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Basic Books /
By Stephen S. Cohen and J. Bradford DeLong The End of Influence: What Happens When Other Countries Have America's Money
America finds itself cash poor, and to a great extent, power follows money. A new book explores the grave consequences this loss will have for America's place in the world. February 11, 2010 |
Editor's Note: America's leading role in the international economy is waning as other world powers find themselves holding onto trillions in U.S. debt. Recently, former Treasury Secretary Hank Paulson's claimed in his new book that Russian officials encouraged the Chinese to ditch their Fannie Mae and Freddie Mac bonds in 2008 in an attempt to make the United States bail out the troubled mortgage giants. (Russia that year sold all of the bonds it had in both public firms.) And then a few days later came news that Chinese military officers have proposed that their country sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan. Power follows money, and Stephen S. Cohen and J. Bradford DeLong's new book The End of Influence: What Happens When Other Countries Have the Money (excerpted below) explores what will happen in this new world, where other countries have America's money. * * *
For more than a quarter century now the countries of the world have been dreaming the neoliberals' dream. They have been trying to shrink their states back to their core competencies to promote economic efficiency, global economic integration, and growth, and to slash through red tape, rent-seeking, and simple corruption. They have been actively privatizing state holdings. They have hugely reduced their ownership and their active involvement in "national champion" companies. They have cut back on interventions to affect market outcomes and on regulation to scrutinize and control market players.
But now they are waking up. And the neoliberals' dream is at an end.
To understand why, we need to journey back to the mid-20th century. The coming of World War II ensured that whatever money still remained in Britain left quickly. Franklin Delano Roosevelt ruled an isolationist country that he wished to cajole into engaging in the war with Hitler as early and as completely as he could. But part of Roosevelt's strategy (and a not-altogether unwelcome consequence, for many who worked in the State, War, and Navy Building-a Victorian-era structure just west of the White House that looked like a French brothel) was to make Britain broke before American taxpayers' money was committed in any way to the fight against Hitler. Only after Britain had sold off the family silver to pay for the nozzle would America "lend" Britain its garden hose to fight the Hitlerian fire.
America did come to the aid of its closest, cherished, and most important embattled overseas ally after Britain was broke. The Grand Alliance was the great moment in the grand story of the English-speaking nations. It does remain Churchillian in the inherited grandeur of its narrative. And America did come to the rescue of England, and together-with enormous although unloved assistance from the Red Army of the Soviet Union and Josef Stalin-America did save the world from the horrors of the Nazis. But while we were gearing up to come to the rescue, we squeezed the British, and when World War II was over, the United States, not Britain, had the money. When the British borrowed money from us, it had to be repaid in dollars, not in sterling. And imports into Britain had to be rationed well into the 1950s. ............(more)
The complete piece is at:
http://www.alternet.org/world/145632/the_end_of_influence%3A_what_happens_when_other_countries_have_america%27s_money 
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