This is the text of a presentation made at the VI International Political Economy Congress (IPEC-2022) of the Moscow Academic Economic Forum (MAEF) held on May 16-18, 2022.
The world has entered a new era. The unprecedented challenges of the post 2008 ongoing global economic crisis, of the global pandemic shock, and the escalating geopolitical tensions now exploding in Ukraine reconfigure the world scene. The spiraling global crisis of capitalism led to extraordinary “heterodox” economic measures by central banks and governments, to trade wars and even to weaponization of finance and money without success. On the contrary, with every new leap of the crisis, catastrophe on top of catastrophe led humanity at the brink of the abyss. In this context, recently its was relaunched by Janet Yellen the idea for a new, Bretton Woods II international settlement adapted to the current US needs in the new world conditions of a capital globalization in terminal crisis. But is it feasible such a US hegemonic world project in the third decade of the 21st century?
A totally new era
Henry Kissinger, the notorious former US Secretary of State and National Security Adviser, in an interview on May 7, 2022 in Washington with Edward Luce, Financial Times US national editor, commenting on the war in Ukraine, stressed: “We are living in a totally new era”.
In a diplomatic but clear way, he also criticized the “crossing of a red line” by the US/NATO policies of eastward expansion “because Russia was threatened by the absorption of this whole area into NATO1”. Keeping his imperialist hostility to Russia, Kissinger, nevertheless, repeated in 2022 the same “realist” warning for a NATO provoked war with Russia that he had made eight years ago, in 2014, in an article following the Maidan events and the US sponsored coup by pro-Western liberal and neo-|Nazi forces to overthrow Yanukovitch and establish a right wing pro-imperialist puppet regime in Kiev.
The “totally new era”, recognized even by such high political representatives of the US establishment comes as the culmination of a long protracted process marked by the collapse of the Soviet Union in 1991, and later by the implosion of finance capital globalization with the Lehman Brothers debacle in 2008 followed by the world finance meltdown and the Great Recession.
The unprecedented challenges of the post 2008 on-going global economic crisis, exacerbated by the global pandemic shock in 2020, and the escalating geopolitical tensions exploding in 2022 in Ukraine are radically re-configuring the world socioeconomic and geopolitical scene of clashing social forces and States.
In this context, Janet Yellen, Treasury Secretary in the Biden Administration, in her speech to the Atlantic Council early April 2022, a week ahead of the spring meetings of the IMF and the World Bank. strongly supported the idea, discussed, and becoming more and more attractive, among Western ruling circles and mainstream think tanks for a new, Bretton Woods- type international settlement to overcome the chaotic collapsing international liberal capitalist order, and adapted to the urgent new US needs in these changing world conditions.
The name “Bretton Woods II” is borrowed by the international agreements for the post war world order established in 1944 under the dominance of the US, when World War II was ending. But similarities are limited to the name and the wishful thinking of US for a “renaissance” of their declining world hegemony. If the 1944 Bretton Woods settlement came at the end of World War II in preparation for a post-war Pax Americana, the project of a “Bretton Woods II”, as it was presented by Yellen in 2022, serves the needs of the imperialist drive towards the Armageddon of a World War III.
Differences and failures
Then, at the end of World War II, America has risen as the indisputable global hegemonic power of the capitalist world, in economic, political and military strength, replacing British world hegemony - a fact already foreshadowed at the end of World War I. It became the center of the rebuilding of capitalism in ruined Europe and Japan and of a the so-called “Thirty Glorious Years” of a protracted post war-boom in the advanced capitalist countries, as the basis of the Cold War against the Soviet Union, of imperialism’s campaign against communism as well as against the national liberation movements of the oppressed peoples.
Now, America in relative decline and hegemonic by default, marked by the historic defeat in Vietnam in 1975 and the chaotic debacle in Afghanistan in 2021, has became the center of the protracted, unresolved, structural, systemic crisis of global capitalism, a social system in historic decline.
Then, at the end and the first decades after the world war, America had a share more than 60 per cent of the global GDP. Now, its share is about 20 per cent, ad it is superseded by China.
Then, in the Bretton Woods Conference, in 1944, the US had the two thirds of the world gold reserves. This fact permitted for some decades to establish the fixed convertibility of the US dollar to gold and a dollar-centered international monetary system, in conditions where it was economically and politically impossible to return to the gold standard, which dominated during the ascending stage of capitalism and had irrevocably collapsed in the 1929 Crash leading to the Great Depression and World War II. This was the cornerstone of the entire Bretton Woods Keynesian edifice.
In 1971, when the Bretton Woods Settlement collapsed with the Nixon measures ending the fixed dollar-gold convertibility, the US gold reserves had shrunk from the initial two thirds to one third of global gold reserves. Inflationary pressures became uncontrollable, followed by the stagflation of the 1970s, accompanied by an international wave of revolutionary upheavals world-wide. Keynesianism as an economic strategy to avoid a return of the 1930s and stabilize the system had collapsed.
Now, not only Keynesianism had failed but also neo-liberalism, the ideological axis of fiance capital globalization, which from the 1980s dominated as the alternative, anti-Keynesian, economic strategy for an exit from crisis has irrevocably failed, as the 2008 financial crash and the still unresolved but dramatically worsening global crisis demonstrate. Today, even mainstream discourse and mass media, from the head of BlackRock Lawrence Frank to Financial Times, speak about a “post-neoliberal era” and for “an end of globalization”.
In the post-2008 protracted crisis the much celebrated by neoliberalism “invisible hand of the market” proved to be paralyzed, totally unable to control and regulate the economic chaos and its political explosive effects. “Extraordinary”, “heterodox” measures were introduced by central banks and government strengthening again the economic role and intervention by the State, both after the 2008 world financial meltdown as well after the 2020 global pandemic shock. But these central interventions failed already before and after the pandemic, as well as before the war in Ukraine.
New nightmares accompany the combined failures of “free market” and of State interventions: a return of hyperinflation, after decades, combined with an irresistible fall to depression, a world economic situation far worst than the “stagflation” of the 1970s.
Furthermore, the failure of the State, even the apparently strongest in the world as the US, manifests a deeper structural crisis of the State, driving it into war abroad and class war at home. A war economy is already under the way to be built, particularly in Europe and America. Its targets are the “strategic antagonists”, China and Russia, and all countries that refuse to follow the orders of the High Command of imperialism. But at the same time, the huge costs of this war economy, and its devastating impact on a world economy shattered by the “perfect storm” of depression, hyperinflation and a pandemic, have to payed by the popular masses in the “core” capitalist countries. As Mario Draghi, speaking on the energy crisis, cynically said the “choice” of the populations of the European Union is between having “peace or air-conditioning”!!
Under these world historical conditions, what kind of a Bretton Woods II could be possible?
What kind of “Bretton Woods II” is prepared?
The project of a “Bretton Woods II”, as it was presented by Janet Yellen in her April 2022 speech in the Atlantic Council, has much to do with the building of an international war economy against Russia now, and against China next, rather than to outline a new international order of peace. The Pax Americana II has to be re-established on new imperial terms or a “new rules-based order”, according to Washington’s official parlance, by a Bellum Americanum Universalis.
We should keep in mind that Janet Yellen and Mario Draghi are the co-authors of the sanctions against Russia, the weaponization of international finance and money. Sanctions try to isolate Russia( and every country associated to it) by a decoupling from the international financial system and a US dollar-centered international monetary system. Indirectly, the architects of the sanctions recognize the irreversible character of the interconnectedness of the world economy, of its globalization as it is established by the world expansion of capital.
To paraphrase Marc Twain, the announcement of the death of globalization proves to be quite premature. “Deglobalization, as we have argued on another occasion2, is, as a matter of fact, capital globalization in crisis. Despite the Covid-19 pandemic and the disruption of global supply chains, “global trade hit a record$28.5 trillion, up 24% year-on-year and 13% higher than in 2019, before the pandemic struck. For all the talk of decoupling, US-China trade swelled more than 20% last year to $687.2 billion.[…] Cross border investment also surpassed pre- pandemic levels last year, swelling to $1.65 trillion” 3
US/NATO led sanctions against Russia did not kill globalization. They try to use it. They are a perverse kind of weaponization of finance capital globalization. The US dominance in global financial markets and of US dollar as the biggest world reserve currency turn into tools of blackmail and extortion on other nation States, into weapons of mass destruction of entire economies, of living conditions and lives of millions of people.
“Free trade” is renamed by Janet Yellen “free and secure trade”, that is, the global value and supply chains are subordinated and under the military-political control of US imperialism, of its allies, of their military bases all over the world.
The “out-shoring of capital” in the previous four decades of capitalist globalization, and its opposite, nationalist “re-shoring” back to its national original base, as it was preached by Donald Trump, are replaced by Yellen now with the “friend-shoring” of capital according to the geopolitical needs of US imperialism.
The distinction between “friend and foe”, which according to Carl Schmitt was the definition of the Political, now it becomes again, in international relations and flows of capital, the basis of Geopolitics and Geo-economics.
“Bretton Woods II” and the Global South
The Bretton Woods settlement in 1944 was armed soon with two crucial institutions, the International Monetary Fund and the World Bank, still in action up to now. In her speech on April 6, 2022, ahead of the IMF-World Bank spring meetings, Janet Yellen has not forgotten to complement her upside down version of a Bretton Woods II, by stressing the important new role that the IMF and the World Bank have to play, in the new world conditions. She focused especially in the plight of the “emerging” and poor countries of the Global South, facing starvation under the impact of the worsening energy and food crisis following the war in Ukraine.
The reference by the US Treasury secretary on starvation in relation to the role of the IMF-World Bank is a monument of cynicism and hypocrisy.
It is already generally acknowledged that in front of a world economy trapped between the Scylla of inflation and the Charybdis of depression, central banks, starting from the US Federal Reserve Bank will tighten monetary policy, and raising the interest rates. This U-turn in liquidity is exacerbating the sovereign and corporate crisis of indebtedness making the accumulated debts unsustainable and bringing a cataclysm of defaults.
“Right now”, the well known economic historian Adam Tooze wrote in Foreign Policy, “ the World Bank is warning that the number of countries at imminent risk of debt distress has risen to 35 and as many as 12 countries may be unable to make debt payments by the end of the year[..] The vast majority of the wold’s population live in middle -income countries, and several of these countries have been in distress as well. Argentina, Lebanon, Venezuela, Zambia, and Ecuador have already defaulted. Pakistan is living from IMF program to IMF program[…] Meanwhile, Sri Lanka is already at the point of no return.” 4
It is precisely the example of the revolutionary popular explosion in Sri Lanka, its contagion in the Indian subcontinent and the prospect to be followed in other countries in Asia, the Middle East, Africa and Latin America spreads the worst fears to the ruling classes and their governments, including the Biden Administration ans its Treasury secretary.
From his vantage point, Adam Tooze focus on the impact that this dollar-centered system has on the gigantic debt crisis, particularly in the Global South: “The existing dollar system”, Tooze remarks, “is a ramshackle improvisation that provides generous support to an inner core, while a large part of the world’s population is left to ride the terrifying roller-coaster of the global credit cycle”. 5
Kristallina Georgierva, the head of the IMF, speaking in the 2022 Spring meeting, advised the European Union governments to not introduce again “austerity” measures” like those during the euro-zone crisis in the 2010s that had provoked the rebellions in Greece and Spain. But not similar guideline was given to the IMF in relation to the countries of the Global South under “debt distress”. From Tunisia and Egypt, and Kenya to Pakistan, Sri Lanka or Argentina, the IMF demands new draconian measures of starvation and social cannibalism. The vast majority of humanity living in the Global South have to be condemned to take the crashing burden of the global crisis and the new war economy.
But this time, the oppressed and over-exploited popular masses of the Global South are not alone as at the first period of the post World War II Bretton Woods when Keynesian concessions were made to the workers in the booming economies of the US, Western Europe and Japan. As the global crisis hits also the advanced capitalist countries, producing a vast downtrodden “periphery” within the “core” of global capitalism, mass upheavals and revolutionary explosions are globalized as well. The “wretched of the earth’ in the Global South and in the Global North have and will join forces against a bankrupt world social system leading to nuclear Armageddon and annihilation.
From the Empire of the Dollar to the Realm of Freedom
The US weaponization of finance and money is based on the past historical development of US economical, political and military strength as a world hegemonic power at the highest and last stage of capitalism, world imperialism. In the actual historic decline of US and global capitalism, US led financial-economic warfare is based above all on American undisputed dominance in global financial markets and of the supremacy of the US dollar as global reserve currency in international transactions. According to the IMF, in the last quarter of 2021, US dollars represented 54,78% of the world’s total foreign exchange reserves, much above the euro, the Japanese yen, the English pound, the Chines renminbi, the Canadian dollar, the Australian dollar and the Swiss franc.
But despite all its supremacy, the Supreme Ruler in this US centered financial-monetary monarchy, the King Dollar is naked. It was naked already long ago, from 1971 when it has lost its fixed convertibility to gold, the cornerstone of the Bretton Woods edifice. Afterwards, as a fiat currency among the floating currency exchange rates kept its leading position thanks to the relative greater strength of the American economy in relation to the other economies. But following the decline of the US productivity and industry, “the remaining foundation-and thus the Achilles’ heel [our emphasis] - of US hegemony is the role of the dollar as the reserve currency on the international goods and financial markets”, writes Marc Saxer, head of the Asian department of the Friedrich-Ebert-Stiffung, the German social democracy’s foundation and think tank. 6
A similar view has been expressed by José Miguel Alonso Trabanco, in Geopolticla Monitor: “Therefore the dollar is paradoxically a formidable pillar of US national strength, but also an Achilles’s heel whose downfall would unravel the unipolarity coveted by the US Leviathan in the post-Cold war period.” 7
Sanctions, particularly the “freezing”/ theft of the Russian foreign exchange reserves abroad, compounded the problem by further undermining the credibility of the US dollar as foreign exchange reserve. In conditions of generalized political instability and uncertainty in international relations, many central banks and governments turn towards currency diversification.
Even a research group of the IMF, headed by the well respected economist and economic historian Barry Eichengreen, has studied the problem and produced, in March 2022, a lengthy interesting document on The Stealth Erosion of Dollar Dominance.8
‘Diversifiers”, non-traditional reserve currencies, alternative international monetary systems, various attempts of “de-dollarisation” are on the order of the day. Various steps will be taken and transitional monetary forms could be emerged. But the problem cannot be resolved without going to its deeper hidden source. This is one of the main lessons from the failure both of “orthodox” and “heterodox” monetary policies introduced after 2008 and 2020 to deal with the global crisis making it each time worst.
Marx, in Capital, discovered and revealed the source of the problem. It is located in the inner split of alienated social labor in capitalism, in its twofold character of concrete and abstract labor producing respectively the use value and value of the commodity. Money is a form of appearance of value, which has as substance abstract labor. “...the progressive development of a society of commodity-producers” Marx writes, “stamps one privilege commodity with the character of money. Hence the riddle presented by money is but the riddle presented by commodities; only now it strikes us in its most glaring form”.9
The fetish character of the commodity develops, as Marx showed into the fetishism of money and then into fetishism of capital, reaching its highest form in the fetishism of fictitious capital,”the absolute fetish”, money generating money in the skies of financial speculation, hiding its source in production. “Fetishism of commodities”, Marx writes, “has its origin in the peculiar social character of the labor that produces them.”.10
The riddle of the US dollar as symbol of money, the US dollar fetishism of universal equivalent, is fetishism of the money in its highest point of historical development in an epoch where finance capital globalization brings the absolute fetish into its world domination- and to its historical limits.
To really defeat it means to change radically the social character of social labor itself, to emancipate it from capitalist exploitation and alienation.
The Exodus from the Pharaonic Empire of capital in decay, which threatens to bury humanity under its ruins is both necessary and possible: our historical goal has to be universal human emancipation, world communism, the end of alienation in all its forms, the revolutionary transition to the realm of freedom.
Athens, May 10-15, 2022
Moscow May 18, 2022
1-“We are now living in a totally new era”- Henry Kissinger, Financial Times May 9, 2022
2-Savvas Michael-Matsas, Deglobalization or Capital Globalization in Crisis? IV Russian Social Forum(RSF-2022), May 1-4, 2022
3-Wang Huiyao, Globalization Isn’t Dead, It’s Just Not American Anymore, May 7, 2022, https://www.bloomberg.com/opinion/articles/2022-05-07/u-s-china-cold-war-hasn-t-killed-globalization-yet