Sam Gindin: Is the Big Ship America Sinking?


Richard Moore

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A Socialist Project e-bulletin .... No. 42... February 8, 2007

Is the Big Ship America Sinking?
Contradictions and Openings

by Sam Gindin

There's something happening
What it is ain't exactly clear
Buffalo Springfield, 1966

Are we in the midst of a momentous turn in world politics? Donald Rumsfeld has 
been shuffled out of the Pentagon. Daniel Ortega, Washington's nemesis from the 
Sandinista Revolution of the late 1970s, is back as President of Nicaragua. Hugo
Chavez has been triumphantly re-elected, and Bolivia and Ecuador also have new 
left-populist presidents. U.S.-led neoliberalism is scrambling in Latin America;
the U.S. state seems to be in the throes of a full retreat in Iraq; and, in its 
look ahead to the year 2007, The Economist is warning of the dangers of an 
'authority deficit' at the level of nation states, international institutions, 
and the role of 'the superpower'. The U.S. economy is slowing down; Europe's 
economy is speeding up; and China, having quadrupled its output over the past 15
years, is becoming more confident and assertive internationally. The fall of the
U.S. dollar has been imminent for some time, but now the talk is of its decline 
turning into a chaotic r! out. And suddenly everyone is an environmentalist, 
with the Bush Administration being the main force against the Kyoto climate 
change protocols.

What next? With the Bush neo-conservatives on the defensive, will a new common 
sense emerge? Will the broad left regain its confidence and move to overturning 
three decades of increased inequality, erosion of social rights and corrosion of
substantive democracy? Will this also extend to challenging corporate power? 
Will Bush's humiliation in Iraq spill into Canadian debates over the war in 
Afghanistan and drag Harper down along with his imperial friend? Will the new 
reality in Iraq force the U.S. and Israel towards some substantive compromise 
with Palestinians? Will the turmoil within the American empire provide space for
the populist experiments taking place in Latin America -- experiments that might
inspire a more radical activism in our own countries?

An Unraveling Empire?

It is tempting to identify, in all of the above observations and questions, 
signs of the unraveling of the American empire. But to argue that the American 
economy may be on its last legs substitutes wishful thinking for sober analysis.
The American economy retains a remarkable capacity to adjust to change (with 
great costs, of course to American workers). American military power has limits 
but it remains the greatest military power the world has ever seen, and its 
coercive potential and reach should not be underestimated. Shifts are occurring 
among the hierarchy of capitalist states and regions -- the dramatic rise of 
Asia and the development of the European Union being the most obvious and 
important -- but American leadership in the making of global capitalism 

There are other reasons for caution. Empires aren't toppled by falling exchange 
rates. The U.S. dollar fell by 44% relative to the G-10 countries between 
February 1985 and October 1987. Although there was a recession in the early 
1990s, this was followed by the great American 1990s economic boom. Empires do 
not collapse from particular defeats either. Vietnam defeated the U.S. in the 
1970s, but a main priority of Vietnam today is to deepen its participation in 
American-led globalization. The American economy is clearly not focused on 
addressing popular needs, but that is not what matters to capital's successful 
survival. For American capital, the more important development is that U.S. 
after-tax profits as a share of GDP are at their highest since 1929.

The U.S. is losing manufacturing jobs at an alarming rate: the number of 
manufacturing jobs in the U.S. is today below where it was fifty years ago and 
as a share of total jobs, manufacturing employment is today less than half of 
what it was then. Yet because of the high productivity of the remaining workers,
manufacturing production is not disappearing: the volume of manufactured goods 
produced in the U.S. has increased six-fold since 1950. Remarkably, given the 
decline in manufacturing jobs, manufacturing production has maintained its share
of the American economy's real (after adjustments for price inflation) output. 
The U.S. continues to generate half the research and development done amongst 
the G-7 leading capitalist economies. According to the U.S. National Science 
Foundation, the American share of the global production of high-tech goods, in 
spite of all the outsourcing and the imports, actually increased from 25% a 
quarter of a century ago to 42! % in 2003. It is certainly true that high tech 
production in China and South Korea has increased much faster, but they started 
from a low base (about 1% in each country) and their global share has risen to 
what is still a fraction of the U.S. levels, at only 9% and 4% respectively.

Even if some U.S. multinational corporations have lost their former overwhelming
dominance in certain sectors, others have maintained their strength, as with the
aerospace industry, and new ones have flourished, particularly in such high tech
sectors as computers, telecommunications, pharmaceuticals, medical equipment, 
biotechnology, and others. The leadership role of the U.S. is confirmed even as 
European and Asian companies increase their drive to catch up, or at times even 
surpass, American manufacturing. In other sectors, the advice and skills they 
seek is that coming from those with the most experience and expertise in the 
making of global capitalism: which overwhelmingly means U.S. banks, investment 
houses, consulting agencies, and law and accounting firms still dominate the 
financial and services sectors.

A Collapsing Trade Position?

What about the American trade deficit (including a trade deficit even in high 
tech goods) and the loss of competitiveness this expresses? American exports 
have in fact been very competitive and increased very significantly. It is the 
remarkable level of imports that account for the trade deficit. In high tech, 
for example, American consumers are buying, and American businesses using, more 
such goods than anyone else does. The result is that the U.S. ends up both 
producing more and importing more. It should also be noted that American 
multinationals now sell far more abroad through their affiliates than through 
exports from the USA, so trade data does not give a meaningful measure of 
American corporate strength.

The U.S. has been able, for over a quarter century now, to import more goods 
than it exports and pay for this through other countries accumulating American 
dollars (dollars which are now falling in value). If any other country tried to 
do the same, it would be disciplined by international financial markets as 
capitalists would pull out their capital until that country corrected its 
'overspending'. The U.S. can get away with this not just because the dollar is 
the dominant currency in the world: more important is that global finance is 
still relatively confident in the American dollar (the dollar remains the 'safe 
haven' in an uncertain world) and the resilience of the American economy. The 
net result has, essentially, been that a larger share of global labour has been 
working to supply the U.S. with its needs, and that the U.S. has also captured a
disproportionate share of world savings. In this sense, the U.S. has been able 
to run consistent trade deficits for over a qua! rter of a century as a sign of 
relative strength rather than weakness in relationship to other advanced 
capitalist centers.

The U.S. economy may face a significant degree of instability and uncertainty in
the coming period. But a global run on the U.S. dollar is most unlikely because 
of the way the rest of the world is now structurally interdependent with -- and 
even directly integrated into -- the American empire. The countries currently 
holding large dollar reserves, especially China and Japan, hold dollars to keep 
their own currencies from rising relative to the dollar and so maintain their 
advantage in exporting to the crucial U.S. market. If they did convert their 
dollars to another international currency such as the yen or euro, the Japanese 
and Europeans -- panicking over a competitiveness-destroying rise in their 
currency -- would immediately turn to buying up dollars, thereby neutralizing 
the net impact on overall holdings of dollars. More generally, the countries 
with large holdings of U.S. dollars have come to understand that, given their 
integration into global capitalism, a crisis! for the dollar is a crisis for 
everyone. This general concern to support the dollar even as it falls, and avoid
a collapse of the U.S. economy, reflects the contradictions of success within 
the American empire, and that structural interdependency has become a 
significant foundation of the American empire.

A Military Power in Retreat?

The U.S. military impasse -- and potential full retreat -- in Iraq raises the 
limits to the American empire. The Los Angeles Times (December 3, 2006) reports 
that the recent trip of top American officials to shore up their Middle East 
allies found "friends both old and new near a state of panic" fearing that "that
the Bush administration may make things worse." But Iraq and the entire Middle 
East will still have to sell their oil on the world market, and the U.S. will 
keep receiving it (as it now does from Venezuela in spite of the Bush-Chavez 
conflict). American oil companies will continue to play a prominent and 
profitable role in the process (as they still do in Venezuela and Bolivia). Many
of the new American military bases established in the Middle East and Central 
Asia in the course of the 'war on terrorism' are likely to remain in place. And 
an unintended consequence of a less unilateral American state forced into 
negotiations with Iran! , may well lead Iran to become more 'responsible' and 
integrated within global capitalism, an outcome not necessarily negative for 
American interests.

There also other reasons for a more sober assessment of existing geopolitical 
alliances and balance of forces. The electoral rejection of neoliberalism in 
Latin America states, for example, is obviously a great electoral victory for 
the people in these particular countries and a rejection of neoliberal policies.
But these neither yet represent a defeat of neoliberalism as a system of power 
and capitalist market relations or a fundamental challenge to existing global 
social relations. In Nicaragua, it is not clear that Ortega any longer 
represents a challenge to neoliberalism. Argentina has come back into the fold 
of global capitalism, and is actively negotiating the repayment of its defaulted
debt. Bolivia and Ecuador face serious limits on how far radical policy agendas 
in such small countries can be implemented given their international integration
and poverty. And even Chavez, for all he has accomplished in Venezuela has, to 
date, found it necessary to go slow in chall! enging private industry and 
finance. Brazil, with half of Latin America's population, is clearly critical to
continental possibilities but Lula has not emerged as a threat to either the 
Brazilian or global capitalists, and, if anything, his government has served to 
contain the opposition from below. There is need for a careful calibration of 
the Latin American struggle against U.S. imperialism and political hegemony, and
the forces that remain to be defeated.

China raises a different set of issues and cautions with respect to shifting 
geopolitical forces. Chinese growth, much at the great expense of Chinese 
peasants and ecology, has indeed been stunning. But China has a long way to go 
to match the U.S. Its total Gross Domestic Product remains about one-quarter 
that of the U.S. The top 500 companies in China are still only one-fifth the 
size of the top 500 U.S. companies. China has relied on foreign direct 
investment as no other capitalist development transition has ever done. Even as 
China becomes more technologically sophisticated, its dependence on global 
technologies, components and markets is not decreasing, but increasing. Between 
1993 and 2003, the share of China's exports produced by foreign-funded 
enterprises (FFEs) increased from 35% to 79%. The FFE's share of exports of 
computer equipment rose from 74% to 92%, and of electronics and telecom from 45%
to 74%. Between 1998 and 2002, FFE's even increased their share of C! hina's 
domestic consumption of high-tech goods from 32% to 45% (see the essay by Howard
French at <>

A crucial question is whether Chinese dependence on foreign corporations is just
a pragmatic economic strategy that can be modified as China develops, or whether
it carries with it a social significance. For example, the foreign dependence 
affects the making of a Chinese capitalist class, intertwining it with ties to 
foreign markets and suppliers. That is, the Chinese capitalist class has a 
developing vested interest, like capitalists elsewhere, in the conditions of 
global capitalism, as well as the Chinese economic space. This can be partly 
seen in the major political and economic summit held in December between Chinese
and American political and business leaders over the nature of Chinese-American 
economic ties and their relationship to the global economy. To the extent that 
such a Chinese capitalist class is in fact emerging, the main global 
'contradiction' represented by China's growth may consequently not be found in 
its threat to the U.S., but rather in China's inte! rnal class and ecological 

There are also specific limits on China's emergence as global political rival in
the immediate period. There are some serious potential problems with China's 
banking system and the unserviced debt that has been mounting; the inflow of 
speculative 'hot-money' and China's real estate bubble are becoming more 
difficult to contain with the Bank of China's main sterilization policy of 
building up U.S. dollar reserves; an aging population and weak social security 
structure that is putting pressure to shift resources from private accumulation 
to public services; an already-existing environmental crisis that will only get 
worse at present growth rates; and extremes of regional and class inequalities. 
There is, finally, the critical question of whether the Chinese state can 
contain the formation of popular forces, above all within the working class, and
their growing expectations of work-place rights, material well-being and 

New Openings?

Where then does this leave us? There may be a downturn, strains and 
uncertainties, even a degree of quite serious turmoil. Given that neoliberalism 
has, to some extent, been discredited as a pure policy framework, this may lead 
to some turn away from neoliberalism's harshest and most messianic policies. As 
The Economist (November 25, 2006) suggested after the fall 2006 American 
Congressional elections, rebuilding "America's social contract" may be "a 
prerequisite for shoring up support for globalization." As well, the Democratic 
Party most certainly will, in light of the delegitimation of Bush's 
international policies of unilateralism, be more cautious in its interventions 
abroad and more sensitive to multilateral incorporation of allies, as has 
already been evolving with respect to Middle East policies and North Korea. In 
the absence of sustained social pressures from within the U.S., however, the 
changes will be limited to a 'kinder' (and pe! rhaps more acceptable) capitalist
globalization and the more 'multilateral' (and perhaps more efficient) 
imperialism which the Europeans have sought from the USA.

American capitalism and the American empire continue to have staying power. This
is because of the absence of pressure from below. Without effective social 
resistance, American capital can restructure at the expense of the middle and 
working classes. Without organized resistance, the 'competitiveness' of U.S. 
firms and the economy becomes the discursive and organizational framework for 
middle and working class discontent. The cracks in the neoliberal architecture 
of the empire in the military quagmire in Iraq, electoral revolts in Latin 
America, and the structural American trade deficit and dollar overhang, are not 
the bursting of historic 'contradictions' that lead to the crisis that will 
unravel American geopolitical hegemony. Rather, these are historic 'openings' 
that challenge us to create a new politics that can lead to radical new 
political alignments. The real issue is not whether 'the system' will fall 
apart, but whether a new kind of left can come together.

In Canada, it is significant that federal anti-scab legislation and a living 
wage are actually on the parliamentary agenda and that the new leader of the 
Liberal Party is an avowed 'environmentalist'. But these positive signs are more
a reflection of the Liberals sensing a general and vague unease in the country, 
than any fear of a radicalized and mass left. The question is whether we can 
build on such openings. Might the present moment be that long-awaited chance to 
place real economic and social transformation - with all the difficult (and 
sometimes uncomfortable) questions of political capacities and organization this
implies -- on the agenda once again?

Sam Gindin teaches political economy at York University.

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