The Golden Rule of Capital

He who has the gold makes the rule.
— Old banker’s saying

The New Imperialism took a little more than a month to conceive and write, but it’s informed by more than 30 years of experience from one of the world’s leading social theorists. The author, David Harvey, has written such landmark studies as The Limits to Capital (1982) and The Condition of Postmodernity (1989), and he has taught at Oxford, Johns Hopkins University and now City University of New York. In this timely and important book, Harvey, an unrepentant historical materialist (read Marxist), analyzes recent actions of the Bush Administration. He does this in light of a larger chain of events, stretching back to the transformation of the global political and economic order in the early 1970s. That’s when policies of and profits from the high-output model of mass industrialism, what Harvey terms “accumulation by expanded reproduction,” began to be replaced by those of brute financial power, speculation and even fraud, what he calls “accumulation by dispossession.”

To bring all of this down to earth, Harvey starts by looking at what role oil may have played in the US decision to unilaterally invade Iraq. Many opponents of the war cite the close ties of President George W. Bush and Vice President Dick Cheney to the oil industry, but the financial advantages that might accrue to these vested interests in and of themselves can’t account for recent American foreign policy. The United States, the English-born Harvey notes, has long sought to control the flow of oil from the Middle East as a way to maintain political and economic superiority. The military occupation of Iraq is only the latest if most overt phase of that strategy.

To see the broader currents, one must first understand something of how the world political and economic system works, especially as it pertains to the United States. That’s a story Harvey is exceedingly qualified to tell. And one of the most admirable things about The New Imperialism is how clearly and succinctly its author musters concepts and facts to support his argument, moving with ease between political economy, social geography and world history.

A significant factor in the rise of the United States to global dominance was its ability for many years to internally resolve conflict between political and economic power, primarily through westward expansion, technological innovation and a robust consumer marketplace, all of which created vast accumulations of wealth. Also, the fact that there was no feudal aristocratic class in America allowed government and business to be more closely aligned than was the case in Europe. After the Second World War, the United States became the champion of the bourgeois order around the globe. In the 1950s and 1960s, it was still able to absorb tremendous amounts of capital through investments in suburbanization, interstate highways, education and the development of the southern and western regions of the country.

Things began to change in the early 1970s. The rising costs of Vietnam and the failure to curb domestic spending combined to create fiscal crisis. The nation’s collective denial was compounded by printing unsecured paper money to cover government deficits, sending inflation soaring. The economies of the Japanese and the Germans threatened and in some sectors overtook America as the leading producer. Conventional Iraq-is-about-oil wisdom has it that the 1973 Arab oil embargo was another watershed event. Cooked up, it turns out, by Richard Nixon in collusion with Iran and Saudi Arabia, it actually did more harm to Japan and Europe, which at the time depended more heavily on Middle-Eastern oil than did the United States.

To counter threats to its productive power, America flexed its financial muscle. It began with control of petrodollars by American banks, but expanded over time through trade agreements, underwritten by loans from the International Monetary Fund and World Trade Organization, and other policies that have come to be known as neoliberalism. Internally, the balance of power shifted from the capacity to produce to the capacity to invest and otherwise control the movement of capital. At the same time, advancements in the organization of production and the growth of information technology set the stage for the outsourced, downsized and contingent workplaces of today’s postindustrial global economy.

But even all of this appears not to have been enough. With Europe forming an economic union of combined strength equal to the United States, and China fast becoming the mother of all domestic markets (with the will and the capacity to absorb unprecedented levels of capital), America’s ability to maintain center stage has again been put to the test. Thus, Harvey maintains, the New Imperialism represents the resort to America’s last source of undisputed supremacy, its military power. Taking military control of the world’s oil resources is an extremely risky gambit to ensure continued US dominance in the global arena.

However, considerable forces are arrayed against the New Imperialist vision of manifest destiny. One is the alliance that seems to be forming between Germany, France, Russia and China as America’s intentions become increasingly clear. (According to Harvey, an important benefit of the Iraq occupation for the United States is that it establishes a geographic foothold between Europe and Asia, and one presumes that leaders on the two continents read maps and have also taken notice.) Another is the reaction among Arabs and the rest of the Islamic world to further U.S. military intervention. A third is the growing resistance to accumulation by dispossession through the worldwide alternative globalization movement, as witnessed in the mass demonstrations of Feb. 15, 2003, and the recent election of L.I. Lula de Silva as president of Brazil.

Perhaps most critical is the logic of capital itself. Harvey estimates the cost of the war to be at least $200 billion. Then there are the past debts and additional claims against Iraq that amount to another $300 billion. With little option (at a time of economic stagnation, high unemployment and gigantic tax cuts) but to go heavily into the red to finance the war, the US position is further eroded by the fact that over a third of government obligations and approximately 20 percent of corporate debt are owned by foreign interests. This leaves the New Imperialism vulnerable to internal and external correction.

In the face of an apparent economic suicide, Harvey offers the possibility of a “new New Deal” that would reformulate state power along more redistributive lines both at home and abroad. One might justifiably look askance at the prospects that free-market fundamentalists would even begrudgingly embrace an activist welfare state. Perhaps it’s more reasonable to think that the New Imperialism may well collapse of its own weight. Whatever the outcome, it appears we’re in for a rough ride.