How did the United States shape the post-World War II organisation of the world economy? Explain in reference to EITHER finance, trade, development, OR energy.
With the coming of the 20th century, the tremendous shock which invested the global community, following the failure of humanity in harmoniously develop cohesive international relations, left a major challenge throughout the post-war era to establish a relatively peaceful system based on common interests as much as shared prosperity. The decline of European empires, in the first half of the 20th century, left uncovered the possibility to promote new agencies of global leadership, which would have the structural role of creating the global superstructure for the development of intercultural and interstate relations. Such ambition has been pursued with the reproduction of the hegemon rational which underlines the stability theory of international relations. For it the British Empire, which glory has been ceased to flourish by the end of World War I, unleashed what has been called by the 2015 finance greek minister Y. Varoufakis (2011), the Global Minotaur. The metaphor recalls the role which the USA, as benevolent hegemon, has been advocating since the ratification of the Bretton Woods conference in 1944. It is worth clarifying that, as a benevolent hegemon a core necessity became to undermine and strategically contain the ‘malignant’ hegemon, which promoted non-liberal socio-economic values, namely the Soviet Union. This paper attempts to define the global implications of the liberal financial organization during the post-war era as an ideological fallacy which, by diminishing the relevance of alternatives to capitalism, did not incorporate economic and financial fruitful critiques of the latter, while avoiding to create common grounds of shared interests(Krotty;2019). In order to do that, the paper will focus on the structural monetary policies of financialised capitalism by drawing upon the neo-Gramscian critique of the latter through an institutional morality approach as opposed to the liberal critique which lays upon the interactional morality justification (Pogge,2013).
To clarify the necessity to adopt a Neo-Gramscian approach, it is worth distinguishing some dominant intuitive features which characterize the financial development of the USA and its implications as the leading global hegemon. Firstly, the hierarchical configuration of monetary agencies which are better known as the World Bank and the IMF, implies that dominant countries would inevitably handle what they perceive as the most convenient fiscal policies both for them and the rest of the world. In order to do so, an international tension is generated so that on one side the benevolent hegemon can transform international agreements on the necessity to safeguard its primacy as much as its global plan, while on the other it has to persuade the rest of the world to conform to its vision (Keohane;1984). Secondly, once the economic power is cooperatively attained, the need to establish a military force that would protect the welfare of the international political economy from external powers seems a necessity rather than a condition. Thirdly, it is worth noting that the necessity to adjust the doctrine of the hegemon to the cooperative necessities of the global economy, led the premises in 1944 for common commitments to openness and nondiscrimination, at least until the US began to protect their status through protectionist doctrines such as the mandatory oil quotas in 1959 and the fatal break between dollar and gold at the beginning of the 70s (ibid).
Historically, the implementation of the Bretton Woods architectures created a global platform in which nation-states began to be bonded by the Anglo-American vision of a global liberal economy. By doing so, the US took the lead to guarantee the financial stabilizer role which was previously managed by the British Empire through the Bank of England: in case of economic recession the Bank would have lent to foreign countries to compensate for British decline in sales. On this line, the IMF and the WB stepped forward as post-wars surrogates. However, to better clarify the divergence between the old and the new hegemonic system, controversial differences may be stressed: on one side, domestically, the British have been able to deploy deflationary policies over popular monetary wellbeing through the independent, non-public function of the Central Bank, on the other, in the aftermath of WWII, US financial institutions were bonded by the growing power of labor and state-interventionist implications. Furthermore, if the British Empire coercively imposed to colonial regions the structural dependence of local monetary authorities with dominant foreign interests (Helleiner;1994), the US, by pushing forward the gold-dollar over gold-standard mechanism, made it possible to adapt the rest of the world to its ‘fiscal benevolence’. Since the BW conference was executed, all countries were induced to conform to a debt-based system which responsibilities were directly backed by the exposition of the US dollar, and this popularises the adhesion of the global community after WWII. Furthermore, under US leadership, while all countries had the right to control their capital flows, they had simultaneously to commit to currency convertibility for current account repayments (Thomas;2013). However, to bear my thesis, It is worth to emphasize the US tolerance of European powers while withdrawing to make their currency convertible until their domestic economic stabilization in 1958. Meanwhile, public authorities such as the WB and the IMF gained the privilege to control international economic imbalances, by providing short-term loans to stabilize deficit countries repayments. It is worth then questioning if the privileged position of the US exhorted a sense of proudness which would inevitably deteriorate their win-win prescriptions.
As a matter of institutional morality, even though the US post-war financial organization has promoted a variety of progressive facets to its overall international image, the British Empire as much as US liberalism had been both responsible to monopolize a part of their hegemonic benefits: for it both the Pax Britannica as much as the Pax Americana have been deployed by their respective hegemons as self-centered behaviors embedded in accumulative tendencies over redistributive processes (Agnew;1995). As a consequence, the institutional architectures have continued to suffer the hegemonic vices of capitalism nuanced by the values of Americanism. Calleo (1987), presents a set of empirical examples which first demonstrated how the gold standard monetary system was the trampoline for the accumulative process of the British Empire from the dispossessed peripheries of the global economy; secondly, how the US proposed the commitment of the global economy to allow a system of floating exchange rate to balance their current account repayment (ibid). The current account deficit of US hegemony has been balanced by its capital account surplus, which reflects the conformity of other countries to balance American expenditures. In order to do so, the rest of the world seems irrationally willing to lend their current account surplus, in other words, their non-financial surplus, to American residents. Such a financialised mechanism exhorts non-American capitalists of the global economy, to diminish domestic investments while balancing the current account deficit of the USA. Such prescriptions and conditionalities grew parallelly to the liberalization and financial dependence of non-western economies in order to be eligible to get the IMF or WB fundings. Rodney(1972) majestically demonstrates that in order to understand the current economic and financial conditions in Africa, there is a fundamental necessity to explain the reason that led African wealth to expatriate outside of the continent: ‘so long as foreigners own land, mines, factories, banks, insurance companies, means of transportation, newspapers, power stations, then for so long will the wealth of Africa flow outwards into the hands of those elements’.
To continue, the primary approach of the monetary stabilizer mechanisms enacted by the WB and the IMF at the beginning of the post-war era, concerned what has been called the Polak model. For more than four decades, It happened to be the foundation for IMF financial programming and conditionality and it had enormous structural implications for countries with a balance of payments deficit. The approach was carried out through draconian fiscal and monetary policies, Woods (2014) argued that James (1966), in a World Bank report, accused the Polak model to promote austerity in terms of governments expenditure, as much as discouraging savings, undermining confidence in developing countries and imposing conservative stabilization measures on the false myth that balance of payments issues was short instead of long-term (ibid). While pursuing a financialised system which ought to ameliorate the internal structure of receivers countries through structural adjustment prescriptions, the need to focus on the external causes of deficits was sidelined. On this line, it is worth stressing that Keynes has been the primary contender of the US financialised international community based on techno-fixies adjustments: he pointed out that finance has to be primary national so that in debt countries would focus on a context-specific strategy to counter-react their deficit condition, while surplus countries would take the responsibility to diminish their surplus; he wanted to manage the balance of payments surplus and deficit as a developmental trait of the international system, and therefore guarantee international regulations and responsibilities on both surplus and deficit countries (Woods;2014).
Until 1960, actions were taken in order to guarantee capital control on private flows. Such a prescription led the basis to safeguard the cooperative relationship between private capital flows and state interventionism, which purpose was to allocate funds upon labor and public sustainability to limit the otherwise unpredictable scissor of inequality. However, by the end of the 50s, the novelty of colonial independence led the western world to establish self-centered unregulated financial activities whose implications came to disturb the post-war devotion to the win-win ideology of American liberalism. Since 1960, the Uk government began to encourage unregulated financial activities in US$, which in turn led to the common recognition of the limits concerning capital control. By the 70s, neoliberal ideology emerged to emphasize the need to support individual freedom and the short-term profit-maximization logic which led to TNCs flourishment as much as to the disgrace of national based business. On this line, global southern governments became immediately more vulnerable to the financialised market of unregulated TNCs. Such conditions led them to passively accept the prescriptions of the WB and the IMF, which liberalization and deregulation of domestic markets became a necessity to attract FDI and more generally TNCs investments. Furthermore, the previous paragraph on the US need to adjust their domestic current account deficit demonstrates that in order to have a capital account surplus, wealthy southern citizens of the world began to be encouraged to park their assets in safer northern financial markets. Such capital drain of non-western financial activities from the global South implied the incapacity for underdeveloped countries to deal with a debt crisis, which flights of capital if repatriated would have contained. Rodney (1974) fascinatingly concludes that, apart from the historical consequences of colonialism, in order to judge present economic conditions in Africa, there is a need to focus our lenses on the reason that allows African wealth to go mainly to the non-African outside of the continent. The loss of government policy autonomy became central to non-industrialized countries which lack of auto-determination led the basis for invasive SAPs as much as the outcome of the Washington Consensus.
To foster my thesis the attention of the paper will focus on the chronological development of the new logic of financialised capitalism from the 70s onward. Since the neoliberal era began, the increasingly independent realm of finance has made it clear that we are no more living in an industrialized economy: as Van Der Zwan (2014) brilliantly puts it, the declining of industrial productivity at the end of the 60s led the basis for a transitionary period which has seen the advancement of financialised capitalism at the expense of the Fordist regime of accumulation. Even tough neoliberal disciples stated that financialisation concerns a more efficient capital allocation mechanism, it seems more realistic that the regime of accumulation took a different shape while confronting with the decadence of the pre-financialised global economy. Krippner(2005), argued that US policies supporting financialisation were a response to a set of domestic crises such as the balance of payment issues, distributional struggles, and loss of public confidence. On this note, Arrighi(1991) claimed that capitalist’s elitarian classes responded to increased competition by shifting their investments from production to finance. Their choices were part of an evolutionary survival mechanism which, if on one side guaranteed to expand market confidence within the financial sector as much as let the rentiers prosper, on the other, the productive sector stagnated leading to ‘socialism for the bankers and austerity for the masses’ (Varoufakis;2013). Such elitarian ‘zeitgeists’ led to the victory of the financiers which managed to encourage non-financial corporations to derive profits from financial activities at the expense of wage-earners and households, who have faced stagnating real wages and increased indebtedness. Economic outcomes such as austerity or unemployment and informal labor, which once affected underdeveloped countries and more broadly the global south, are becoming growing evidence for the most prosperous global economies in the global North. The combination of the new regime of financial accumulation backed by the new ‘ethos’ of corporate behavior encouraged the development of a new transnational elitarian class based on short-term investments, which imminent profitability would undermine long-term social and environmental benefits: as Marx(1867) stated, under capitalism, the concept of money will produce self-maximizing instincts while alienating human capacities necessary to create social wellbeing.
The crucial step forward of the new corporate ‘ethos’ concerns the illegitimate logic that corporate efficiency is defined as the ability to maximize dividends and keep stock prices high. Such a mechanism has been enacted after the inevitable recognition, echoing Marx’s predictions, that managers or CEOs tend to maximize their wealth. Therefore, to reform managers’ behavioral fallacy, corporate efficiency is achieved through the reunification of ownership and control, under the pretext that corporate manager’s inefficient instincts will be bonded by the need to meet the demands of shareholders. One of the possible critiques of financialised corporate behavior states that the mechanism of disciplining the managerial board, by allocating the external pressures of shareholders, seems overly deterministic, ‘assuming both intent and efficacy on the part of the capitalist class’ (Van Der Zwan;2014). For a matter of clarification, it is essential to emphasize that throughout the neoliberal era, as opposed to the industrial-Fordist period, the financial gains of these operations are not reinvested in the firm’s productive facilities, but rather are distributed to shareholders in order to maximize external corporate factors. The logic of framing the new corporate ‘ethos’ around the rhetoric of the redistributive process becomes socially incoherent while looking at the increasing level of CEOs profits compared to an average worker within the firm: CEOs compensation has grown 940% since 1978, while average worker compensation has risen only 12% (Mishel;2019).
The social implications of the neoliberal, hyper-financialised ‘zeitgeist’ seem of crucial importance for how we are managing our lives in the 21st century. The simplistic neoliberal notions of individualism, competition, and self-maximization perfectly overlapped with the requests of financialised capitalism: for it discourses of risk-taking, self-management and self-fulfillment are popularly as much as ambiguously spreading around global societies (Best;2008). However, such rhetorics do not highlight the critical point that individuals and households are instrumentalized as debt promoters despite stagnating real wages; the social compromise between labor and capital has been sidelined and while state-led capitalism compromised that governments should take on debt to stimulate the economy, neoliberalism allows citizens to become economically and financially exposed. Technological progress and the internet allow everybody to become a hypothetic investor. To survive, finance has to include low-income and middle-class households in the financial markets: consumer credits, house mortgages, pension plans. The SDGs as much as the IMF and WB prescriptions over past decades stressed the vital necessity to introduce new sources of financial gains by including low-income and middle-class households within financial markets (UN;2019). Such popularisation of finance has shaped the foundations of how we relate to global issues such as the eradication of poverty or tackling the environmental disaster: the debate around them became the internal incapacity of the global economy to allocate the right amount of capital; while external causes such as the need to reframe corporate behavior as much as the consequential financial maximization of profit at the expense of predatory extractions of raw materials are sidelined: is it still worth taking the risk? ‘the oil spill in Mauritius reminds us of the danger fossil fuels pose to our environment’ (Greenpeace;2020). Such approach led the basis to a capital centered morality, by which individuals and institutions are encouraged to shape their inner as much as external perceptions of the world through the allocation and management of their personal or social investments: ‘life itself become an asset to be managed’. As a consequence, the intoxication of our collective subjectivities through the self-elevation of individual capital maximization seems to be the transcendental solution to institutional and individual problems; such approach will affect the perception that communities will have of a future that is encouraged to be uncertain, insecure and worth of risk takings (Best;2008).
To conclude, in order to maximize the post-war financial architecture, which cultural hegemonic prescriptions have been the principal cause for the punctual necessity of neo-Gramscian critiques, the malignant outcomes of US ‘benevolent’ hegemony have to be addressed: the intoxicated debt system in which balance of payment ought to reinforce the stability of the hegemon vis à vis the global economy; the capital centered morality in which global cultures have been encouraged to conform with, at the expense of cohesive international relations, echoing J.M. Keynes prescriptions; as much as its implications on self-centrism, which association with moral relativism becomes the main drivers of progress and development while diminishing objective moral assumptions on the necessity to reframe and maximize the limits of US hegemonical instincts.
