Pride, power and exorbitant privilege: There’s more to US decline than loss of face

Jan 29, 2023
United States and Russia sanctions. Governments conflict concept.

It is not just pride which motivates the US elite’s fear of China and of multipolarity. Their ‘exorbitant privilege’ rests on power conferred by hegemony. The struggle of Australia, and countries around the world, to reclaim sovereignty in resistance to that power will be difficult because so much hinges on it.

Mike Gilligan incisively and authoritatively eviscerates Australia’s subservience to the US in relation to China, its ceding of sovereignty, and the consequences thereof. However he treats much too lightly what’s in it for America when he writes, ‘America’s territory is not threatened by China. Its pride is. America is picking a fight to preserve its global domination as it sees it’.

Pride there certainly is, and arrogance and hubris. The American empire is the greatest the world has ever seen and its reach and power is enormous.

However there are deeper currents within the river of world events. For American hegemony the struggle is existential, and without hegemony the United States will be much diminished and poorer; it will have to live within its means rather than drawing sustenance from its empire.

Hegemonic power has various dimensions – political, military, ideational, economic and financial. The US is being challenged, indeed is faltering, in each of these in various ways and to differing degrees.

The Ukraine war, which was the result of the extension of hegemony through NATO expansion aimed at the depowering of Russia, has exacerbated difficulties and revealed shortcomings in this multi-dimensional power structure.

Whilst the media has constantly boasted of the isolation of Russia that, in fact, has not happened but the limitations of US influence have become apparent – The West Is With Ukraine. The Rest, Not So Much.

The proxy war in Ukraine against Russia has exposed significant military problems for the US. As Alex Vershinin pointed out in a seminal article, the Ukraine conflict sees the return of industrial warfare, demanding huge amounts of arms and ammunition. Because of offshoring of production to China and other places beyond the inner imperial space facilitated by globalisation and driven by financialisaton the Collective West has become hollowed out and cannot produce the quantities needed even to prosecute a limited proxy war. Hence the shortages of materiel and munitions, and the transfers from NATO national armouries and beyond, and from US bases in Israel and South Korea.

In some ways the ideational dimension has held up best. The mainstream media is replete with war propaganda with very little access allowed to informed comment – hence the importance of oases of dissenting realism such as Pearls and Irritations. Putin has been transformed from a foreign leader reluctantly accepted, as exemplified by him being Time Magazine’s Person of the Year in 2007, to today’s cartoonish embodiment of all things evil. This portrayal is widely embraced in the West, but not so much beyond, another indicator of America’s waning power.

These dimensions – political, military, ideational – are primarily instruments of power. The economic and financial are that, but they are also where the advantages of power are harvested.

At the beginning of 2022 Biden was boasting that sanctions would bring Russia to its knees. A year later it is clear that although Russia has been hurt, its resilience has also been strengthened. In Russia Putin is very popular (81% in December 2022, much more than any Western leader) and daily life goes on with minor irritations but optimism. Europe suffers most and the rise in energy prices caused by cutting it off from Russian supplies is making energy-intensive industry unsustainable resulting in relocation, some as in the case of BASF to China, but also to the US itself where energy is cheaper. This process has been facilitated by the Inflation Reduction Act which gives subsidies to companies relocating from Europe. European leaders may fume, but they are impotent. And so the harvesting proceeds.

The US controls much of the world’s financial superstructure such as banking and insurance, and the capstone is the dominant position of the US dollar as the currency of trade and reserve.

There are those who argue that dollar hegemony is a burden which the US should shed. Tilford and Kundnani writing in Foreign Affairs dismiss Valéry Giscard d’Estaing’s complaint that dollar hegemony ‘gave the United States an “exorbitant privilege” to borrow cheaply from the rest of the world and live beyond its means.’ Not so, they respond:

The dollar’s dominance stems from the demand for it around the world. Foreign capital flows into the United States because it is a safe place to put money … and they cause the United States to run a large current account deficit. In other words, the United States is not so much living beyond its means as accommodating the world’s excess capital.

Some might suggest that the US is a safe haven precisely because it makes so much of the rest of the world unsafe through invasions, sanctions and, in the case of Afghanistan and Russia in the last year, of seizing foreign holdings.

It may come as no surprise that Tilford and Kundnani are very much in a minority and that the prevailing opinion, amongst friends and adversaries alike, is that dollar hegemony accords the United States huge benefit. Examples range from former US Treasury Secretary Henry Paulson to President Putin, and in between people as varied as French academic Emmanuel Todd, Credit Suisse economist Zoltan Pozsar, Arab journalist Janna Kadri, North American academics James K. Galbraith, Radhika Desai and Michael Hudson, Belgian businessman Gilbert Doctorow, and a host of others, including many contributors to Pearls and Irritations. Naturally the analyses, perceptions, and hopes vary but the consensus is that dollar hegemony, and its demise, dedollarisation, are crucial issues.

Gilligan is right about the US using Australia as a pawn against China. But it is not just pride which motivates the US elite’s fear of China and of multipolarity. Their ‘exorbitant privilege’ rests on power and the struggle of Australia, and countries around the world, to reclaim sovereignty in resistance to that power will be difficult because so much hinges on it. Exorbitant privilege is not relinquished lightly.

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