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The Transatlantic Alliance will survive Trump

from Mark Weisbrot

Every week, and often more than once a week, there is another article in the major media or in foreign policy publications about the demise of the post-World War II Anglo-American world order. These analyses typically single out the Transatlantic Alliance between the US and Europe ― two of the world’s largest economies ― for special concern and anxiety as the underpinning of this world order. Not surprisingly, President Trump’s wildly fluctuating comments on NATO (despite the fact that he is expanding it), his unprecedented rudeness to European leaders, and his friendliness with Putin at the Helsinki summit have all added to the angst.

The basic story behind this moaning and melancholy is that the leaders of America put together a “rules-based” system based on “open markets” and democracy (the two are sometimes seen as synonymous) that has fostered prosperity and relative stability. The United States was the only sizable industrial economy to emerge not only unscathed, but with its economy doubled in size, following World War II. While others might have taken advantage of this unrivaled power for their own gain, the story goes, America’s beneficent rulers constructed a world order for the good of everyone. Trump is seen as a threat to its continued existence.  

This assessment of the post-WWII world order leaves out some three million dead Vietnamese, and half a million dead in Indonesia who might question the beneficence of this system if it had not killed them. More recently, a million dead Iraqis, if they could be heard, might also raise objections about whether American dominance has been in the interests of all. And there are hundreds of millions of people in Latin America, Africa, and Asia who suffered for decades under US-backed dictatorships, as well as US-sponsored wars. Much of the violent dysfunctionality in these countries today is a direct result of these interventions, as well as continuing US influence.

In fact, as I write this now, the US military is directly involved in a war that has deliberatelyproduced what the UN has called the worst humanitarian crisis in the world, in Yemen. It has pushed more than eight million people to the brink of starvation, created the worst outbreak of cholera in modern history, and killed thousands of civilians in bombing raids. The United States is providing midair refueling to the Saudi and UAE bombers, intelligence, targeting assistance, on-the-ground military personnel, and more ― constrained only by growing opposition in the USCongress.

But let us ignore these inconvenient truths for a moment, as almost all of these analyses do.

Let’s look at the present situation. The Transatlantic Alliance is much stronger than most of these analysts recognize. This is mainly because it is not just an alliance of democratic governments with shared values, but also an alliance of the rich countries of the world ― their leaders, that is ― against the poor and middle-income countries of the world.

The rules of the World Trade Organization, to which 164 countries are bound, were written by US and European corporations. The WTO’s most significant achievement since its creation in 1995 was to increase US-style patent protection throughout the world, leading to the deaths ofmillions of poor people who could not get access to essential medicines. After years of struggle, some of these rules were rewritten, but much damage remains. The WTO’s rules on agriculture also greatly disadvantage developing countries and seek to prohibit governments from subsidizing domestic production for domestic consumption to feed people who are badly malnourished, e.g., in India. WTO rules also make it much more difficult for developing countries to employ the industrial policies that high-income countries like the US used to get where they are today.

The International Monetary Fund, an organization that has 189 member countries, is run by the United States and Europe. In fact, for most of the world outside of Europe, the US Treasury Department is in charge. The World Bank, which by custom since 1946 has to have a president who is American, is also controlled by the United States and its allies, and cooperates with the IMF in promoting and imposing economic policies that Washington favors. These policies areoften not in the interest of developing countries, as one would expect from organizations that are not accountable to low- and middle-income countries, or to any electorate.

These are the institutions of global governance that exercise power in the world, other than the UN Security Council, where the Transatlantic Alliance must share veto power with Russia and China. The IMF, for most of the past half century, has been the most important avenue of US influence over low- and middle-income countries. It has sat at the top of a creditors’ cartel, where countries who did not agree to IMF conditions would not get loans from other multilateral lenders (e.g., the World Bank) and sometimes not even from the private sector. This cartel lost influence in most middle-income countries in the first decade of the twenty-first century, but it has been coming back some (e.g., in Argentina) and still maintains its creditors’ cartel in poor countries.

European leaders are quite angry about the Trump administration’s unilateral abrogation of the Joint Comprehensive Plan of Action, the negotiated agreement with Iran that had put an end to the threat that it would develop nuclear weapons in the foreseeable future. Europe clearly has much more of a security risk from the Middle East, including Trump’s threatened war with Iran; not to mention all the political problems that have been created by the refugee inflow that was primarily a result of US intervention there. But what did they do about it, after their anxious pleading with Trump failed to move him? Nothing, because these leaders ― not the people of Europe, who have been screwed royally since the Great Recession ― need their beloved partner in crime.

The US is the gendarme of the rich counties’ global economic and political order. This is partly because the US did not suffer the destruction that Europe did in the world wars, and partly because Europeans have developed welfare states that do not allow for the fantastically wasteful military spending that maintains 800 US military bases across the globe.

But Washington’s weapons of mass and ordinary destruction are by no means its whole arsenal. The “exorbitant privilege” of being able to print the world’s most important currency, which makes up 60 percent of the world’s reserves held by central banks, is another. When Lehman Brothers collapsed in 2008 and the world financial crisis hit, the Federal Reserve arranged currency swaps for its European partners to make sure that they didn’t suffer any temporary international liquidity problems. On the other side of the divide, if you are outside Washington’s good graces, the dollarized world financial system allows the US vastly more power than other countries would have to enforce sanctions against you (e.g., in the cases of Cuba, Venezuela, and Iran), without, or even against, the United Nations’ approval.

Europe’s elite are bound to the rulers of the United States by virtue of their common interest in maintaining their dominance of the world economy. This is despite the reality that their spoils do not trickle down to the citizenry of the United States or of Europe.

This Anglo-American dominance won’t last forever. Eurasia, the world’s largest land mass, whichbred the colonial powers who conquered the world, continues to increase its economic integration despite the United States’ best efforts to counter this world-historical trend with its attempted TPP and TTIP commercial agreements. China’s economy is already 25 percent larger than that of the US on a purchasing power parity basis. (This is the measure most used by economists for international comparisons, since it takes into account price differences between countries.) In a decade, it’s projected to be about twice as big as that of the US.

Over time, European countries, led by their corporations and financial institutions, will look more to the East and less to the West as the world becomes more multipolar and the US share of the world economy shrinks. But for the near future, the US and European elite need each other as the global hegemon tries to hang on to its unelected position. Trump can be as rude, crude, and ignorant as he pleases with his European allies, but it won’t make them rebel against “the leader of the free world.”

See article on original site

  1. Prof Dr James Beckman, Germany
    August 29, 2018 at 8:34 am

    There once was a Roman Empire, At many places & points in time it provided more security, wealth & cultural understanding than available alternatives. Yes, today both the EU & Asia comprehend the model. Local warlords may or may not, given their personal motives.

  2. September 3, 2018 at 6:53 am

    Dean, excellent job of describing the international structures created following World War II. Mostly by the US and its European allies. It’s interesting to note that those who set this up originally intended none of the purposes to which it has been turned over the last 50 years. How’d the world get into this mess. Goes something like this. Several versions of capitalism have struggled against one another, and other potential options in the US since colonial days, and even before. Trump carries flimflam capitalism. The capitalism of the conman. This version goes back to the early history of land speculation and get-rich-quick-schemes in the US. Industrial capitalism arrived with industrialization. This includes the “Robber Barons” and major manufacturing industries. Finally, there is financial capitalism exemplified by ever larger banks, and financial clubs (stocks, bonds, commodities as contracts only). UK capitalism was not quite so mixed. This didn’t matter after WWII since American capitalisms became the only capitalisms. The Great Depression killed Industrial capitalism. Till FDR revived it. He should have let it die. Flimflam capitalism and financial capitalism began to merge till by the 1970s only the merged form remained. After WWII American “saved” industrial capitalism became dominant across the world. Mostly because there were no serious competitors. But flimflam-financial capitalism continually ate away at industrial capitalism. Till during the 1970s industrial capitalism was forced to cede control of American capitalism. Then with the help of some politicians (and their ultra-wealthy masters) who believed “free and open markets” would save not just America but American conservatism, economists who flimflammed the “magic” of marginalism in markets, and Congresses who accepted the “power of the bribe” flimflam financialization took control of the American and then the world economy. In full charge by 2005 the new masters almost at once pushed things too far and created the largest recession since the Great Depression. Flimflam-financialization tightened its control. Politicians and their masters, economists, and members of Congress passed law after law and entered into multiple international agreements to ensure the continuation of flimflam financialization. To the point that now few can even see the possibility of any other options. But the scariest part is that when world capitalism collapses few if any will have any notion about how to respond to rebuild the world’s economy. That collapse is near – 25 years or sooner. Democratic socialism or fascism? What will be the new path?

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