Commentary on Political Economy

Sunday 11 September 2011

Uncle Sam and the Eternal Return of Capitalism

As friends on this Blog will recall, we had been predicting for many months (perhaps even before the DeGrauwe paper was conceived!) that US capital would not tolerate for much longer being "the consumer of last resort" on the basis of absorbing excess capital from "mercantilist" bourgeoisies such as Germany's and Japan's, but above all the Chinese dictatorship which if allowed to continue on its present path (and it will not!) would constitute a "clear and present danger" not just to the domination of global capitalism by Uncle Sam but also (worst of all) to world peace especially in South East Asia. Something had to give, and it has. Professor Michael Pettis describes this process in terms of the costs of the US providing the dollar as a "public good" for world capitalist trade (see his post at - which is another way of saying what we have been saying for as long as donkeys have ears!
The US are now pursuing what we baptised as a policy of "malign neglect" that will drive a recalcitrant Germany to near ruin unless it changes domestic consumption and deman policy quicksmart - and the Chinese dictatorship to seek collective political asylum.... in the US where it has directed all the ill-gotten gains it has made during the Great Moderation on the blood sweat and tears of its own unfortunate people - who, without the tiny shadow of a doubt, will soon rise to the last person against this most corrupt regime that has destroyed its social fabric, laid waste its environment, and now refuses to liberalise its economy and democratise its society to engage in what we have called "relative exploitation" rather than "absolute exploitation" which is dependent on "the mobilisation of social resources" with very little by way of productivity growth (which requires relatively "democratic" institutions to have any chance of success in world trade).
As we predicted, already European banks are in imminent danger of going bankrupt only to be "rescued" by far better capitalised US counterparts (see FT story on JP Morgan opposing Basel III today). The rest... the rest, as they say, will be history or "deja vu all over again"!

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