I recently came across a Talking Post interview with John Pilger (1) about the war in Ukraine – which he views above all as ‘a war of propaganda. … almost nothing one reads in the western press about the invasion of Ukraine is to be trusted ….. scepticism is crucial now as nothing can be trusted.’
Well and truly wearied by what appears to be the most extensive western propaganda campaign in living memory (never mind despair at the impact of the war on all those involved) my thoughts have been turning to China and how a similar process that has been underway for a number of years will inevitably get the same turbo charged treatment in the near future.
Staying, for the moment, with John Pilger, his 2016 documentary ‘The Coming War on China’ (2) seemed a good place start. It’s long – nearly two hours long, with half taken up covering the testing, use and impact of atomic bombs and the related history of US military intervention in the Pacific since then. Whilst this obviously includes the conflicts in Korea, Vietnam and Cambodia (and touches on middle eastern countries such as Iran and Iraq) the US’s current focus is clearly on China – increasingly depicted as a threat to democracy, human rights and the international economic rules-based order (3) …… in essence to just about anything that is good and wholesome in the region.
Pilger attempts to explain the increasing militarisation of the Pacific as essentially a mis-understanding on the part of the US, which has unhelpfully emptied its relevant government departments of all China experts (much as it has done with its Russia experts). Despite the US claims of ‘provocations’, the messages that Pilger highlights from Chinese officials, journalists and academics, is that China does not want to run the Pacific – it just wants to stop the US dominating the region. So there you have it – if only the US realised …….
Nevertheless, despite in my view being a little short on analysis in this instance, Pilger is nothing if not diligent when it comes to investigative journalism. He suggests that profits from armament manufacture in the US are driving the need for an enemy, ‘and the perfect enemy is China’. Moreover, he points out that a number of US officials have been talking for a while about achieving ‘full sector dominance’ in the region – and to this end the US has been surrounding China with military bases and missiles (just like it has done to Russia). So perhaps the US (or at least those with the power) realise only to clearly that its aim is to dominate the region – which makes China’s understanding of the situation entirely credible – and it is likely at some point (just like Russia) to have to make a decision when and how to resist militarily.
Pilger states that these US military bases are part of a world-wide network of around 1,000 scattered across every continent and that this does not include secret ‘lillypad’ bases that are embedded in 147 countries. When you include the 4,000 bases inside the US this amounts to an enormous and terrifying infrastructure – the sort you probably need if you are aiming for world-wide full sector dominance.
The documentary’s main message is that if we are not careful all this is going to get out of control and we’re going to end up with a major military conflict – including the trading of nuclear weapons and all that goes with that. Given that the warm up act has subsequently transpired to be a proxy war with Russia, these concerns are not to be treated lightly and I think we need to be ready to resist being softened up to demonise China in order to support this coming war.
These huge issues and threats aside (for the moment), I was somewhat taken aback by the sheer size of the US world-wide military infrastructure. I knew it was big – but this big? … how does it pay for all this?
The simple answer is that it doesn’t pay – everyone else (ally, non aligned and opponent / competitor) does by lending the US the money – and here, with a lot of help from Professor Michael Hudson (4) is how:
The US spends $1 trillion annually to maintain its overseas bases and undertake military operations, an amount that is not far short of its annual budget deficit ($1.4 trillion in 2022). Given all the neo liberal dogma about national budgets having to balance (as though they were the same as a household budget) how can this be sustainable / allowed to continue without dire economic consequences for the US economy?
Since the 1970s the US has moved from being a creditor country (lending to others to exert influence) to a debtor country (owing to / borrowing from others to make the books balance). Despite this it has managed to increase its military expenditure to an amount which exceeds that of the next 10 highest spending countries combined(5). It has, and is still (just about), managing this through the world-wide ubiquity and central role of the US dollar. It is the global currency of business and inter-governmental payments. Through this the US enjoys massive economic advantages and the ability to influence / control the economies of other countries (as no doubt Britain once did with its Sterling area and empire).
US dollars spent abroad on building and maintaining foreign bases and associated infrastructure are exchanged by foreign companies for the local currency (in order to pay local suppliers, labour costs etc) at the country’s Central Bank. This leads to large deposits of US dollars. As foreign countries are largely debarred from investing in the US economy (NB the fuss that the US creates about China’s controls on foreign investment!) other countries’ Central Banks have little option but to use the dollars to buy US Treasury Bonds. The latter are essentially an IOU issued by the US – or more exactly a loan to the US, on which it pays interest. Thus, the expansion and maintenance of overseas bases has continued with minimal cost to the US and little impact on its budget deficits.
The global US dollar hegemony covers more than just military spending in foreign countries. A high percentage of global transactions are undertaken in US dollars, resulting in the same build up of dollars in foreign central banks and their conversion into US Treasury Bonds. China, in particular, is caught up in this due to the high level of exports of consumer goods into the US and Russia’s export of gas and oil (a significant proportion of its economy) was, until very recently, entirely traded in dollars.
The $7.5 trillion of US debt held by foreign countries is sustainable as long as (i) there is no expectation that the US will ever pay off the principal debt and (ii) the dollar continues to be the world’s principal currency.
Michael Hudson calls this a 50yr free lunch – and the sums are so large he suggests that this is more than military ‘self-funding’, as recycled dollars have continually bailed out the US domestic economy. There are technical reasons why foreign central banks have little choice in this (relative exchange rates and economic competitiveness) but ultimately the US asserts its control over the process by insisting that foreign countries buy US Treasury Bonds with their surplus dollars rather than gold – or run the risk of economic and in some cases military retaliation.
This state of affairs is obviously a problem for those countries attempting to resist the untrammelled access to their economies by a rapacious western imperialism. This seeks to extract excess profits through the use of cheap labour and collect rentier (6) income through privatisation and dismantling of public sector services. In response a process of de-dollarisation has been gathering pace over recent years as countries such as Russia, China, India etc have sought to begin to free themselves from the economic and military control exerted across the world by the US and her NATO allies. Russia and China in particular have gradually and significantly reduced their holdings of US Treasury Bonds and have been buying gold instead. China, which crucially has retained state control over its banking and finance sectors, and Russia are currently choosing to weather the economic head winds that come with gradually opting out of the international ‘rules based’ trading system based on the US Dollar. They are exploring options to set up alternative inter country payment systems. Russian Foreign Minister Lavrov commented in 2020 (7):
‘We are pursuing our own foreign policy, which has taken shape over the past two decades ….. there’s more to the world than the West. In the 1990s, after the collapse of the Soviet Union, we wanted to become part of something, but we now realize that there isn’t much we can become part of. At least, the West is not building anything of its own. … If we take Western development models, we have no place to fit in. We need to build something ourselves.’
Now this should be no surprise to us as Vlad the Bad went out of his way in the years before he finally accepted that you might as well talk to a brick wall as try to negotiate with the US, to make international speeches about the need for there to be more than one way of doing business in the world. He was arguing for a move from a uni-polar to a multi-polar world. However, by 2020 the Russians seemed to have finally accepted the intransigence of The West when Lavrov commented (8):
‘The most distinctive feature of our time is this: everyone understands that a redistribution of power is taking place and this is exactly what our western colleagues are fighting so adamantly, clinging to their centuries of dominance.’
The clear danger for the US is the potential for a significant number of countries to make (the admittedly risky) provision to step away from using the dollar as the main international currency and develop their own arrangements between themselves. This would create significant, if not catastrophic, economic consequences for the US and severely limit its ability to influence / control the economies and politics of other countries. It would be faced with the impossibility of trying to pay down its debts, would not be able to continue funding its military in the way it has become accustomed to and would face the deconstruction of its western imperialist world order.
So, faced with reducing international and economic clout, the US, dragging us NATO allies with it, has fallen back increasingly on military coercion, threat and of course war. The proxy war against Russia in Ukraine is another step in the process that included Iraq, Libya and Syria (all of which resisted US economic incursion and exploitation). But this war is one of far more significance. It involves direct confrontation with a nuclear armed country that feels that its back is once again against the wall. The irony is that this war is accelerating the growing resistance to the uni-polar world order presided over by the US – and reducing any chance there might have been to negotiate moves to a more multi-polar structure.
The current US strategy would appear to be that once Russia is sufficiently weakened through the war in Ukraine, to pivot towards China and provoke a military response (in the South China Sea or over Taiwan) which will be framed as aggressive and a threat to the current (western) world order. Our governments and mainstream media will prepare us well for this and to be supportive of the subsequent western military engagement ‘in response’. Before the propaganda machine takes off with a vengeance we need to re-establish that scepticism that John Pilger advocates as essential.
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This post was updated and amended on 04.02.23, in the light of comments from my friends Philip and Peter. Thanks guys!
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(1) John Pilger – This is a war of propaganda. Youtube 09.07.22.
Interviewed by Yonden Lhatoo, South China Morning Post.
(2) John Pilger – The coming war on China? Youtube December 2022.
(3) The current economic international rules-based order refers to the framework that governs international trade and the basis on which the economies of individual countries are run. It promotes ‘free trade’ as a global positive and in doing so insists that all countries should be open to foreign investment and finance capital and proscribes state subsidies for industry (viewed as comprising an unfair advantage). This effectively prevents ‘developing’ countries from developing their own industries behind a tariff wall and through the receipt of state subsidy. (NB it was through state subsidy and protective tariffs that the current global economic giants of the US, EU, UK built their capitalist economies in the late 19th Century.) This is entirely consistent with current US foreign policy of preventing the establishment of any rivals to its own global pre-eminence.
Hudson (below) suggests that the current rules-based order is entirely based on US exceptionalism and is designed to safeguard and promote its interests.
(4) Hudson, Michael (2022) – The destiny of civilisation: Finance Capitalism, Industrial Capitalism or Socialism.
I have found this book invaluable in understanding the dynamics of the current world economy and current political implications. An excellent review by my friend Phil can be found here:
(5) US military expenditure was $778 bn in 2020 – more than the next nine top spending countries combined.
Stockholm International Peace Research Institute Military Expenditure Data Base.
(6) Rentier income is a term from classical economics that refers to unearned income. In this context it refers to income derived from land rents (largely mineral extraction rights), monopoly profits and interest paid on loans. Despite the undeniable need for credit in a capitalist economy, these rents are not in themselves productive, they are in fact an overhead cost on production and represent transfer payments from debtor to creditor – from ‘developing’ country to imperialist giants.
(7) Sergei Lavrov – Opening remarks on 28th Assembly of the Council on Foreign and Defence Policy, Moscow 10.12.20.
Quoted in Hudson, chap 13 (above).
(8) Sergei Lavrov – Speech to Valdai Club, 13.10.20, on the causes of turbulence in modern international politics.
Quoted in Hudson, chap 3 (above).
Bryan, I agree with all of these comments. In fact in addition to the military spending, US consumer spending on imported products, mainly from China which then then deposits the proceeds in US Treasury Bonds has helped to finance huge US balance of payments deficits for a long time.
It’s not surprising therefore that U.S. is getting a bit uncomfortable about countries like China wanting to invest proceeds of exports into other activities and reduce the domination of the USD, a point made in your article.
Thank you Peter for your supportive comments – much appreciated.
You are, of course, right to emphasise the importance of the import of consumer products into the US in creating US $ deposits in the central banks of other countries. As you say these are largely converted into US Treasury Bonds and thus are a major contributor to the US’s free lunch. Moreover, without taking this into consideration, it is difficult to understand the strength of the resistance to US $ hegemony of Russia and China – who after all do not (yet) host US military bases! When one factors in the huge boost to this process that a world energy market that is conducted in US $s provides, it is clear that countries such as Russia and China will be very unhappy to continue supporting the economy (and military machine) of a country that seems intent on destroying them.
Peter, I have included a paragraph about the impact of non military spending across the world that is paid for in US dollars.
Excellent post Bryan. I’d like if I may to replicate it on my site, with due acknowledgements.
Minor point. I don’t think US arms spend is nine times that of the next ten spenders combined. (It hovers around the $1tn p.a. mark while China, the next big spender, is around €300-400bn p.a. if memory serves.) In my post, which you’ve cited, I’d claimed “more than the next ten spenders put together”. I’ve since found that “more than nine times …” is likely closer to the mark.
An invaluable post though. As we hurtle towards armageddon in Ukraine and South China sea, the mass ignorance as to why this is happening is truly dismaying. As ever, our ruling classes deny the material interests at stake for a tiny elite, and – helped by corporate media whose lies are mostly of omission (in this case silence on the existence of the US empire) – offer idealistic accounts. Unfortunately, with a high degree of success.
Thank you Philip.
It is indeed disheartening that there is so little awareness of where this is all likely to be heading and why. But, as you indicate, this is not surprising given the parameters that western mainstream media operate in.
Thankyou for spotting the error in the sums, I had a niggle that they didn’t quite add up, but rushing to complete the piece I chose to ignore it! At times like these I have some sympathy for professional mainstream journalists (of whom I am often critical) who are writing under much more pressure than I am and against external deadlines rather than self imposed ones. I have amended the post accordingly.
Please feel free to use the post in any way you see fit.