Socialist Worker

Twilight of the American century?

The credit crunch may have weakened the US, but it is still the global superpower, argues Chris Bambery

Issue No. 2122

On 7 February 1941 an editorial entitled “The American Century” appeared in Life Magazine signed by its founder and publisher, Henry Luce. It argued that the US had missed its chance at the end of the First World War to mould the world around its economic and social model.

But now a new world war had broken out – and the US had been presented with a renewed opportunity that it could not let slip through its hands again.

Luce wrote, “We must accept wholeheartedly our duty and our opportunity as the most powerful and vital nation in the world and in consequence to exert upon the world the full impact of our influence, for such purposes as we see fit and by such means as we see fit.”

He added that “in any sort of partnership with the British Empire, America should assume the role of senior partner”.

The editorial’s call fell on receptive ears in US ruling circles and beyond. It was reprinted in publications ranging from the highbrow Washington Post to the mass market Reader’s Digest.

Yet today many are wondering whether the American Century has had its day. US economic power has been declining for decades. Its military resources are bogged down in the occupations of Iraq and Afghanistan. And now the credit crunch threatens to smash its global financial clout.

But how did the US clamber up to its position of global dominance in the first place? The myth is that its rise was a triumph for the free market. But in fact the US state intervened repeatedly to ensure its economic and financial dominance.

The US’s rise to become the greatest industrial power in the world followed its civil war that ended in 1865. The industrial Northern states incorporated the largely agricultural South, whose slave-based economy had produced cotton for Britain’s textile mills.

Within 15 years of the North’s victory the US had overtaken Britain in industrial production. By 1913 the US share of world manufacturing was 32 percent.

But it was the First World War that triggered its rise to become a global financial power. Prior to that war the US had been a debtor nation, borrowing more from European powers than it invested abroad.

During the war France and Britain had to sell their US securities to finance their debts, while Germany lost its foreign holdings altogether and had to pay crippling reparations. Both victors and vanquished ended up taking out American loans.

The international economic recovery of the mid-1920s was based on countries importing US goods and borrowing dollars. The nation’s share of global industrial production had reached

40 percent by 1929, when the Wall Street Crash ushered in the Great Depression of the 1930s.

This depression was largely caused by US banks demanding an immediate return of their German loans and the US government’s rush to protect its domestic market by erecting import controls to safeguard its agriculture and industry.

Oil dominance

Many of the import controls were aimed at Britain, which found its dominance of Middle Eastern oil being challenged by the US. Yet by 1938 the German trade threat meant it had replaced Britain as the biggest perceived threat to the US.

That year saw US president Franklin Delano Roosevelt sign the Naval Expansion Bill. It was the largest peacetime military expenditure in US history and ensured that the the country outspent all its rivals in the naval arms race.

For the US ruling class, the Second World War was not about defeating fascism but rather a conflict between rival imperialisms. In effect it was a conflict as much among the eventually victorious Allies as between them and the Axis powers.

The exiled Russian revolutionary, Leon Trotsky saw this coming as early as 1934. “US capitalism is up against the same problems that pushed Germany in 1914 on the path of war,” he warned. “The world is divided? It must be redivided. For Germany it was a question of ‘organising Europe’. The US must ‘organise’ the world. History is bringing humanity face to face with the volcanic eruption of American imperialism.”

As late as 1939 the US lay at number 19 in the league table of military power – behind Portugal. But between then and its entry into the war in late 1941, the US increased its armed forces eightfold to 1.5 million.

After France fell to Hitler in June 1940, Roosevelt asked Congress for a

$1 billion increase in military spending (the equivalent of $12 billion today). They agreed $1.5 billion. Over the coming months they would agree to spend another $6.5 billion on military spending.

The Second World War would see the US finally eclipse Britain as the major imperialist power. It would lay the basis for economic and political arrangements which dominated the following half century.

During the course of the war US gross national production surged from $91 billion to $166 billion. Industrial output doubled. Its output of machine tools trebled. General Motors supplied one tenth of US war production and hired 750,000 new workers. The Ford motor company produced more military equipment than Italy.

Roosevelt and his cabinet were explicit about their plans to safeguard and capture foreign markets. His vice-president Henry Wallace boasted that “the American businessman of tomorrow” would understand that “the new frontier extends from Minneapolis all the way to Central Asia”.

Under its “open door” policy, the US wanted to break into the other imperialists’ colonial markets, smash protectionist barriers and establish their control of the world capitalist system.

No other power could spare the resources which the US could deploy. The Manhattan Project, which developed the atomic bomb, employed 120,000 people based in 37 installations spread across 19 different states. In order to build the bomb in just three years the Federal government spent $2 billion – the equivalent of $24 billion in today’s money.

The British war effort and economy relied on US imports and loans. The price it would have to pay was the dismantling of its empire. The British ruling class also had to accept the package agreed at the Bretton Woods conference in 1944, which pegged Western currencies to the US dollar, instituted free trade and founded the International Monetary Fund and the World Bank.

War-torn Europe and Asia were starving and would require US food aid. The US also provided the Marshall Programme – loans and grants to those countries to rebuild their economies.

General George Marshall was president Harry Truman’s secretary of state. He made very clear that the programme’s benefits would “come to an abrupt end in any country that votes Communism to power”.

One longstanding US objective was control of Middle Eastern oil. The US did not rely on these supplies, but Europe did. After difficult negotiations the British were forced to cede control of Saudi Arabia.

It signed a treaty giving the US effective control of Saudi Arabian oilfields, granting the Americans rights to a huge military base at Dhahran on the Persian Gulf – at the heart of a massive oil field. The Saudi king was awarded major loans and US arms.

To back up its economic clout with military muscle, the US built military alliances spanning the globe. The most important of these alliances, the North Atlantic Treaty Organisation (Nato) was founded in 1949 and served to involve the US permanently in European affairs.

George Kennan, the US state department’s architect of policy of “containing” Communism, nevertheless ridiculed Nato as a “military defence against an attack no one is planning”. He added that Nato “added depth and recalcitrance to the division of the continent and virtually forced individual countries to choose sides”.

The Cold War was used to force states across the globe into accepting an “alliance” with the US – in reality, dependence. On the domestic front Senator Joseph McCarthy led a witch-hunt against communists and left wingers that broke any radical challenge to the new post-war order.

Yet the limits of US power were also becoming apparent. In 1949 the US hopes of dominating China were dashed when the Communist Party took power. In 1950 the US was drawn into a conventional war with China in Korea that ended in a costly stalemate.

The US was still able to intervene openly across the Third World, but even this was severely curtailed by its ­disastrous defeat in Vietnam. The cost of that war meant a huge US budget deficit. The dollar suffered a severe erosion of its financial power. Above all, the US began to face important economic competitors in Japan and Germany.

This ushered in a long era of US decline. In 1945 the US accounted for 50 percent of the world’s gross domestic product (GDP). Today the figure is down to 25 percent.

The history of the last three decades has been one of the US attempting to regain to its pre-Vietnam power through a series of foreign wars, often camouflaged as “humanitarian” interventions. The “war on terror” is just the latest in a series of attempts by the US to exploit its military strength to boost its flagging economic power.

This decline needs to be put into context. The US is still the biggest ­industrial power in the world, far ahead of China. Chinese imports account for just 3 percent of the US’s GDP, while Chinese exports to the US account for 10 percent of China’s GDP. There is still an unequal relationship between the two.


Some 40 percent of the world’s spending on research and development is controlled by just 100 multinationals – the bulk of whom are based in the US.

The three biggest pharmaceutical companies, (Pfizer, Johnson & Johnson and Glaxo Smith Klein), two of the four biggest car producers (Ford and General Motors) and the biggest computer software company (Microsoft) are all based in the US.

Above all, the US government accounts for 50 percent of world arms spending. The US used the politics of fear to consolidate its control of the “free world” during the Cold War period. The “war on terror” plays the same role today, with Islam replacing Communism as the ideological target.

When the former Soviet Union collapsed in 1991 there was much talk of how we were living in a “unipolar world” with the US as the sole global power.

Yet that is not how things have panned out. China is perceived as a key rival to the US and the war between Russia and Georgia has seen Russia renew its imperial ambitions in its backyard.

The current economic crisis demonstrates the weakness of the US economy. But it controls key military, financial and economic assets – and it will deploy them to assert its global position. Judging from the record so far of “the American Century”, we know that this will come at the expense of the rest of the world and of the vast bulk of the US’s own population.

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Tue 7 Oct 2008, 18:07 BST
Issue No. 2122
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