"The Almighty Dollar:
and "Gunboat Democracy."
Members of the SF Gray Panther War and Peace Committee have been investigating global economic and
military issues. These are their reports.
The Almighty Dollar: Is It Still Mighty?
In 1944, as World War II was
ending, the U.S. was the leading power at a conference of 41 nations
held in Bretton Woods, New Hampshire. It was there, in a luxurious hotel
surrounded by the White Mountain National Forest, that the International
Monetary Fund and the World Bank were established, and the dollar became
the chief international currency. The U.S. backed the dollar with gold
at the fixed amount of $35/ounce.
In 1971, under enormous economic pressure from a huge trade deficit,
Vietnam War debts, and spending on social programs needed to quell domestic
unrest, Richard Nixon ended the gold standard and allowed the dollar
to "float." The U.S. made deals with the Saudis that oil would
be sold only in dollars, according to David Spiro in The Hidden Hand
of American Hegemony, so oil-importing countries had no choice but to
keep a large reserve of dollars--all except the U.S., which needed neither
gold nor another currency in reserve. Until 1999, when the 25 countries
of the EU issued the euro as their common currency, the dollar remained
supreme. Now, however, it is declining rapidly and more and more countries
are looking at the euro as an alternative.
Economist John Miller writes in Dollars and Sense that the U.S. economy
is held together by "imperial privilege" and by an aggressive
military. How does this work? The U.S. current account deficit (the
difference between the country's income and its consumption and investment
spending) is currently about $610 billion, most of which stems from
the trade deficit. The last time the current account deficit rose above
4% of the GDP was in 1816; now it stands at 5.78%. This deficit represents
the amount of money the U.S. must attract from abroad each year. The
money comes from foreign governments and individuals who loan the U.S.
government money by investing in treasury bonds (Japan and European
countries are no longer buying U.S. stocks). The United States borrows
$2 billion a day. Because "foreigners have been happy to purchase
the gobs of debt issued by the U.S. Treasury and corporate America"
(Miller), U.S. interest rates have remained low. Although huge amounts
of the U.S. budget go to servicing these debts, the borrowing gives
the government money to maintain its huge military while simultaneously
giving tax cuts to the rich.
How can the U.S. get away with running up debt at low rates? Until the
euro entered the picture, the global currency was the dollar, and this
allowed the U.S. to keep control. Most international trade is conducted
in dollars, most central banks' reserves are held in dollars, and today
oil is bought and sold only in dollars (Coilin Nunan, Feasta Review).
In 2000, Iraq decided to sell oil in euros. Two years later the U.S.
invaded, and the oil currency was quickly shifted back to dollars. In
recent months, Iran, North Korea, and Venezuela have all discussed switching
to the euro; all are threatened with "regime change" in some
What next? Since January 2002, the dollar has fallen more than 20%.
To keep foreign investors interested in buying U.S. securities, the
Fed will have to boost interest rates to make up for their declining
value. Or, foreign investors may just stop buying, causing a crash in
the dollar and the stock market and a severe economic downturn with
worldwide effects (Miller). A move to the euro as a second international
currency, or even as an exclusive international currency, would force
the U.S. to cut its trade deficit dramatically, as it, too, would need
reserve currency. Will there be an equitable solution, or will the U.S.
continue to rely on imperial privilege backed up by war?
The President's proposed budget
says it all: $419 billion for "defense" (up 38% in five years
and not including the cost of wars in Iraq and Afghanistan), and less
than half that amount for all other discretionary spending programs.
US military installations (890 of them) encircle our globe, more than
those of any other country at any other time in history. What are they
doing there? What purpose do they serve? Are they outposts of freedom,
"standing watch on distant borders," as President Bush would
have it? Or are they, as more and more people suspect, enforcers for
the economic interests of the US government and its friends?
"Once upon a time, you could trace the spread of imperialism by
counting up colonies. America's version of the colony is the military
base,"2 writes Chalmers Johnson, President of the Japan Policy
Research Institute and professor emeritus at UC, San Diego. And since
the administration of George H.W. Bush, when the first Gulf War brought
opportunities for permanent bases in Saudi Arabia and Kuwait, they have
multiplied like invasive plants. Says geographer Zoltan Grossman:
Since l990, each large-scale U.S. intervention has left behind a string
of new U.S. military bases in a region where the U.S. had never before
had a foothold. The U.S. military is inserting itself into strategic
areas of the world, and anchoring U.S. geopolitical influence in these
areas, at a very critical time in history….Indeed, the establishment
of new bases may in the long run be more critical to U.S. war planners
than the wars themselves….3
Many analysts believe that the increased US military presence, especially
in the Middle East and Central Asia, is an effort to dominate the world's
chief source of cheap energy, oil, and the pipelines which transport
it. The US imports only about 5% of the oil found in the Persian Gulf,
with the rest going mainly to Europe and Japan. The European Union and
East Asian economies pose a mounting threat to the economic well-being
of the US, but control of their oil supply would allow the US to dampen
production of these competitors by limiting the supply or increasing
the price. The increasing militarization of US foreign policy may mirror
the weakening US economy.
And what of Iraq, and US plans for freedom and democracy there? With
the closing down of US bases in Saudi Arabia after 9/11, Iraq offered
an ideal situation for a large US military presence in the Middle East.
And, despite denials from President Bush and Defense Secretary Rumsfeld
that US troops will remain in Iraq only until Iraqi security forces
can take over, reports persist of the construction of 14 "enduring
bases."4 In addition, the U.S. is building a permanent military
communications system,5 and the largest US embassy in the world, with
a staff of over 3000 people.6
One of these bases, Camp Liberty
(formerly Camp Victory North) near Baghdad Airport, is the largest overseas
post built since the Vietnam War and when full will hold about 14,000
troops. Each of its three sections will have a chow hall, chapel, Morale
Recreation and Welfare building, PX shoppette, barber shop, gym, internet
café, basketball and volley ball courts, legal services center
and courtroom, and more.
The communication system, known as the Central Iraq Microwave System,
will "consist of up to 12 communications towers throughout the
country and fiberoptic cables connecting Camp Victory…to other
coalition bases in the country…" Senior defense analyst Thomas
Donnelly of the American Enterprise Institute says, "This is the
kind of investment that is reflective of the strategic commitment and
intention to continue a military presence in Iraq."7
Whether continued resistance to US occupation and the recent Iraqi elections
will change US plans remains to be seen, but in an article in the Toronto
Star in March, 2004, Linda McQuaig discusses an ultra-secret task force
on energy headed by Vice President Cheney which as early as the spring
of 2001 examined Iraq's assets and the foreign oil companies interested
in them. McQuaig's interview with Fadel Gheit, an oil analyst for Oppenheimer
& Co., gives a very clear picture of Wall Street's and US oil's
interest in the area:
Not only does Iraq have vast quantities of easily accessible oil, but
its oil is almost untouched. "Think of Iraq as virgin territory…This
is bigger than anything Exxon is involved in currently…It is the
superstar of the future…" Gheit just smiles at the notion
that oil wasn't a factor in the U.S. invasion of Iraq….its location,
nestled between Saudi Arabia and Iran, made it an ideal place for an
ongoing military presence, from which the U.S. would be able to control
the entire Gulf region. Gheit smiles again: "Think of Iraq as a
military base with a very large oil reserve underneath….You can't
ask for better than that."8
The likelihood is that as the economic competition with China, India,
Japan, and the EU heats up, the US will continue trying to expand its
military presence around the world, especially in oil-rich and strategically
important areas. "Demand for oil in China is growing at a blistering
rate, about 30% to 40% a year. Demand is coming not just from China,
but also from India and the rest of the developing world," says
Anne Korin of the Institute for the Analysis of Global Security. 9 One
has to wonder which will run out first, the oil or the money necessary
to support the vast military web trying to control it.
The wars of the last two decades had little to do with the oft-repeated
mantras of freedom, liberty, and human rights, nor were there serious
efforts to resolve problems through negotiations. "Washington went
to war not as a last resort," says Grossman, "but because
it saw war as a convenient opportunity to further larger goals."10
As a people whose armed forces are inflicting misery throughout the
world, whose economy is being bankrupted, and whose sons and daughters
are dying in these wars, we must commit ourselves to opposing the militarism
and imperialism, which drive our country's foreign policy. Another world
1Francis, David R. "US bases in Iraq:
sticky politics, hard math," Christian Science Monitor, 9-30-04.
2 Johnson, Chalmers "America's
Empire of Bases," posted on TomDispatch.com, 1-30-04. Johnson
writes extensively on this topic in two books, Blowback, and Sorrows
3 Grossman, Zoltan. "New US Military Bases: Side Effects or Causes
of War?" posted on ZNET, 2-5-02.
See also Grossman's power point presentation, New U.S. Military Bases:
Side Effects or Causes of War? at http://www.uwec.edu/grossmzc/zoltantalks.html.
4 Spolar, Christine. "14 'enduring
bases' set in Iraq: Long-term military presence planned," Chicago
Tribune, March 23, 2004.
5 Lake, Eli. "Amid Talk of Withdrawal,
Pentagon Is Taking Steps for Longer Stay in Iraq," The New
York Sun, January 14, 2005.
6 Wright, Robin. "U.S. Has Big Plans
for Embassy in Iraq," Washington Post, January 2, 2004.
7 Lake, op.cit.
8 McQuaig, Linda. "Crude Dudes. US
Oil Companies Just Happened to Have Billions of Dollars They Wanted
to Invest in Undeveloped Oil Reserves." Toronto Star, September
9 Tsuruoka, Doug. "China's Ever-Growing
Oil Needs May Result in a Global Shortage," Investor's Business
Daily, January 26, 2005.
10 Grossman, op.cit.