Empire is materializing before our very eyes. Over the past several decades, as colonial regimes were overthrown and then precipitously after the Soviet barriers to the Capitalist world market finally collapsed, we have witnessed an irresistible and irreversible globalization of economic and cultural exchanges. Along with the global market and global circuits and production has emerged a global order, a new logic and structure of rule — in short, a new form of sovereignty. Empire is the political subject that effectively regulates these global exchanges, the sovereign power that governs the world.
— — Michael Hardt and Antonio Negri
It’s little secret that the US is a global Empire. It functions on the precepts of neo-colonialism loth foreign and domestically. America’s binary colonial governmentality is creating a more stratified world for both citizens and non-citizens. Through proxy financial governance, globalization, and neoliberalism, America’s solution to poverty and quality of life are consumer oriented, but these policies could easily undermine its global hegemony Since the fall of the Soviet Union, it has maintained and extended its hegemony over the world. It maintains its power over underdeveloped countries by forcing free trade liberalism on glob al trade, often using proxy institutions, such as the World Bank and the International Monetary Fund, and the World Trade Organization, The use of proxy institutions makes the US an informal Empire. One of the key tools, used by the IMF, are Structural Adjustment Loans (SAL) and subsequent Structural. Adjustment Programs The (SAP), which come with a crippling terms and conditions. In order for a country to receive loans, Structural Adjust Loans, the country must change its form of government and economy to favor free trade — often at the coast of social programs.
However, unlike its European predecessors, such as the British Empire, the US does not use its imperial reach to benefit the American people as a whole. It protects the so-called “Homeland” from violent attacks by terrorists, but it uses its global capitalist hegemony to benefit a small percentage of its population. A large proportion of those receiving economic aid and security are part a quickly rising rentier class who benefit from economic rent in the form of debt collection. (This class does not invest capital to create jobs, but instead uses Americans consumer habitus and medical needs to enrich themselves). Neoliberalism has not only created greater stratification between the Global North and South, but it has also contributed to domestic stratifications as social programs have been cut and wages have stagnated below inflation. Ronald Reagan dismissed Keynesian demand side economics in favor of Hayekian supply side economics, promising that the money industry leaders saved would trickle down to the bottom echelons of society. Not only did this not occur, but that money was used for foreign investments in underdeveloped countries to create manufacturing jobs. Unfortunately, this money did not help the countries, such as Malaysia because businesses were not taxed and workers were paid sub-par wages. All of this was part of neoliberal free trade imperialism.
The US’s global economy is run by companies that outsource production to the global south and sell their products to Americans whose buying power has been declining since the 1970s. The US’s global informal power, not only stratifies countries around the world, but it is also working to undermine and further stratify its domestic populace. Combined with financial capitalism, practices both globally and domestically, it is only a matter of time before the US public can no longer sustain a consumer economy. Either today’s leading corporations will have to seek markets elsewhere, thereby leaving the US population in dire circumstances, or else the post-industrial service economy will have to start paying its employees higher salaries; salaries compatible with industrial salaries that helped make the US middle class in the Golden Age of American capitalism c.1950–1973.
“Informal empire describes the spheres of influence which an empire may develop that translate into a degree of influence over a region or country, which is not a formal colony in the empire, as a result of the extension of commercial, strategic or military interests of the empire.”
“The difference between formal and informal empire,” John Gallagher and Ronald Robinson wrote in ‘the Imperialism of Free Trade,’ was not one of fundamental nature but of degree.” The main difference lies in their method and proximity of governance. Formal empires are often known for colonizing a specific area and either extinguishing or forcing native people into the dominant culture, whereas informal empire allows a degree of autonomy and rules through negotiations, trade, finance, technological or other assistance (development, etc.), threats, etc. Although the US has maintained a sense of informal empire, it should not be forgotten that it conquered North America by force annexed places like the Philippines and Hawaii. Its last two wars Afghanistan and Iraq the US army has become an occupying force even though that was not their intention. Sometimes the line between formal and informal empire is paper thin. Today, however, the US hegemony has spread, not by force, but through the covert expansion of capitalism — neoliberalism to be more exact — and the US uses international proxy institutions, such as the World Bank and the IMF to open the world to “free trade imperialism.”
Proxy Rule and Globalization
The Worlds Bank and the IMF were created in 1944 at the Bretton Woods conference and were initially intended to help rebuild Europe after the War, but it wasn’t long until these institutions were used to help non-European nations of the Global South. As the US gained hegemony over international political economic policies, especially after the fall of the Soviet Union they sought to make free trade neoliberalism dominate the economy, especially after the collapse of the society union, this meant that underdeveloped countries had to get on board and open their markets to free trade and their banks to foreign investment. The IMF and World Bank became the means through which western powers were able to infiltrate the economies of the Global South. With the help of these institutions, underderdevelope3d countries are faced with severe poverty if they do not take loans from the IMF or World Bank, but if they do take loans, they are subject to Structural Adjustment Programs and austerity economics e.g. a rock and a hard place. Structural Adjustment Programs give the reins of government of debtor nations to the IMF, which restructures the economy according to the general rules of global trade — known as comparative advantage. The World Trade Organization policies countries to ensure that they follow the dictates of neoliberal free trade. This is an informal, covert means of economic and cultural imperialism, a continuation of practices begun by Europe, primarily, in the nineteenth century, however, today, imperialism has gone underground and become covert.1
Global capitalism is based on the economic theory of comparative advantage. Comparative advantage is based on the relative opportunity cost a nation must forgo in order to trade a certain good. Nations will seek to trade a good or goods with which they have a low opportunity coast (what they give up in order to produce a certain good). For instance, say that for every car the US produces it must give up producing 5 cartons of cigarettes, this is their opportunity cost. Comparative advantage is easier to understand if we approach it from personal less abstract sense. Let us say that a lawyer wants to find a good typist. The lawyer is a good typist, but she makes more money as a lawyer and not as a typist, so she higher a typist with which she has a comparative advantage and can get more work done. Back to the American example. Let’s say that for every car Mexico produces, it has to give up ten cartons of cigarettes. Americas comparative advantage is cars, while Mexico’s is cigarettes. Mexico can make more money by giving up on car production and instead focusing on cigarette production, while America can give up on cigarette production and focus on car production. This, or course is an over simplified version of comparative advantage.
The World Trade Organization (WTO) helps encourages or rather enforces nations to open their borders to trade and to help them understand their place in the array of global markets. Create in 1995, the WTO came on the scene when globalization was booming after the fall of the Soviet Union and the capitalization of the former Soviet bloc. According to its website, the WTO “is a place for them to settle trade disputes. It operates a system of trade rules. Essentially, the WTO is a place where member governments try to sort out the trade problems they face with each other.” It also serves as judge and juror of trade violations, which often involve tariffs and other protectionary measures. Although the website suggest that the WTO does promote protectionists policies where need be, there is little empirical evidence to support this claim. Most of its work is to keep boarder open. The WTO is one place where America does not exert its authority over the institutions oversight. For instance, in April 2017, Mexico complained to the WTO that America’s embargo on Mexican Tuna violated free trade. America claimed Mexico was not practicing safe tuna fishing, thus harming dolphins and therefore refused to buy Mexican tuna. Mexico brought their charges to the WTO, where the WTO ruled in Mexico’s favor, “allowing it to impose trade sanctions worth $163 million a year against the U.S.”1 The WTO is notorious for its anti-environmental and anti-labor policies in preference of free trade.
Sociologist Walden Bello gives a brief overview of SAPs in “Structural Adjustment Programs: ‘Success’ for Whom?’ Bello claims that Structural Adjustment Loans were originally created to assist Northern “banks that had become over extended in the Third World.” And secondly, “the longer term objective [of SAPs] was to further integrate southern countries into the Northern-dominated world economy.”1 “To accomplish these twin goals, the World Bank and the International Monetary Fund became the linchpin of a strategy that involved providing complaint Third World debtors with billions of dollars in quick-dispersing SAL or ‘standby loans’ that would then be transferred as interest payments to the private banks.”2 In order “to receive SALs, the southern governments had to agree to undergo structural adjustment programs (SAPs).”3 The conditions of the programs were as follows:
1. Removal of restrictions on foreign investments. Local investments cannot be politically favored over foreign investment.
2. Building an export economy, thereby becoming more dependent on the global economy. The basis for this export industry derived from Comparative Advantage, an economic policy that decided which goods a nation should trade for its mutual advantage.
3. Breaking up unions, reducing wages. Roll-back social programs, prevent government spending on social benefits.
4. Cut tariffs.
5. Privative state enterprise.”
6. Deregulation of state safety and environmental protocols.
The general plan of trade for lending institutions and global capital economists was to get underdeveloped nations to become completely reliant on international trade e.g. globalizations. Sovereign self-sufficiency was not an option, in fact progenitures of the SAPs worked hard to prevent this. (ideals of nation-state vs. this ideals). David Korten writes: “through the structural adjust programs, the World Bank and the IMF have pressured countries of the South to open their borders and change the economies from self-sufficiency to export production. Trade agreements through GATT (precursor to the WTO) have reinforced these actions and opened economies in both North and South to increasingly FEWEW IMPORTATION OF GOODS AND MONEY.” What they wanted debtor nations to do was focus all its attention on a specific industry (just which industry depended on the nation, comparative advantage, capital, infrastructure, etc.) that would complement global trade thereby benefiting the debtor country and the world at large.
If a nation agreed to the SAP’s stipulations, foreign investment could help the nation improve and expand whatever industry was chosen to support the economy. These institutions were so insistent that the nation focus on one industry that it ran the risk of becoming a monoculture, where all labor and assists were connected to one particular export commodity. Workers not employed in this industry could lose their jobs and because social assistance programs were cut — as a stipulation of the SAP — workers would fall through the cracks and poverty would increase. Also, if a foreign firm owned the particular industry and brought in labor saving technology, this could also create poverty and social stratification. Unions were considered bad because it made industries less competitive as workers bargained for better wages or working conditions.
The stipulations of SAPs enticed capitalist from the Global North. They could build a factory without satisfying certain building safeguards and pay laborers what they wanted. What is more, is that the profits earned by these foreign capitalists does not go to the nation via taxes, it is not part of the nation’s GDP, it goes to the share h9lders. Any financial benefits a debtor nation receives this specialized industry (whether foreign or domestic) goes to pay off the loan and its interest. The Global North not only receives profit from the industries it sets up outside the US, but it also receives financial rent from the interest payments on loans.
Another negative trade factor concerns the development of industries. Free-trade is the buzzword of today’s global economy. Western nations are some of the strongest advocates of free trade, this is primarily because their industries have matured beyond the point of worry. For instance, neither the US nor England promoted free trade when their industries were fledglings. In other words, they had to protect their markets so that these industries could develop and thrive, then and only then were they ready to compete on a global free trade market. This protection is not afforded to industries in the Global South.
Goldsmith, in “Development as Colonialism,” best sums up the free-trade pitch made by the US before the end of WWII, during the Bretton Woods discussions. US intellectuals and economists decided that the best way to reshape the global economy after WWII was through “economic development… and it was by promoting free trade that development could be maximized. Free trade is seen to involve competition on a ‘level playing field,’ and nothing could seem fairer. However, when the strong confront the weak on a level playing field the result is a foregone conclusion, as it was at Bretton Woods. At the time of that conference, in the twilight of WWII, the US totally dominated the world political-economic scene; the European industrial powers had been ruined by the war, their economies lying in tatters; and Japan had been conquered…”. “A century earlier, it was Britain that was preaching free trade to the rest of the world and for the same reason. At the time, she effectively dominated the world economy…. If free this is what is meant by free trade imperialism did not work, the answer was to take over those countries where goods could be sold at a profit without having to worry about competition.” This is what is meant by free trade imperialism. What Goldsmith is getting at is that development and free trade are tools of colonialism and that the US’s glob al free trade informal empire continues to practice colonialism, despite pandering to the word ‘free’ om free trade.
The Chilean Phenomenon and the advent of neoliberalism
The Chilean military dictator, backed by the U.S. seized control of the country on September 11, 1973. Former president Salvador Allende had been killed in an air strike on the presidential palace the day before Pinochet’s military coup took command. Andres Solimanos argues that “Chile became a testing laboratory for free market economic policies that included the privatization of state owned enterprises, the deregulation of markets, opening to foreign trade capital inflows…”. Chile’s neoliberalism was more radical than Thatcher or Regan, but they were of the same; philosophy. Foreign Aid and SAPs took notes from the Chilean phenomenon. As can be seen above, policies of the SAP, reflect some of the core features of neoliberalism. The “Chicago Boys” traveled to Chile to help Pinochet implement neoliberal friend policies. Milton Friedman had a significant impact on Pinochet, who made Friedman’s work a reality — at the cost of many lives (Global Capitalism in Disarray).
Debt and Domestic Colonialism
America’s neo-colonial tactics of governmentality extend as far inward as they do outwards.Americans’ ability to consume is an aspect of capitalism lost in the rhetoric of supply-side — or trickle-down — economics. The neglect of demand side economics, or Keynesianism, may prove to be the new specter haunting capitalism. The undoing of global neoliberal capitalism does not come from an external threat, but instead comes from within capitalism itself — the momentum is building and implosion appears emanate. Supply-side economic theories and policies were not designed for a global economy. The trickle-down formula was developed to solve a market anomaly called stagflation and it has haunted American capitalism ever since. Designed to induce incentives for capital reinvestment in companies, so that they would provide more jobs, supply-side economics not only did not work domestically, but its strategies helped move capital overseas, thereby rendering private incomes inadequate. Today’s global “sharing” economy in addition to business strategies such as planned obsolescence has taped private incomes and threaten to suck the well dry.
In the 1970s, the U.S. faced high unemployment, inflation, and a stagnate economy — three factors that were not supposed to occur simultaneously, this anomaly became known as stagflation. According to Brian Snowdon and Howard R. Vane, stagflation was at its height from 1973 to 1983. The causes of stagflation are the subject of debate.Snowdon and Vane list several causes under debate including, but not limited to attempts by the government to scale-down unemployment, rising gas prices, and other fiscal blunders by the government. According to economist Paul Krugman, stagflation is a myth, which serves as propaganda for conservative economic policies e.g. trickle-down economics. Krugman is right in arguing that conservative economists use stagflation as a scare tactic, but he does not mention how supply-side economics has become an American mantra and when it is mixed with neoliberalism (from both Democrats and Republicans) it has dire consequences.
From the Great Depression to the 1970s, the U.S. economy was governed by Keynesian, or demand-side, economic policies. Between 1950 and 1973 is also known as the “gold age of capitalism,” because unemployment was low and incomes high.Under Keynesianism, the federal government created jobs for those who could not find work during the Depression. Both strategies were designed to expand and maintain capitalism by creating incentives to either increase demand, thereby positively affecting supply or vice versa — creating jobs by offering incentives for capitalist investment.Demand-side economics, also known as Keynesianism, is attributed to saving America (U.S.) from the Depression. For instance, President Roosevelt’s federal Work Projects Administration (WPA) provided jobs for unemployed laborers. Finances for the WPA acted as capital to provide new jobs. Workers spent this money, thereby putting it into circulation, which helped revitalize the economy. The general idea behind demand-side economics is that if people are given money, they will spend it. As business owners make more money, they will use it as capital and reinvest it, thereby creating new jobs. Some scholars argue that Keynesianism helped the U.S. achieve its status as a financial superpower.
But in the 1970s, the U.S. faced high unemployment, inflation, and a stagnate economy — three factors that were not supposed to occur simultaneously, this anomaly became known as stagflation. According to Brian Snowdon and Howard R. Vane, stagflation was at its height from 1973 to 1983. The causes of stagflation are the subject of debate. Snowdon and Vane list several causes under debate including, but not limited to attempts by the government to scale-down unemployment, rising gas prices, and other fiscal blunders by the government. According to economist Paul Krugman, stagflation is a myth, which serves as propaganda for conservative economic policies e.g. trickle-down economics. Krugman is right in arguing that conservative economists use stagflation as a scare tactic, but he does not mention how supply-side economics has become an American mantra and when it is mixed with neoliberalism (from both Democrats and Republicans) it has dire consequences.
Supply-side economics is similar, but it works from the other direction. Policies shift focus from the general public to capitalists and seek to stimulate the economy by providing capitalist with incentives, through tax breaks and other means, to investment money in businesses with the hopes that investments will go to areas that create jobs. Both strategies were designed to expand and maintain capitalism by creating incentives to either increase demand, thereby positively affecting supply or vice versa — creating jobs by offering incentives for capitalist investment. According to a report by the Brookings Institute (1985), supply-side economics “is essentially a capital formation strategy: new capital will create productive capacity, jobs, and wealth in an accelerating and self-sustaining cycle.”Economist Martin Feldstein explains the connection between neoliberalism and supply-side economics by claiming that trickle-down theory “was a return to basic ideas about creating capacity and removing government impediments to individual initiative” common to Adam Smith’s idea of a free market.
According to Emmanuel Saez and Gabriel Zucman, in “The Explosion in U.S. Wealth Inequality Has Been Fueled by Stagnant Wages,, Increasing Debt, and a Collapse in Asset Value for the Middle Classes,” argue that since the late 1970s disparities in incomes between the 1 percent and average American households increased from “seven to twenty-two percent.”Although most scholars agree that economic stratification increased significantly in the 1970s, scholars have yet formed consensus on what caused the disparities. A recent paper by David Jacobs and Jonathan C. Dirlam, however, provides ample evidence indicating that the causes of stratification are best explained by “national-level neoliberal economic determinants” i.e. supply-side economics.For instance, they cite a paper by Walter Korpi who connects political decisions with economic outcomes in relation to unionization. “Neoliberal forces aligned with business will yield strong explanations for changes in income inequality.”In other words, supply-side economics holds a positive causal relation with decreases in labors’ political and economic agency.
In the 1990s, under the presidency of Bill Clinton, U.S. businesses used the World Trade Organization and the North American Free Trade Association to migrate transnationally in search of cost efficient capital, such as labor. Although businesses moved production overseas or throughout the Americas, their target audience were American (U.S.) consumers. Prior to these remanufacturing jobs in the U.S. provided adequate income for most workers, but when these jobs moved overseas, America lost a majority of its high paying jobs. Today, the U.S. is a post-industrial service-oriented economy. And as we saw above, spending power of U.S. households is declining, while profits of a wealthy few are increasing. If the U.S. continues on this path, consumer demand will decline from the sheer weight of expenses, thereby setting-off a chain reaction to businesses. Because the tax burden falls on the middle class — not the corporate elite — the proverbial safety nets of unemployment and other assistance programs (almost nonexistent already) will be underfunded, thereby exacerbating the problem.