Michael Hudson's "Super Imperialism: The Economic Strategy of American Empire"
 
First written in 1972, it was updated in a 2003 edition that's every bit as relevant now - thus this review focusing on Hudson's new preface, introduction, and detailed account of the book's theme.

He revisited it in his 2008-09 Project Censored award- winning article titled: "Economic Meltdown - The 'Dollar Glut' is What Finances America's Global Military Build-up" in which he explains the following - the "inter-related dynamics" of:

In softer form, it's what former US diplomat, advisor, father of Soviet containment, and dove compared to others at that time George Kennan believed should be America's post-WW II foreign policy. In his February 1948 "Memo PPS23, he stated:

Yet Kennan advocated diplomacy over force in contrast to Paul Nitze, Dean Atcheson and other Truman and succeeding administration officials favoring hardline militarism, future wars, and National Security Council Report 68 (NSC-68) policies to contain the Soviet Union. In 1962, nuclear disaster nearly resulted. The threat remains, more menacingly than ever by "forc(ing) foreign central banks to bear the costs of America's expanding military empire" through recycling their dollars into US Treasuries - something the mass media call "showing their faith in US economic strength."

Hudson refers to a "sinister dynamic," not involving consumers or private investors, but central banks putting "their money" in US Treasuries, but "it is not 'their money' at all. They are sending back the dollars that foreign exporters and other recipients turn over to their central banks for domestic currency."

"When the US payment deficit pumps dollars into foreign economies, these banks (have) little option except to buy US Treasury bills and bonds which the Treasury spends on financing an enormous, hostile military build-up to encircle (today's) major dollar-recyclers China, Japan and Arab OPEC oil producers" - essentially a process by which they finance their own endangerment. 

Up to now it's continued, but, given the reckless dollar glut in recent months, with less enthusiasm by bigger buyers and hints of a possible end game or at least less buying than previously - mostly among BRIC (Brazil, Russia, India and China) and OPEC countries but other emerging economies as well getting more interdependent on themselves than on America.

In his 2002 preface, Hudson noted that "the US Treasury (pursued the same balance-of-payment)  'benign neglect' (strategy as) it did thirty years" earlier. In 1971, it "caused a global crisis when its $10 billion (level) led to a 10 per cent dollar devaluation." Now it's hundreds of billions annually and still high during the current economic crisis when exports and imports are lower.

Earlier and especially now, if Europe and Asia let the dollar deflate, their exporters will be disadvantaged at a time they can least afford it. So they're forced to "support the dollar's exchange rate by recycling their surplus dollars back to the United States" by buying US Treasuries.

Sooner or later, it's a losing proposition, especially in today's climate with the Federal Reserve sacrificing dollar strength to bail out Wall Street and trying to keep long rates low to contain borrowing costs. Yet the greater the dollar erosion, the more losses foreign investors will incur and less likely they'll tolerate more by  buying bad assets.

So far, however, they're still recycling their dollar inflows to fund America's budget deficit and global militarism - something Hudson calls a "Free Lunch in the form of compulsory foreign loans to finance US Government policy."

Even so, they have no say over US policies, yet America and international lending agencies, like the IMF and World Bank, "use their dollar claims" on indebted nations to enforce Washington Consensus diktats. Independent-minded states face sanctions, isolation, coups or wars if they refuse.

Until Nixon closed the gold window in August 1971, America couldn't run unlimited balance-of-payments deficits. However without gold convertibility, it's continued for nearly 40 years along with protectionist policies through generous subsidies to US exporters - most notably to agribusiness. As a result, Hudson sees international tensions growing for the next generation, perhaps even greater now given America's reckless monetarism and perpetual wars.

His book "provid(es) the background for US - European and US - Asian financial relations by explaining how (post-1971) the US Treasury-bill standard came to provide America with a Free Lunch." Also how the IMF promoted debtor nations' capital flight and the World Bank supported "foreign trade dependency on US farm exports...."

The early 1970s dollar crisis and balance-of-payments deficits seem small compared to today. Yet the  "Treasury-bill standard (frees) the US economy from (doing) what American diplomats (force on) other debtor nations (with) payments deficits: impose austerity to restore balance in its international payments. The United States alone has been free to pursue domestic expansion and foreign diplomacy with hardly a worry about the balance-of-payment consequences." No other nation has that luxury.

Post-WW II, Washington made other countries dependent on America, something it eschewed after WW I, staying isolationist instead to pursue internal development. 

In the 1970s, emerging nations proposed a New International Economic Order (NIEO) through the UN Conference on Trade and Development to promote their own trade and other concerns. It "originated as a response to America's aggressive world economic diplomacy, and how US strategy has provided other nations with a learning curve that they may follow in pressing their own national and regional interests." 

The more reckless and belligerent America becomes, the more incentive they have to try - and in greater alliance, with BRIC country partners, may have a greater chance for success.

Introduction

Post-WW II, on the pretext of national security, America pursued "world power....and economic advantage as perceived by American strategists quite apart from the profit motive of private investors."

After WW I, it achieved world creditor status from its "unprecedented terms (in extending) armaments and reconstruction loans to its wartime allies." In 1917, it entered the war late when it felt staying out would "entail at least an interim economic collapse (the result of) American bankers and exporters (getting) stuck with uncollectible loans to Britain and allies." So it joined the Triple Entente as an associate, not a full partner, to protect its $12 billion investment.

Post-war, America was the world's major creditor - but one "to foreign governments with which it felt little brotherhood" and no obligation to stabilize world finance and trade. Unlike its post-WW II policy, it didn't extend loans to foreign countries so they could finance their US-owed debt. Nor did it open its markets to foreign imports. It wanted Europe's empires dissolved, their military spending cut, their wealth "to flow out and their prices to fall" - the idea being in this way to re-establish world payments equilibrium, a very unrealistic notion, but many leading Europeans embraced it. It didn't work and made repayment of foreign debts impossible.

The "world economy emerged from World War I shackled with debts far beyond its ability to pay," except by "borrow(ing) funds from private lenders in the creditor nation to pay the creditor-nation government."

A more enlightened policy would have turned "other countries into (US) economic satellites." But America eschewed European imports, and US investors preferred its own outperforming stock market. On trade and finance, US policies "impelled European countries to withdraw from the world economy and turn within."

America's isolationism prevented it from collecting its foreign debts. "Its status as world creditor proved ultimately worthless as the world broke into nationalist units," and sought independence from foreign trade and payments.

Washington pursued isolationism, thus prompting other nations to seek self-sufficiency. A bankrupt Britain convened the 1932 Ottawa Conference "to establish a system of Commonwealth tariff preferences." By the mid-1930s, Germany began preparing for war. At the same time, the Depression affected one country after another as private capital dried up while at the same time Britain and other nations had mounting debt problems. It begs the question as to why they let them get so onerous in the first place.

American Plans for a Post-WW II "Free-Trade Imperialism"

Early in the war, US officials and economists knew America would prevail and emerge as the world's dominant power. However, transitioning from war to peace needed large export volumes to stimulate economic growth and full employment. "This in turn required that foreign countries be able to earn or borrow dollars to pay" for what they got. So America supplied them through government loans and private investment. 

In return, it "name(d) the terms on which" they were provided and structured the IMF and World Bank so countries could "pursue laissez faire policies by insuring adequate resources to finance the international payments imbalances," the result of opening their markets to US imports. It was thought that free trade and investment would result in "balanced international trade and payments....under US leadership."

Post-war, America was the only dominant nation intact, so it alone had enough foreign exchange to invest substantially abroad. Its commercial strength turned other economies into US satellites and assured America achieved maximum world power by:

At first, the enlightened solution wasn't taken - extended foreign aid for rebalancing as Congress put internal interests ahead of foreign policy.

The Cold War Pushes America's Balance-of-Payments into Deficit

Cold War strategy gave Congress an anti-communist reason to "bribe foreign governments" to fight the red menace as well as open their markets to US exporters. It got the Marshall Plan and other aid agreed on to "keep its fellow capitalist countries solvent" and not tempted to turn left. The possibility continued foreign aid for several decades.

At the same time, America's balance-of-payments reached never before attained levels and needed rebalancing "to promote foreign export markets and world currency stability." To buy US products and services, other countries needed resources to pay for them, something only Washington could arrange at a time when they weren't creditworthy.

However, what worked early on became destabilizing as America began "sink(ing) into the mire that had bankrupted every European power that experimented with colonialism." Unlike foreign investors that cut their losses when necessary, national security interests (and industries profiting from them) trump other considerations even when counterproductive. Once begun, military spending takes on a life of its own - something very apparent given its current out-of-control level and growing.