World War I—Its Causes and Consequences (Pt 4)

Could it happen again?

This August marked the 100th anniversary of the outbreak of World War I. Could it happen again? Before exploring this question, I should review how the world has changed since those European summer days of a century ago.

I have already examined in this blog the changes in imperialism—the underlying cause of the “Great War”—over the last hundred years. But before I explore the question of whether something like the Great War could happen again, I should briefly summarize these changes.

The main powers in Europe

At the start of 1914, there were a number of independent imperialist “powers,” as they were called, that were in economic, political and, as events were soon to demonstrate, military competition with one another. In Europe, the main powers were Britain, Germany, France, Russia and Austria.

Britain had been for the preceding century—since the defeat of Napoleon—the most powerful country in the world. Britain’s military power was largely naval. As the British chauvinists put it, Britannia ruled the waves. It was naval power that held the English empire—“where the sun never set”—together. In turn, British naval power was made possible by its highly advanced—for the time—industry.

France, which had been Britain’s primary rival in the world war that followed the French Revolution, was a significant imperialist power in its own right. It had a large empire in Africa, Indochina and elsewhere. Its industrialization, however, had always lagged behind that of Great Britain.

As a result, large amounts of idle money capital tended to pile up in France compared to the situation in the more dynamic capitalist countries. Since the French capitalists converted a relatively smaller amount of their money capital into industrial capital, a relatively larger amount was converted into loan capital—finance capital. Much of this capital was loaned abroad, especially in Russia.

By the beginning of the 20th century, however, France was no longer Britain’s most important rival within Europe. Germany, due to its rapid industrialization, had replaced France in that role. In Germany, capitalist production based on the latest technology was developing fast. Because its industrialization had come later than Britain or France’s—Germany wasn’t even unified as a country until the 1870s—Germany had relatively few colonies.

However, unlike the case in France and increasingly Britain, the German capitalists tended to quickly convert the money capital that passed through their hands into productive capital—both constant and variable. Therefore, finance capital developed somewhat differently in Germany than it did in Britain and France. In Germany, there was a need to mobilize every spare penny and place it in the hands of the industrial capitalists. As a result, Germany’s banking system was ultra-modern, with both commercial and investment banking centralized in a small number of huge “universal banks.”

This stood in contrast to the older British and to a large extent even the U.S. pattern, where commercial and investment banking were conducted by separate companies. The biggest of the German universal banks was the Deutsch Bank, which remains to this day Germany’s most powerful bank.

The ultra-modern nature of German banking colored Rudolf Hilferding’s pioneering analysis of finance capital. (1) As a result, Hilferding over the years has been criticized by many other Marxists for exaggerating the role and power of banking capital.

In military terms, Germany was the inheritor of Prussia’s powerful land army. United Germany, like Prussia before it, was considered a land power. But as Germany began to build an overseas empire around the turn of the 20th century, it built up its navy as well. This set off alarm bells in London, which responded by forming a secret alliance with declining France against the rising power, both economic and military, of Germany.

Russia possessed a huge colonial empire. But unlike Britain’s, the Russian Empire had been built largely on a pre-capitalist basis. The Russian Empire in contrast to Britain’s “maritime empire” was an “inland” empire. It was geographically contiguous and represented a highly centralized political power over a large geographical area. However, capitalism in Russia, despite its rapid growth since the 1890s, was overall still poorly developed. The great majority of the working population of the Russian Empire were peasants exploited by landlords, as opposed to wage workers exploited by capitalists.

It was Russia’s empire that had Europe’s largest land army. If the sheer size of the armed forces determined a country’s military power, Russia would have been the most powerful country in the world. In reality, Russia’s military power was greatly limited by its low level of industrialization relative to its imperialist rivals.

Europe had one other great power, Austria-Hungary—usually called Austria for short. Austria was somewhere between Russia and Germany economically and militarily. It had a fairly well developed capitalist industry, which brought it closer to Germany in that respect, though its industry was nowhere near as dynamic as Germany’s.

Like the Russian Empire, the Austrian Empire was a prison house of nations, but on a smaller scale. Within the Austrian Empire, a German minority ruled over many oppressed countries, especially Slavic peoples such as Czechs, Slovaks and the south Slavs. Politically, Austria was a throughly archaic state that had grown out of the medieval Holy Roman Empire of the German people.

There were other European imperialist powers like Belgian, for example, which cruelly tyrannized over the Congo, and Holland, which ruled over Indonesia. But within Europe, they were secondary powers.

The United States and Japan

In addition, in 1914 there were two other “great powers,” located outside Europe. One was the United States, and the other was Japan. Japan, which had only recently emerged from feudalism, had achieved a relatively high degree of industrialization, and its industry was still developing extremely rapidly. (2)

Japan had stolen Taiwan from China in 1895 and then decisively defeated Russia in the war of 1904-05. Russia’s defeat helped trigger its 1905 revolution. In 1910, Japan colonized Korea. Its next targets were China and Indochina. This was to put it on a collision course with the United States, though the actual collision was not to occur until the Second World War.

By 1914, the United States was already in a class by itself. During the preceding century, English-speaking settlers had conquered a huge section of North America that was to become the “lower 48.” (3) These lands included mineral, hydrocarbon and agriculturally rich areas. In its early years, the U.S. was able to exchange raw materials and agricultural commodities for capital goods—building up its own industry in the process—as well as for consumer goods.

The English-speaking settlers crushed the native Americans, killing many of them while driving others into so-called reservations. The English-speaking capitalists of the North had also been obliged at great cost in lives and money to put down a British-supported slave owners’ rebellion, commonly called the U.S. Civil War.

The United States emerged from the Civil War as a far more centralized country than it had been previously, with a common paper currency under the National Banking System. This system had a major weakness, however. It failed to provide a way of rapidly increasing the means of payment in a crisis. Only in 1914, just months before the Great War broke out in Europe, did the United States finally acquire a modern central bank—the Federal Reserve System. With the creation of the U.S. Federal Reserve, the international gold standard was perfected.

By the the turn of the 20th century, the U.S. had the highest level of industrialization in the world. Its industry not only produced more commodities; just as importantly, it did so with a smaller expenditure of human labor per commodity.

Potentially, therefore, the U.S. was already the most powerful military power on Earth. However, except during the Civil War, the U.S. maintained only small armed forces. This was because the U.S. was protected from other “great powers” by the Atlantic Ocean to the east, the Pacific Ocean to the west, and the North American Arctic to the north. There was simply no way another “great power”—and there were no other such powers in the Western Hemisphere—could invade the United States.

The U.S. was therefore in a position to utilize a greater percentage of the surplus value produce by its workers to accumulate additional productive capital—both constant and variable. As the great capitalist prosperity that had taken hold after 1896 began to run out of steam on the eve of the Great War, the United States was increasingly penetrating the markets of the European powers.

Sooner or later, something had to give, and it did. As Britain weakened industrially relative to far more dynamic capitalist countries like the United States and Germany, a new regime among the imperialist powers became inevitable. Britain was destined to play a much reduced level, while the role of the United States would grow tremendously. But what was not settled in 1914 was how this would be achieved and what role the other imperialist powers would play in relationship to the United States.

The international monetary system in 1914

The international monetary system was based on the convertibility of all the main central bank-issued currencies into gold coin. Therefore, unlike today, the price of gold in terms of these currencies, including the most important one—the British pound—hardly ever moved beyond extremely narrow ranges. Essentially, the world had a single currency—gold bullion (4)—with different local names, like pound, dollar, franc, ruble and so on.

With the exception of the United States—which lacked a central banking system until 1914—between 1874 and 1914 the capitalist world enjoyed more financial stability than it ever had before or ever would again with the exception of the first 25 years after World War II. This “one currency” world encouraged the investment of capital not only in the colonies and semi-colonies but even more among the imperialist countries themselves. A common argument in the years leading up to the Great War was that since the big capitalists of one imperialist country had large investments in other imperialist countries, a war among them was impossible.

The biggest difference between 1914 and 2014

The biggest single difference between the imperialism of 1914 and the imperialism of 2014 is the overwhelming dominance of a single imperialist power, the United States. The United States is described today not as a “great power” like it was in 1914 but as the world’s “sole superpower.” As a result of its overwhelming military and political domination, the U.S. has been able to impose its paper currency—not convertible into gold—as the de facto world currency, though gold very much remains the money commodity.

Even at the height of its power, Great Britain never achieved anything like this. The role of the dollar as the world’s currency means that prices of all the main commodities—most famously but not only oil—are quoted in U.S. dollars that represent constantly varying, not fixed, quantities of gold bullion. Consequently, the bulk of the world’s debts are also denominated in dollars. As a result, the U.S. dollar is the chief means of payment on the world market. This has certain consequences.

‘Dollarization’

In the weaker capitalist countries, the U.S. dollar has increasingly invaded their
internal circulation. In Ecuador, Panama and Zimbabwe, the U.S. dollar has replaced the local currencies altogether, in a process called “dollarization.”

The dollarization of the world capitalist economy, combined with the partial and in a few cases complete dollarization of local capitalist economies, has gone so far that the U.S. Federal Reserve System is in effect the world’s central bank. Indeed, the majority of green dollar bills circulate outside of the U.S.

The dollar system also includes two other institutions, the International Monetary Fund and World Bank. The IMF provides short-term loans for countries facing severe short-run liquidity crises, while the World Bank provides long-term loans for major infrastructure projects.

Recently, the Latin American and BRICS countries—Brazil, Russia, India, China and South Africa—have created alternatives to the IMF and World Bank. However, they are not yet able to offer an alternative to the U.S. dollar as a world currency. Until they can, they will be in no position to end the role of the U.S. Federal Reserve System as the world’s unofficial but very real central bank. It is the Federal Reserve’s role as the world’s central bank that forms the heart of the dollar system. I hope to devote a future post to a more detailed examination of this question.

In the world monetary system of 1914, the British pound also played a central role. However, unlike the U.S. dollar today, each British pound was defined as a gold coin—the British sovereign (5), which contained a fixed quantity of gold bullion—money material. In contrast, the U.S. dollar today is a purely token currency. Therefore, in the world of 1914, gold was not only the world’s money commodity in whose material use value the value of all other commodities were measured, it was also the world’s chief currency. Today, however, the latter role is played by the U.S. dollar. ( For an explanation of metallic, token and credit money, see here.]

When World War I began, the shipment of gold was disrupted due to the danger that ships carrying gold bullion would be sunk. This caused the exchange rate of the British pound to soar far above its “gold points.” (6)

As the war began, the pound price of gold actually briefly fell below its “par” value—one gold sovereign equaling one pound sterling. However, the long-term effect of the war on the pound was quite the opposite. In the years following 1914, the British pound suffered one devaluation after another.

An attempt to restore its convertibility at its old par value between 1925 and 1931 ended with a run on the gold reserves of the Bank of England in 1931 and another pound devaluation.

The British pound was never again to return to its old gold value. So in examining the impact of war on currency, just like is the case with output and employment, we always have to keep in mind the difference between short-term and long-term effects. They are often quite opposite.

The North Atlantic Treaty Organization

Just as important as the dollar system is the military arm of the U.S. world empire. NATO has emerged as that military arm. An important feature of the U.S. world empire in contrast to the situation in 1914 is that NATO keeps the other imperialist powers, including the big ones—Germany, Britain and Japan—in a militarily and therefore politically subordinate position. In this way, the U.S. acts as policeman among the imperialist powers, preventing war from breaking out among them.

For example, the basic economic antagonism that led to three wars between France and Germany—the Franco-Prussian war of 1870-71, the Great War 1914-18 and the war between Germany and France in 1939-1940—has not disappeared. But if tensions between Germany and France came anywhere close to threatening another Franco-German war, the White House backed up by NATO would step in and impose a settlement.

Two other crucial differences

There are two other crucial differences that distinguish our world from the world of 1914. Throughout the history of production, as the productive forces have developed so has the development of the means of destruction. World War I brought unprecedented destruction, but the same development of the productive forces that made possible that destruction made possible an unprecedentedly rapid rebuilding of the same productive forces in the wake of the slaughter.

Thus, within a few years after World War I European industrial production, including that of defeated Germany, exceeded the levels of 1913. What brought the renewed growth of production in Europe to a screeching halt in 1929 was not the destruction of the productive forces during the war but the sharp curtailment of the ability of the market to expand, which was one of the consequences of the war.

World War II brought far greater physical destruction than World War I, but the even more powerful productive forces also made possible an extremely rapid recovery of material production. Again, within a few years war-torn Europe, and shortly after that war-ravished Japan, had higher levels of production and generally higher standards of living than the best pre-war levels. Over the long run, the two world wars, destructive as they were, were mere “bumps on the road” as far as the development of the material forces of production were concerned.

That era, however, is now over. If the means of destruction available today were to be fully deployed in another “great war,” there is general agreement that it is unlikely human civilization could go on, and even the biological survival of the human species would be in doubt. Even if it did, it might take many centuries or even thousands of years for human civilization to again reach the levels of the 21st century—if ever. Many assume that this makes another world war impossible. I will examine this question below.

The other big difference between imperialism in 1914 and 2014 is the change from colonialism to neocolonialism. The traditional name for the situation where a country is nominally independent but economically subservient to one or more imperialist powers was semi-colonialism. However, I believe that the term neocolonialism better captures the shift from outright colonialism of the European imperialist powers that characterized imperialism before 1945 and the situation that prevails today. However, the nature of neocolonialism has changed since the Cold War years.

The socialist camp

Before 1989, the existence of a socialist camp made it possible for the neocolonial countries to play the socialist bloc against “the Empire.” It enabled them to win a greater degree of political independence without completely overthrowing the neocolonial economic bonds. The latter was only really possible if a country joined the socialist bloc—like Cuba did in 1960.

For example, Washington had to tolerate the nationalism of Nasser and then the Baath Party of Syria and Iraq because from Washington’s point of view the Nasserites and the Baathists were the lesser evil relative to the Communists. If the Communists had gained power in Egypt or Iraq, for example—the Iraqi Communist Party was Iraq’s largest party at the time of the revolution of 1958—this would have meant that these countries would have joined the socialist bloc. This would have made them not only politically but economically independent of the Empire.

However, in a highly regressive development, this situation has changed fundamentally since 1989. The counterrevolutionary destruction of the Soviet Union was itself a result of a long retreat by the Soviet leadership in the face of the tremendous power of the U.S. world empire. Today, the former socialist countries of eastern Europe and even some of the former Soviet socialist republics are members of NATO. This has greatly limited the ability of neocolonial countries to maneuver.

Imperialism since 1945

In contrast to the pre-1945 situation, since 1945 imperialism as a whole acts in a centralized way. For example, during the 1930s semi-colonial China was able to form an alliance with Washington against Japan, which played a crucial role in the defeat of Japan’s attempts to convert China into Japan’s India. The successful defense of China’s limited political independence made the victory of China’s revolution in 1949 far easier than it would have been if the United States and Japan had been united. And modern China, with all its amazing industrial and scientific progress, would have been inconceivable without the victorious 1949 revolution.

In the years between 1945 and 1989, the existence of the socialist camp headed by the Soviet Union replaced the inter-imperialist struggle with a struggle against their common “Soviet” enemy. For example, the Chinese revolution enjoyed the support of the Soviet Union, and Vietnam greatly benefited from the support of the socialist bloc during both the French and American wars.

Conditions are far less favorable today. For example, early this year a pro-NATO government was established in Ukraine. Ukraine had been the most important Soviet Socialist Republic after the Russian one. The participation of Ukrainian President Poroshenko in the recent NATO summit underlines the fact that Ukraine is now viewed in Washington as a de facto or associate member of NATO. And it is no secret that Poroshenko and his “Euro-Maidan” supporters aspire to full NATO membership.

This is an extremely dangerous development. Washington, however, has not yet made a formal commitment to go to war with Russia if Russia were to use military power to remove the pro-NATO Ukrainian government—something, by the way, Russia shows no sign of doing.

Fortunately, the pro-NATO Ukrainian government has not established its control over all areas of the old Ukraine Soviet Socialist Republic. The Crimea, which has a majority Russian, not Ukrainian, population, has rejoined the Russian Federated Republic, and the southeastern regions have established “peoples republics” that are resisting Kiev’s authority. Kiev’s attempts to crush these peoples republics by military force with the Empire’s encouragement seems to have failed for now.

However, even if the people’s republics—or what the Russian nationalists call “New Russia”—in time gain full de facto or eventual legal independence, or even join the Russian Federation, a pro-NATO government will be in control of most of Ukraine. Therefore, the situation will still be a considerable net gain for the Empire compared with the situation that prevailed between 1991 and 2014.

The example of Syria

Another example of the difference in the world between 1945 and 1989 and the world today involves Syria. In 2013, Obama demanded that the Baathist president of Syria, Basher al-Assad, resign—a gross violation of Syria’s right to self-determination (7)—and threatened to launch a bombing war to overthrow the Assad government much like it did in Libya—with disastrous results for the Libyan people—in 2011.

Capitalist—but non-imperialist—Russia opposed this. This was a very good thing—and the U.S. did not actually carry out its threat to launch a bombing war against Syria at that time, though it is now bombing parts of Syria in its war against
the Islamic State. But Syria, in exchange for not being bombed for a year, was forced to give up its chemical weapons, making a future invasion of Syria by U.S. or other NATO forces that much more likely.

We can’t forget that the invasion of Iraq by the U.S. and other NATO forces in March 2003 was preceded by continuous acts of unilateral disarmament and international “inspections” that were imposed on Iraq—which of course allowed the Pentagon to know exactly what military power Iraq really had without any opposition from capitalist Russia. More on this below.

Do nuclear weapons make a new world war impossible?

Nuclear weapons have been used on only two occasions, both times by the United States against Japan in the final days of World War II. There have been no major wars between nations that both have nuclear weapons, only a few border clashes. There have, however, been many wars since 1945 between nations that have nuclear weapons and those that do not. Most of these wars have been fought by the United States and its satellites, especially apartheid Israel. In addition to the United States and Israel, the nuclear countries are Russia, Britain, France, China, India, Pakistan, and most recently North Korea.

It seems that South Africa, working closely with its fellow apartheid state Israel, had acquired nuclear weapons just before the end of apartheid. However, as part of the deal that ended apartheid and established majority rule, South Africa gave up its nuclear weapons that the apartheid regime had developed with Israeli assistance.

Similarly, when Ukraine gained “independence” in 1991, it gave up the Soviet nuclear weapons that had been located in Ukraine.

It is worth noting that none of the defeated axis powers are allowed to have nuclear weapons by the Empire. However, highly industrialized Germany or Japan could rapidly acquire them if either the Empire allows them or in the future they again become fully independent countries. The fact that neither Germany, Japan or Italy have nuclear weapons illustrates the continuing subordinate position of the countries that challenged the U.S. in World War II almost 70 years after the war ended.

Clearly, attacking a country with nuclear weapons involves great risks. For example, would George Bush and Tony Blair have invaded Iraq in March 2003 if Iraq had actually had even a few or even a single nuclear weapon? Even if one nuclear device had been detonated over the U.S-British expeditionary forces advancing on Baghdad in 2003, these forces would have suffered by far the worst day in their entire military histories.

Since the Vietnam War, the U.S. public has become sensitive to wars that involve significant casualties, while still being tolerant of wars that involve few if any casualties. Examples of the latter were the air wars against Yugoslavia in 1999, which destroyed what was left of that country, and the U.S-NATO air war that crushed Libya in 2011. Obama promises that the current war against the Islamic State will remain an air war.

If Obama and his successor can at least keep the number of U.S. ground troops minimal like is the case at present, there will be few if any U.S. casualties in this war as well. However, like all wars, the new war against the Islamic State will have “unintended consequences,” which may include a growing role for U.S. ground forces and rising casualties at some point.

Disarmament and war

Disarmament of targeted countries has emerged as an important part of the Empire’s war strategy. This was most clearly illustrated in the case of Iraq. Bush and Blair were determined to invade Iraq and overthrow its government. But they were also determined to do so with minimal casualties among the imperialist forces while fighting a war both on the ground and in the air.

In order to ensure this, Iraq had to be throughly disarmed before it was invaded in 2003. Inspectors and disarmers throughly combed the country looking for so-called “weapons of mass destruction,” which included not nuclear weapons—Iraq obviously had none—but poison gas and rockets capable of going beyond a certain range. Within hours of the beginning of the invasion on March 19, 2003, there were pictures of Iraq destroying rockets designed to carry only conventional explosives that UN disarmers had determined slightly exceeded the range that Iraq was allowed.

This situation helped disorient the anti-war movement that blossomed in the United States and Western Europe just before that war—but largely collapsed once the invasion began. Many in the anti-war movement argued that since the Iraqi government of Saddam Hussein was disarming the country, the U.S. and Britain should have done their part and not invaded. However, it was precisely the unilateral disarmament of Iraq that convinced Washington and London that they could capture Baghdad and overthrow the Iraqi government with minimal U.S. and British casualties.

Not surprisingly, the first phase of the war was highly successful from the imperialist point of view, with the Iraqi government overthrown and its capital occupied within three weeks with very light casualties among U.S. and British soldiers.

What Bush and Blair failed to foresee was the mass guerrilla war that followed after the conventional Iraqi army had disappeared. It was this guerrilla war, widely supported among the Iraqi population, that resulted in the thousands of U.S. solders being killed and wounded in the following years. The chaos caused by the invasion of Iraq and the ensuing occupation led this year to the rise of the Islamic State and Washington’s latest shooting war.

What would have happened if the Iraqi government had said no to disarmament and inspectors—like Cuba did at the time of the October missile crisis of 1962? (8) At worse, the United States and Britain would have marched on Baghdad anyway and anti-war demonstrations would have been somewhat smaller though the political issue would have been clearer.

But it is just possible that Washington and London might have figured the casualties that the invading U.S. and British forces would have incurred if Baghdad had retained the weapons it possessed in 1991 would have been politically unacceptable. Similar considerations prevented the United States from invading Cuba even after the socialist bloc was destroyed by the capitalist counterrevolution, though in the case of Cuba the knowledge that the Cuban people would fight to the death to defend their country and revolution is the most important factor.

The problem with nuclear weapons

For the Empire, using nuclear weapons has a definite downside even if they are used against a non-nuclear power and are limited to “tactical” nuclear weapons. Their use would transform the battlefield into a radioactive wasteland that would only slow the advance of the invading army. For example, the invaders would have to be protected against radioactivity and consequent radiation sickness.

There has been some talk that special relatively “low yield” nuclear weapons could target leaders of an invaded country if they take refuge in deep underground shelters or bunkers. However, powerful chemical weapons approaching the explosive power of a “low yield” nuke could also be used without the complications of radioactivity.

So far, these considerations plus the political outrage that would follow the use of even a “low yield” nuclear weapon by the United States or one of its satellites have prevented the use of nuclear weapons in any of the numerous wars that have broken out since 1945.

Russian counterrevolution increased the danger of nuclear war

The events in Ukraine in 2014 have proven that far from ending the danger of a nuclear war between the U.S. and Russia, the Russian counterrevolution by vastly augmenting the power of imperialism has greatly increased it. For example, the U.S. is far more likely to attack a greatly weakened Russia than they would have the Soviet Union.

To be sure, Russia’s nuclear arsenal inherited from the Soviet Union still acts as a powerful deterrent against even a limited shooting war against Russia by the United States and NATO. And for now, the rise of the Islamic State and the declaration of war against it by President Obama has directed the Empire’s attention away from Ukraine and back toward the Middle East. But the plans to fully absorb Ukraine into the Empire and eventually NATO remain, and the long-term danger of a war between the Empire and Russia continues to grow.

Will nuclear weapons be used in a future world war?

What would happen if a full-scale war broke out between the U.S. and Russia or the U.S. and China, or both at the same time? Would nuclear weapons be used? Not necessarily. As explained above, the use of tactical nuclear weapons tends to transform the battlefield into a radioactive dead zone that would actually hinder the advancing imperialist armies.

On the other hand, the launching of a full-scale nuclear attack would have such devastating effects that even if the attacked country failed to counterattack or was simply unable to counterattack, mother nature would react. Therefore, any nuclear-armed government involved in a large-scale conventional war with similarly armed countries would still be deterred from using nuclear weapons in wartime even if the tide of battle was running against it.

But would these deterrents be enough if the imperialist aggressors—or a nuclear-armed victim such as Russia—faced the prospect of complete defeat on the battlefield? The reality is that nobody knows. One thing is certain. A new world war—or even a more limited war like a second “Crimean War” (9) between the Empire and Russia—would involve dangers to our civilization that the Great War and World War II never could. Hopefully, if such a war does come, the timely intervention of workers’ revolutions against the imperialist aggressors would save the day, but there are no guarantees this would occur.

Another inter-imperialist war?

So far, I have assumed that a war on a scale that could be called a world war would be between the United States and Russia and/or China. But how about a war between the imperialist powers themselves? The media never discusses this or claims that war among “democracies”—meaning the imperialist powers—is impossible. But if this is really true, why has the United States, as has been recently revealed by Edward Snowden, been carrying out massive espionage operations against its imperialist “allies” such as Germany? And why does the United States maintain bases and extensive military forces on the soil of its European and Japanese “allies” while tolerating no foreign bases on its own soil?

As I have demonstrated in this blog, the economic competition among both individual capitalists and capitalist nations is very far from the friendly rivalry pictured in the marginalist economic textbooks. Instead, it is a desperate struggle for survival. The basic reason that capitalist economic competition is so vicious is that again, contrary to the marginalists and Say’s “law,” the normal condition of capitalism is a situation where the ability to produce commodities is considerably greater than the ability to sell them. Competition therefore inevitably reduces the number of individual industrial and commercial capitalists—or capitalist corporations—as well as the number of successful capitalist nations.

Within capitalist nations, the struggle among capitalists rarely takes the form of violence only because the capitalist state, which keeps the lion’s share of the means of violence in its own hands, “regulates” the competition among the individual capitalists. Through this “regulation,” competition is kept non-violent. However, among those capitalists who operate illegally, such as organized crime, competition often does assume a violent character with individual capitalists—called “gangsters”—often taking competition to its logical result and murdering the “competition.”

However, in the absence of an international force of violence, the competition among the imperialist states inevitably leads to the mass violence called war. In 1914, no international force such as NATO existed that “regulates” the competition among the major imperialist powers today. Therefore, the competition between Britain, Germany, Russia, Austria-Hungary, Japan and the United States led to the mass violence called the Great War and then the even greater violence of World War II. After that, a supranational force of violence was created to regulate the inevitable competition among the imperialist powers and prevent it leading to its logical result—world war.

Unlike the Great War, World War II settled things decisively for what has turned out be a whole historical period, which so far has lasted 70 years—not particularly long in historical terms. A supranational force of violence controlled by the White House was created, called the North Atlantic Treaty Organization, or NATO. A number of subsidiary “alliances” were also created called CENTO (10), SEATO and the “special security agreement” with Japan. But these mini-NATOs have now disappeared, or in the case of the “special security agreement” with Japan is being increasingly integrated into NATO.

UN ‘peacekeeping’

UN “peacekeeping” operations also play a role here. During the Korean War, U.S. invaders were formally designated “UN forces.” Only the Soviet Union’s veto in the Security Council prevented that body from declaring the U.S. invaders being declared UN forces during the Vietnam (American) War.

The Empire is really a group of institutions that mutually reinforce one another. The most important on the military side is NATO and secondarily UN “peace keepers,” and on the financial side the dollar system. There is also a trade side, originally called GATT—General Agreement on Tariffs and Trade—and now dubbed the World Trade Organization, or WTO.

The WTO grew out of the decision of the U.S. to open its markets to its European and Asian (mostly Japanese) competitors after World War II. The refusal of the U.S. to do this after World War I was one of the fundamental causes of World War II. Basically, Germany and Japan got access to the U.S. home market that they had sought but had been denied after World War I. In return, they had to give up their basic sovereignty. What Washington gave them was not only access to the U.S. home market but to other markets safeguarded by Washington/NATO. Remember, at the end of the day, it is not patriotism that drives big business but the thirst for the highest possible rate of profit.

Vulnerability of the dollar system

A breakdown in any one of these institutions—the dollar system, NATO-UN “peace keepers” and the WTO—would immediately bring into question the other institutions as well. At present, the most vulnerable is the dollar system, which I have examined extensively in this blog. The crisis of 2007-09 illustrates the contradictions of the dollar system, which are rooted in the commodity foundations of capitalism.

Let’s briefly review what happened to the dollar system during the crisis of 2007-09. In July-August 2007, the international credit system suddenly began to freeze up in response to what was called at first the “sub-prime mortgage crisis.” By 2007, it was becoming obvious that banks had issued mortgages to people who had no means of repaying them. It was generally assumed that the Federal Reserve System that sits at the very center of the dollar system would flood the commercial banks with reserves—in effect newly printed paper dollars—like it had done in earlier much less serious crises such as the 1987 stock market crash and the 1998 Long-Term Capital Management hedge fund crisis. So confident were Wall Street speculators of this that after a brief sell-off in August 2007, they pushed the stock market back up to record levels during September and into October.

What the Wall Street “bulls” overlooked was that the U.S. dollar was weak and falling against gold and other currencies. This was due in part to a decline in gold production that had begun in 2001, which was undermining the dollar system. This indicated that most commodity prices had risen above the underlying values of commodities—or more precisely their prices of production. It was this situation of commodity prices in excess of prices of production that tied the hands of the Federal Reserve System during the remainder of 2007 and well into 2008.

The Federal Reserve System feared that if it flooded the banking system with reserves—in plain language, crisp new dollars right off the printing press—a run on the dollar even greater than that of the 1970s would lead to the collapse of the dollar system. If that happened in the absence of any alternative world paper currency, the capitalists would begin to price commodities in terms of gold, which would then replace the dollar as the world currency and chief means of payment on the world market. This would end the ability of the U.S. to purchase huge amounts of commodities with debt denominated in a currency that it creates itself.

If this happened, the financial rug would be pulled out from under NATO. At the beginning of the crisis in 2007, instead of printing more money as the Wall Street “bulls” expected, the Fed created all kinds of new short-term credit facilities to bail out failing financial institutions short of printing more dollars. In effect, they were trying to find a way to halt the crisis without expanding the existing supply of means of payment. The result was the panic of 2008.

Panic of 2008 saves dollar system and NATO

The panic of September 2008 had disastrous effects on world trade, industrial production and employment across the globe. But there was an upside for Washington. Due to the workings of the dollar system, an incredible rise in demand for U.S. dollars as a means of payment allowed the Federal Reserve to do what it could not do before the panic. It was able to flood the banking system with newly created reserves on a scale beyond anything it had ever done before without triggering a run on the dollar. The Federal Reserve System, which appeared to be losing its power, was now more powerful than ever. (For a more detailed explanation of this episode, see here.)

It then took full advantage of the situation created by the panic in order to limit to the extent possible the damage to profits and world trade, industrial production and employment. The panic also had one other positive consequence as far as the Empire is concerned. It reversed the decline in gold production that had begun in 2001, sending gold production back up to record levels. This renewed rise in gold production has greatly strengthened the dollar.

Whether this renewed rise in gold production will long survive the current “low” gold price remains to be seen. But for now the dollar is again firmly in the saddle. The panic therefore saved the day for NATO and consequently the WTO—which depends on the military power of NATO—as well. But how long can the Empire survive if it depends on periodic financial and economic disasters like 2008—and in the future even greater disasters—to save it?

The law of uneven development

As I explained in the main part of this blog, the law of uneven development that favored the United States in the years before the Great War has increasingly worked against it ever since with its relative economic strength declining in relation to its capitalist competitors. Recently, however, the media has reported that the U.S. economy has been doing much better than Europe and Japan, and its performance has even improved relative to that of China. Has the law of uneven development begun to work once again in favor of the United States?

It is far too soon to draw such a conclusion. Because of the extraordinary demand for the U.S. dollar that began in the fall of 2008, and the renewed rise in gold production mentioned above, the U.S. Federal Reserve Board has been able to maintain a rapid rise in the U.S. monetary base without a further depreciation of the dollar either against gold or other currencies. Indeed, the trend has recently been very much in the opposite direction as the Federal Reserve moves to end its “quantitative easing” and is even promising that it will eventually contract the dollar monetary base as part of a process of “normalization.”

Whether they will really be able to do that will be examined in future posts. But for now the movement of money into the U.S. dollar has had the effect of increasing the growth of demand within the U.S. relative to the rise of demand in European, Asian and other countries.

However, this is not good news for the U.S. economy in the long run. On the contrary, it tends to work against the U.S. domestic economy because the relative rise in domestic demand has the effect of attracting commodities from abroad. This has a tendency to increase both absolutely and relatively the U.S. trade deficit. This inevitable consequence of the dollar system then tends to make the U.S. still more dependent on production abroad, actually accelerating the long-term relative decline in the U.S. economy while creating a glow of superficial prosperity.

This is exactly what we saw during the Clinton prosperity of the late 1990s. At that time, a strong dollar generated strong demand for commodities within the U.S. home market, especially commodities that are sold almost entirely on credit such as housing and automobiles.

The strong credit-fueled demand for houses and cars within the U.S. home market was barely dented during the cyclical downturn of 2000-03. But the price was that the U.S. trade deficit, which had been quite modest during the 1990s, began to soar. The growth in the trade deficit, both absolutely and relatively, ended only with the Great Recession. Is this cycle now repeating? And will it end with yet another even greater recession? There is much to suggest that the answer is yes.

There has been one other factor at work that has led to a decline of the U.S. trade deficit and a strengthening dollar. The high price of fossil fuels has enabled the U.S. fossil fuel sector, which had been in long-term decline, to stage a considerable comeback—an extremely dangerous thing for the environment—adding to the problem of global warming. In addition, the U.S. natural gas industry has been able to considerably lower its cost (price) of production—or in Marxist terms, lower the individual value of the commodity natural gas produced through “fracking.”

This has brought the U.S. into increasing competition with Russia, another big producer of natural gas. Whatever success U.S. industry is having in the fossil fuel sector, a case can be made that its growing dependence on extractive industries as opposed to manufacturing actually represents a further deepening of the long-term economic decline of the U.S. Capitalist Russia’s reliance on natural gas, other fossil fuels, and raw materials—along with gold and other precious metals—is hardly a model for a successful capitalist economy. Quite the contrary.

Permanent war

The weight of never-ending colonial wars is having an increasing impact on U.S. society. Since George Bush used the the 9/11 attacks as an excuse to launch his war against the Taliban government of Afghanistan, the U.S. has not known a day of official peace. President Obama had hoped to end the quasi-official state of war and announce the end of U.S. combat operations sometime in 2014. Now, the official announcement is being postponed to the very last moment—that is, December, the very last month of 2014.

It has now been revealed that there will still be 10,000 U.S. troops in Afghanistan after U.S. combat operations officially end. Therefore, the war in Afghanistan will go on even if at a lower level—for now—than during the Obama surge, which was supposed to finally defeat but failed to defeat the Taliban. And now there is a whole new war in Syria and Iraq against the Islamic State, which is closely aligned with and shares the ideology of the Taliban—a war that Obama has indicated will last for years.

A few years ago, the administration believed that it had finally defeated or bought off the Iraqi resistance, both secular and religious. The explosion of the Islamic State in both Iraq and Syria caught it off guard. It now has taken on the task of defeating both the secular nationalist Baathist Assad government and the religious-based Islamic State. In the process, Washington’s new war against the Islamic State has helped discredit the Washington-backed Free Syrian Army among rural elements of Syrian society still heavily influenced by religion.

Not surprisingly, Washington at the latest NATO summit meeting attempted to force its NATO “allies” to increase their war spending and to play a larger role in Washington’s latest Middle Eastern war. NATO members agreed to increase their war spending to 2 percent of GDP. And Washington is putting great pressure on its “allies”—both the imperialist satellite states of Western Europe and the neocolonial Arab regimes—to join the air war against the main “force of evil” of the moment, which was the Baathist Assad government of Syria last year (2013) but this year (2014) is the Islamic State.

Of course, there are some long-term dangers for Washington if the imperialist satellite states of Western Europe like Germany, France and Britain actually knuckle under to Washington’s demands and increase their long-term military spending. Today, the other imperialist countries remain under the thumb of Washington. But how about tomorrow? Rome in its declining days increasingly relied on “barbarian tribes” to defend its empire. This worked for awhile, but eventually the “barbarian tribes” began to pursue their own interests, which were often in contradiction to those of Rome, and the Western Roman Empire soon disappeared.

After the Empire’s fall

Sooner or later, the Empire—dollar system, NATO-UN peacekeepers, and WTO—will rupture and this whole rotten-to-the-core structure of exploitation and oppression will come tumbling down, just as all previous empires before it have fallen. The exact circumstances that will lead to the inevitable fall of the Empire cannot be known in advance. Will it be the result of pressure from without or revolution from within or without? Or will the Empire’s fall be ushered in by a collapse of the dollar system or by some other circumstance that we cannot now foresee?

Unless another imperialist “super-power” emerges—and it is hard to see who would play this role at this time—the global political and military anarchy that would result would sooner or later lead to a world war—with or without the use of nuclear weapons—unless the world working class steps in and imposes its own “law and order”—also known as the dictatorship of the proletariat—on the warring capitalist gangs, and then eliminates those gangs.

Only the working class at the head of other exploited working people can replace the current system of exploitation, both of class by class and nation by nation, with a worldwide socialist order that alone offers a road of long-term development beyond the current level. The alternative is a descent into barbarism leading sooner or later to the total destruction of human civilization and perhaps even the human species.

If this happens, it may well be through another “great war” that goes nuclear. In that case, unlike the Great War of 1914-18, this really will be the war to end all wars. But it is also possible the same results will be achieved “peacefully” through global warming or some other environmental disaster arising from the capitalist system even before the fall of the current U.S. world empire.

What all this shows is that there is only one real alternative, the victory of the revolution of the working people of the world, with the global working class at its head.

________

1 Rudolf Hilferding (1877-1941) published his most influential work, “Finance Capital,” in 1910. In it he defined finance capital as bank capital invested in industry transforming the banks into industrial capitalists. The book greatly influenced Lenin and played a large role in the development of the Marxist theory of monopoly capitalism and imperialism during the first half of the 20th century. (back)

2 Japan’s industrialization continued at a rapid rate until World War II. Even the super-crisis that began in 1929 only briefly slowed it. After World War II devastated it, Japan’s rapid industrialization resumed. It progressed at such a rate that by the 1960s and 1970s there was much talk of Japan replacing the United States as the most powerful capitalist country in the world. This grossly exaggerated the strength of Japan both economically and militarily and thus politically. Since the 1990s, the Japanese economy has been marked by stagnation. The law of uneven development, which favored Japan during most of the 20th century, is now very much working against it. (back)

3 My own native New York state is called “the Empire State” because it was said by the early white settlers that founded it that it was destined to become the seat of an empire. The empire first took the form of the conquest of the continental U.S. by English-speaking settlers at the expense of both the native peoples, who were either killed or driven into “reservations,” and Mexico. As a result of the two world wars, the Empire then became global. New York City, though it was only briefly the political capital of the United States, emerged as the financial center of the U.S. global empire of finance capital. (back)

4 As part of its role as the money commodity, gold bullion is as Marx explained “the coin of last resort,” which it remains today. For example, gold is used in some illegal transactions. If the U.S. dollar were to suffer a hyper-inflationary collapse, gold bullion would step in and replace the U.S. dollar as the global currency once again.

However, for now under the dollar system, while it can never replace gold as the commodity in whose use value the value of all other commodities can be measured—that role can be played only by an actual commodity such as gold—the dollar has emerged as the world’s token currency.

In order to discourage illegal transactions, the U.S. Treasury prints no bills in denominations greater than $100. Due to repeated devaluations, the $100 bill or “C-note”—represents only a small amount of actual money.

As a consequence, the $100 bill represents a much smaller amount of money—gold bullion embodying a given amount of abstract human labor measured in some unit of time that is directly social—than the smallest banknote issued by the Bank of England in the days of the classic gold standard. In those days, the smallest denomination British banknote was the five-pound note, which represented far more
gold then today’s $100 bill. Hence, the need in illegal transactions—including many “intelligence operations”—to fill suitcases with $100 notes. The only larger denominated “coins” are either gold coins or bars.

However, dragging around large amounts of gold coin or bars is even more inconvenient than dragging around suitcases filled with C-notes. There is some talk that bitcoins or some other “digital currency” might fill the role as the world coin for illegal transactions, but they have the disadvantage of being subject to wild swings in value relative both to the dollar—the standard of price—and to debts and gold. [link to post on bitcoins] (back)

5 A British sovereign is made of 22 carat gold of a weight of 7.98 grams. (back)

6 Under the classic gold standard, which reached its highest point of perfection just before the outbreak of the Great War, the banknotes of all the “major powers” and many smaller powers as well were convertible into gold coin of a fixed weight and fineness. These coins could easily be melted down into pure bullion—money material—and then re-coined or deposited into central banks in exchange for their notes or deposits denominated in their currencies. Gold was thus the world currency, and pounds, dollars, rubles, franc, and marks were simply local names for given weights of gold bullion.

However, currency exchange rates were constantly varying as the terms of exchange swung in favor of or against the various currencies, causing their prices in terms of other currencies and gold bullion to fluctuate around their par values. Since it was costly to actually ship gold bullion from one country to another—in addition to shipping costs, there was the need to purchase insurance—unless a given currency dropped so much below its par value that the cost of actually shipping the gold was less than the exchange loss, it was cheaper to “eat the exchange losses.” The exchange levels that would actually cause gold to be shipped were called the “gold points.” (back)

7 A year ago—2013—U.S. President Obama threatened to bomb Syria allegedly because the Syrian government of President Basher al-Assad had used poison gas that resulted in the deaths of many children. Many people not only in the political mainstream but on the left were sucked into supporting the demand that “we” had to to do something about the crimes of the Assad government. What was lost sight of was that it was a violation of Syria’s right of self-determination for President Obama to demand the resignation of the head of state of another country. According to the basic democratic principle of self-determination, who the president of Syria is is of concern only to the people of Syria.

But doesn’t something have to be done against a government that gases “innocent children”? Nobody who has any conscience can see the gassing of children as anything but a horrible crime. Of course, the facts in this case, as in all such cases, are hotly disputed. Did President Assad actually give the order to use poison gas against children? There are many reasons to doubt that the Syrian president actually did this.

But there is even a more basic issue involved. Syria was not accused of threatening to attack any other country. The threat of war involved only the internal policies of the Syrian government. The hidden assumption here is that the Syrian people are so primitive and barbaric that they cannot be expected to call to order the leaders of a government that orders the gassing of children and that we in the “civilized” West must step in and stop it.

That is, “we” in the West must take up the “white man’s burden” and bring civilization to the savage peoples of Syria. This is exactly the kind of thinking that those of us who live in the imperialist countries must constantly be on guard against and must learn to completely reject. It is racist to the core. If we don’t learn this basic lesson, we are no better than the “social imperialists” of 1914. (back)

8 As part of the settlement between the United States and the Soviet Union that ended the Cuban missile crisis—or October crisis as it is called in Cuba—in 1962 the governments of the United States and of the Soviet Union agreed that inspectors would be sent to Cuba to ensure that all nuclear weapons were removed. However, the Cuban government was not consulted. Cuba announced that no inspectors would be allowed and none were. Cuba was not invaded at that time and it has not been invaded to this day, unlike the case with Iraq that agreed to the inspections and was then duly invaded. (back)

9 The Crimean War was a war fought between Britain and France on one side and czarist Russia on the other between 1853 and 1856. The main but not the only fighting occurred on the Crimean Peninsula, which is again part of Russia. As the power of the old pre-capitalist Ottoman Empire crumbled, both czarist Russia and capitalist Britain and France had ambitions to take the place of the Ottoman Empire. This was a limited war because neither Britain nor France attempted to overthrow the czarist government nor did czarist Russia attempt to conquer France, still less Britain.

The war ended with a victory for Britain and France and a decisive defeat for czarist Russia. Russia’s poor performance in the Crimean War showed the need for an anti-czarist Russian revolution and therefore was one of the events that finally led to the Great October Socialist Revolution of 1917. (back)

10 CENTO, also called the Baghdad Pact, was formed in 1955. It largely became a dead letter after the Iraqi revolution of 1958, which overthrew the British-imposed monarchy. CENTO was formally dissolved in 1979 after the Iranian revolution in 1979. SEATO, or Southeast Asian treaty Organization, was formed in 1954 after the first Indochinese or French colonial war against the peoples of Indochina. SEATO was formally dissolved in 1977 after the victory of Vietnam and its southeastern Asian allies in the second Indochinese (American) war. (back)