Britain's imperial tribute-gathering. By 1938 the value of US assets abroad had reached $11.5bn. After the Second World War private sector lending and investment continued to increase as US corporations strengthened their hold over foreign economies in just the same way that Britain had done in earlier times. Between 1960 and 1976 the US current account surplus reached nearly $70bn. Then something new happened: rather than pumping ever more money overseas the United States as a nation started sucking money back. Thirty years later the current
account showed a deficit of nearly $900bn. (That is to say the US imported $900bn more than it exported. These numbers are usually expressed as a percentage of GDP, and the trend is startling: in 1997 the current account deficit was under 2 per cent; by 2007 it was nearly 7 per cent.) In part this was an inevitable consequence of American commercial success. As more of the world's business became American-owned it was natural that more of what Marx called surplus value – profit – ended up in the United States. It is worth emphasising again that this ‘corporate imperialism' was not part of a giant conspiracy of megalomaniac oligarchs to rule the world; rather it was the accidental consequence of thousands of rational, routine activities buried in the interstices of corporate life. As an example, highly intelligent men and women of the utmost personal integrity toil away in corporate tax departments to find ways of maximising profits by minimising tax. These departments are benchmarked against each other on their ability to reduce their corporation's ‘effective rate of tax'. The giant American corporation Procter & Gamble has sales of £2.6bn out of its Newcastle factories, filling British shopping baskets with everything from toothpaste to babies' nappies, but clever tax management ensures that it pays just £7m in British corporation tax. The British supermarket group Asda paid hundreds of millions of pounds in tax until it was taken over by the American Wal-Mart corporation, who promptly depressed its reported profits by loading it with debt. Such corporate creativeness is not only perfectly legal but is engaged in for sound business reasons that have nothing to do with ‘imperialism', however defined. The incidental effect of Wal-Mart's tax management, however, is that funds that might have been building schools or hospitals in Britain have been diverted into the corporate coffers in Bentonville, Arkansas, and end up funding American consumption.

These international funds transfers are often lost sight of in political debate. In Britain the Private Finance Initiative (PFI), under which private corporations take over services previously run by government employees, is controversial, but one aspect is straightforward. Among the main PFI contractors are American corporations like the Texan behemoth EDS,
which over four years obtained £11bn of PFI revenue on which it reportedly made £2.55bn profit. Whether this profit was justified or not is debatable, but what is not is that this enormous sum of taxpayers' money, instead of being injected into the UK economy, became available for US consumption. Tribute had passed across the ocean as surely as it had when the Britain's imperial civil servants retired to Bognor Regis with their Indian-funded pensions.

As important in driving international funds transfers as these corporate dynamics is what might be called America's PR success. Foreigners want to invest in America; they too believe the American dream. Individuals, corporations and even governments around the world have ploughed their savings into US government bonds and US corporate equities. In February 2005 the
New York Times
reported that the US was pulling in 80 per cent of total world savings ‘largely to finance our consumption' It noted that ‘43 per cent of all US Treasury bills, notes and bonds are now held by foreigners.'As foreign savings flowed in, the funds available for American consumption increased. Not only did the US government and corporations rack up debt but so did individual Americans. In 1980 savings accounted for 7.4 per cent of the national income; a quarter of a century later the picture had reversed, with the average American spending $104 for every $100 of income. The dangers for the whole world of such an uncontrolled surge in US credit became all too apparent in 2008. Nevertheless the United States appears to have created a virtuous circle in which its commercial success draws in wealth from the rest of the world; this in turn allows American corporations to expand their influence overseas, which in turn draws in yet more wealth.

America's commercial empire is held together in large part by the primacy of the dollar. Two-thirds of world trade is dollar denominated and two-thirds of the foreign exchange reserves of the world's central banks are dollars. Crucially the world's oil markets operate in dollars. Oil importing countries must buy dollars and oil exporters are incentivised to invest in the US, thereby avoiding any foreign exchange risk. As the former US ambassador to Saudi Arabia explained to a congressional
committee, the Saudis, in part out of friendship with the United States, insisted that everyone pay them in dollars: ‘Therefore the US Treasury can print money and buy oil which is an advantage no other country has.'He worried that at some point they would ask themselves ‘why they should be so kind to the United States'. One man tried to challenge the dollar's role: Saddam Hussein insisted that Iraqi oil sales be denominated in euros, a decision reversed after the American invasion of his country.

The primacy of the dollar and the capital transfers that go with it reinforce, and are reinforced by, the other imperial bonds that the United States has established around the world. The
Observer
quoted one prominent Harvard economist delicately warning that if the Euro ever weakened the status of the dollar it ‘could complicate international military relationships'. As with most economic arguments it is possible to look at these monetary transfers through the other end of the economic telescope. Rather than arguing that America spends more than it earns, and therefore must be sucking in wealth from Asia and Europe, America's leading investment guru, the billionaire Warren Buffet, argues that the wealth transfers are in the opposite direction. In his words the trade imbalances are the ‘force-feeding of American wealth to the rest of the world'. Buffet famously lives a modest life in a smallish home in Omaha, Nebraska. For him wealth is not what you spend but what you own. By buying US shares and bonds, says Buffet, foreigners are buying American assets. As these assets last for ever, while the money received by America in return is quickly spent, it is the foreigners who are becoming wealthy at America's expense, not the other way round.

As with so much in economics, Buffet's argument is advanced in a series of logical steps to arrive at a conclusion that defies common sense. Ask most people whether they would feel wealthier if they were given £10,000 to spend or £10,000 locked in a glass case to look at, and very few would choose the Warren Buffet option. His argument only makes sense if you believe that one day the foreigners will be able to open their glass cases, sell all their American bonds and shares and start spending the
money themselves. But the sums are now so massive that nobody could afford to buy these supposed assets; if foreigners suddenly tried to unload them the markets would collapse. Collectively the foreign stockholders are locked in; America, almost entirely by accident, has created a virtuous circle for itself that mirrors a vicious circle for the rest of its empire. But that circle could unwind over time. Foreign central banks have enormous stockpiles of dollars – two-thirds held by just six countries: Japan, South Korea, Taiwan, Singapore and, more ominously for America, China and Russia. If the political environment changes, America's economy could be held to ransom.

America and Russia formed their empires in the same way at roughly the same time. Then in the twentieth century corporatism changed the face of American imperialism. For a time it seemed that, in the phrase of Alexis de Tocqueville, the two empires would hold in their hands ‘the destinies of half the world', but as the century drew to a close America emerged as the sole superpower. The United States had won out not only because of its superior military might but because its ideology had triumphed. Throughout much of the world American values were perceived to be superior – politically, ethically, economically and practically. The Russian empire was deemed to match the American on none of these attributes. For most of their history the parallels between the two empires were remarkably strong, but the modern American empire seems to epitomise what the American sociologist Seymour Lipset called ‘American exceptionalism': the United States is in fundamental ways different to every other society. But there remains one facet of Russian history that is a uniquely valuable comparator. The outstanding feature of the American empire is one that was shared perhaps only by the Soviet empire: the denial of its own existence.

Both empires hid from their own people. Russia installed an imperial puppet regime in Czechoslovakia in 1948 and America did the same in Iran a few years later. Both actions in any other age would not only have
been regarded as ‘imperial' by outsiders but would have been proudly proclaimed as such by the imperial power. In the twentieth century such proclamations were unthinkable, with the result that Russian soldiers sent to crush the 1968 uprising in Prague were genuinely taken aback by the popular hostility they encountered, and most Americans were similarly unprepared when Iranians stormed the US embassy in 1979 and held their diplomats hostage. The Soviet and American empires were unique in that their people stared uncomprehending at the realities of imperial power partly because they were shocked at the very idea of empire. Britons had been outraged by such imperial infamies as the Amritsar massacre, but they understood that theirs was an empire. For ideological reasons the new imperialists denied even that: the two sets of imperialists and their minions defined ‘imperialism' so that it only covered the other side.

Algeria, hosting the 1973 Non-Aligned Conference, attacked both Russian and American imperialism, prompting Fidel Castro to launch into a spirited denial of Russian imperialism. ‘How can the Soviet Union be labelled imperialist?' he asked. ‘Where are its monopoly corporations? Where is its participation in multinational companies? What factories, what mines, what oilfields does it own in the underdeveloped world? What worker is exploited in any country of Asia, Africa or Latin America by Soviet capital?' Similarly apologists for US imperialism deny not just the crude military manifestations of the imperial dream but the whole commercial substructure on which the modern American empire is built.

During the second Iraq War an opinion poll found that a higher percentage of Americans than at any time since the end of the Vietnam War asserted that the United States ‘should mind its own business'. The problem is that America's business is now global. Minding America's business no longer implies isolationism; it means making sure that foreign governments and citizens keep their ‘surplus' assets rolling into America's coffers. America's human citizens can only carry on minding their own business in the narrow sense meant by the poll's respondents if the US government acts abroad to mind the business of its corporate citizens.
Protecting its corporate citizens may or may not mean invading Iraq, but it certainly means opting out of international treaties, protecting and subsidising domestic industries while stopping other governments doing the same, and where necessary directly intervening in the politics of nations around the globe. All these are activities that America's critics describe as ‘imperialist', but they are only the superficial manifestations of a much deeper ideological ‘empire' created by the relentless, and quite innocent, ideological indoctrination carried out as the values of American institutions and corporations are transferred to the rest of the world. The distinguishing characteristic of the more controversial and informal ‘cultural' imperialism that some claim to see is that it is not imposed by evil foreign aggressors but has become embedded in the everyday lives of the new commercial colonies. Much of the world now accepts American values as their own.

On 1 September 2004 Chechen guerrillas seized a Russian school on the first day of the new school year. Hundreds of terrified children and adults were victims of one of the most barbaric hostage seizures in modern history. On the second night the sound of explosions sent fresh waves of anguish through the thousands of relatives and friends surrounding the school. The world's media descended on North Ossetia, and all over the world people were gripped by the unfolding horror of terrorism on the scale of 9/11. On the morning television in Britain, however, the school siege warranted only third place. Considered more important were a report that Hurricane Frances was expected to hit Florida later that day and the main story: a speech given by President Bush II in New York as part of his re-election campaign. To the British media a perfectly ordinary party political speech and a storm warning on the other side of the Atlantic were more newsworthy than a unique human tragedy on the other side of Europe. (Even later in the day, when the hostage crisis disintegrated into tragedy and pictures of the blood-soaked corpses of murdered children were being beamed on to the world's TV screens, British TV broke off to cross over to New York and report that former US president Bill Clinton had been admitted to hospital with chest pains and was being visited by
his wife.) There are many ways to explain this apparently bizarre sense of priorities: the technical ease of getting comprehensive TV coverage from the US, an underlying sympathy with all things American, an instinctive lack of sympathy (going back to Châlons) with all things east European, a simple preference for TV interviews with people speaking the same language. The reasons for devoting so much more time to America than to Russia on that particular morning are unimportant; the fact is that it happened. Britons woke up to a diet of US news reinforcing US priorities and values. The images presented to them were Bush II claiming to be rescuing the world from terror, not Putin struggling to do the very same thing. In one very small way Britain was exhibiting its position as part of the American empire.