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a dollar in the hand will be worth nothing somewhere else…….

Since the establishment of the Bretton Woods system in 1944, the US dollar has been the global reserve currency. Even when the United States terminated convertibility of the dollar to gold, effectively bringing the Bretton Woods system to an end and making the greenback a flat currency, the dollar's global hegemony continued.

Since 1971, the dollar's hegemony has been based mostly on one fact: almost all commodities in the world, especially oil, are traded in the dollar. Despite the growing economic problems of the US, including the stagnation of the income of the middle class, increasing inequality, and the ballooning of the country's national debt, the US has maintained its position as the largest economy in the world with high per capita GDP.

 

By Benyamin Poghosyan

 

The collapse of the Soviet Union and the end of the Cold War ushered in a new era of US hegemony. In the 1990s and the 2000s, thanks to its economic and military power, the US adopted an assertive and aggressive foreign policy of "promoting democracy" across the world marked by NATO's bombing of Serbia, American invasion of Afghanistan and Iraq, and the destruction of Libya.

However, the 2008 global financial crisis marked the beginning of the end of the US' absolute hegemony. The US' decline and "the rise of other economies", primarily China, but also Russia, India and Brazil challenged American primacy. The establishment of new international organizations and groupings, such as the Shanghai Cooperation Organization, BRICS and BRICS-plus has created new platforms to help establish a multipolar world.

But as the US started facing growing competition from other centers of power, it decided to exploit the role of the dollar as a global reserve currency in a bid to contain the rise of other countries and maintain its hegemonic role worldwide.

To achieve its goals, the US used economic sanctions against other economies. The critical tool for the US was the introduction of the so-called "secondary sanctions", which targeted not only specific countries and companies but also third-party states and organizations. Using the dominant position of the dollar in the international market, the US threatened to exclude some countries and companies from the international financial system if they did not follow Washington's policies and diktats.

The first victim of this policy was Iran, which faced severe US economic sanctions. Now the US is using sanctions against China, particularly against Chinese telecommunications companies, such as Huawei and ZTE, which are significant competitors for US information and telecommunications technology giants in such areas as 5G networks and artificial intelligence.

Since February, the US and its allies and partners have imposed severe sanctions on Russia. Here again, the US exploits the role of the dollar as a global reserve currency, excluding Russian banks from international financial markets, and using secondary sanctions as a primary tool to force other countries to follow its rules and policies.

But since the economic situation of the US continues to deteriorate and the country's economy needs the injection of significant financial resources to stay afloat, the US Federal Reserve implemented an aggressive policy of interest rate hikes, thus stimulating the significant flow of capital from European and Asian markets to the US.

This policy resulted in a significant devaluation of many countries' currencies including the euro, which reached its lowest level in the last 20 years. The US' aggressive financial policy triggered significant inflation in many countries, causing widespread economic disruptions and a rise in poverty, especially in the developing world.

However, as the US government has been more often using the dollar as a primary tool to safeguard its geopolitical interests and contain the rise of other economies, the trust in the dollar is declining, and many developing countries have been trying to abandon the dollar as the primary currency for trade.

While China and Russia have started using the yuan and ruble as mediums of exchange in bilateral trade, Saudi Arabia is considering using the yuan as a negotiable instrument in its oil trade with China. And Egypt has decided to issue yuan-denominated bonds.

Also, countries such as India and Iran are discussing the possibility of using their national currencies in regional and international trade. This means that despite the dollar still being the most common global reserve currency, the process of de-dollarization in global trade has accelerated. Incidentally, the US policy of using the dollar as a tool of economic coercion and geopolitical confrontation significantly accelerated this process.

The post-Cold War order will result in the establishment of a truly multipolar world and the end of the US' absolute hegemony. It could also mark the end of the position of the dollar as the leading and strongest global reserve currency.

The author is chairman, Center for Political and Economic Strategic Studies, Yerevan, Armenia.

The views don't necessarily reflect those of China Daily.

If you have a specific expertise, or would like to share your thought about our stories, then send us your writings at [email protected], and [email protected].

 

READ MORE:

https://www.chinadaily.com.cn/a/202209/15/WS63227097a310fd2b29e77b08.html

 

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crises: the new normal?…..

 

The Free Market Is Making All Our Problems Worse, Not Better

 

BY PAOLO GERBAUDO

The world is on fire all around us. The free market can’t put that fire out — only massive state intervention in the economy can.

 

Mainstream politicians these days are constantly looking for excuses to justify their divergence from market dogma. From the pandemic to the energy crisis, the war in Ukraine and growing inflation, ever-new crises are forcing policymakers to use heavy state intervention, which neoliberals saw as their sworn enemy, to prop up markets.

These interventions are justified as emergency measures necessary to guarantee continued economic operations before a coveted return to market normality — which is, however, always postponed. Just witness the European Central Bank saying in April it would stop purchasing bonds, only to announce a new bond-buying to address ballooning borrowing costs in countries like Italy.

 

No Going Back to the Old Normal

To date, the state interventionism we have seen coming from both center left and center right over the last decade and more clearly since the explosion of the COVID pandemic has closely followed this logic of facilitating a return to “normal market conditions.” By now, however, it has become apparent that there is no way to go back to the old normal; economic conditions have drastically changed and the premises and expectations that accompanied the era of neoliberal globalization do not offer any credible guidance anymore. Faced with this farcical attempt by the political mainstream to use state interventionism to restore market society and protect wealth, the Left should use this opportunity to reclaim the socialist tradition of progressive state interventionism, as a means to transform society and shift power relations.

In fact, the proactive use of the state as a means to construct a new society was common to different strands of the Left. It was not just an idea harbored by Leninists who aimed to construct a command economy with state ownership covering virtually every sector but also held in different ways by social democrats, who led the transformation of the old liberal states into welfare states, nationalized strategic firms, and applied indicative planning to reorganize the economy and guide it toward socially desirable ends. The state was understood as a “battlefield of class struggle,” as Nicos Poulantzas famously put it, and the point of the Left was conquering new trenches in the sprawling state apparatus while radically democratizing it.

 The Myth of the Weak State

This view of left state interventionism lost part of its allure in the aftermath of the working-class defeat of the 1970s and 1980s, and because of the collapse of the Soviet bloc and the evidence of its economic inefficiency. The neoliberal revolution managed to convince citizens in a globalizing world that state intervention was doomed. Neoliberal politicians like Bill Clinton presented globalization as “the economic equivalent of a force of nature, like wind or water” that it would be stupid to try to reverse, while Barack Obama in 2016 framed it in similar terms as “a fact of nature.” Politics was presented as the management of the necessity of globalization, with economic decisions limited to those acceptable to international investors, with some sections of the moderate and soft left broadly accepting these ideological premises.

 

Yet we now find ourselves at a juncture when this vision of globalization as inevitable and permanent and of the state as a weakling creature have been patently demonstrated to be empirically dubious and historically anachronistic. During the pandemic, politicians of both the center left and center right were forced to create new emergency social welfare provisions in order to help unemployed workers, and now they are forced — much against their beliefs — to apply forms of price control and to set aside funds to fight against the cost-of-living crisis. Emergency state interventionism has become the new normal, and the return to normal market society is continuously postponed.

Part of the change we are witnessing is not so much practical as epistemic — namely, it has to do with how we perceive and know the world. In fact, contrary to the neoliberal gospel, the state and state interventionism never really went away. As many political economists have shown, the neoliberal project and the very existence of globalization were always premised on state patronage, for example by establishing the necessary regulatory frameworks and repressing protest. But at the rhetorical level this narrative of the “weak state” had important ideological implications: it served to restrict the range of acceptable policies to those that were in the interest of international capital. This fiction was aided by the peculiar conditions of the “Great Moderation,” the era between the mid-1980s and 2000s marked by limited macroeconomic volatility, low inflation, and low interest rates.

Under the illusion of stability of the “long ’90s,” economic policy appeared as if on automatic pilot, amounting to limited interventions: small “nudges” to the market, which could be presented as limited exercises in “course correction” — technical rather than political decisions. However, the crisis of capitalism is now so profound that it is not anymore possible to maintain this pretense. Economic decisions appear immediately as political decisions, hence ones where different interests are at stake, and where all too often the interests of business continue to be put before the interests of workers. This was evident with Bidenomics, where the infrastructure package that was in the interest of companies was passed, while the social measures part of the so-called Build Back Better package were stopped in Congress — because of the opposition of Democratic centrists who expressed major worries at state aid to the poor, while at the same time applauding state aid for entrepreneurs.

 

Reclaiming the State

The strategic challenge now is to match this economic reality in which heavy state interventionism has become the new normal, with a vision in which this intervention is not seen just as a piecemeal and last-ditch measure to revive the market. Socialists need to reclaim a constructive view of the state, what economist Mariana Mazzucato has called a “mission-oriented state,” which was part of the tradition of social democracy. From Franklin D. Roosevelt’s New Deal to social democrats in Europe, the Left in the twentieth century resorted to the creation of state agencies and major public employment plans to foster economic development, guarantee social equality, and rebalance the relations of power between labor and capital.

There are all too many issues that call for immediate state intervention: from the cost-of-living crisis calling for a return of price controls and wages that are indexed to inflation to climate change that demands an acceleration in investments and actions geared at reduction of emissions and climate adaptation. But besides specific measures, what is called for is also a new vision of how state interventionism can be used not only as a stopgap against immediate emergencies but also as part of a long-term plan to achieve that economic and environmental security that the market is not able to provide — and to redistribute power away from the economic oligarchies that have condemned our society to permanent chaos and toward workers and ordinary citizens.

 

READ MORE:

https://jacobin.com/2022/07/free-market-neoliberalism-state-intervention-socialism

 

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NOTE: THE WORLD OF (PRESENTLY AMERICAN) HUMAN LEADERS HAS BEEN TO USE CRISES AFTER CRISES TO KEEP PEOPLE AMUSED IN THEIR PLACE WATCHING THE "GAME OF DUNNIES" ON TV (CABLE) AFTER A HARD DAY'S WORK FOR SUBSISTENCE MONEYS. "NORMAL" NEVER EXISTED AND THIS IS WHY THE RELIGIONS OPPORTUNISTICALLY INVENTED HELL, HEAVEN AND DONATIONS. 

 

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