momentous as those of 19th-century colonialism.”18 Only Japan, China, and Taiwan escaped the IMF juggernaut in East Asia. Japan kept aloof even when the Americans publicly rebuked it for failing to absorb more exports from the stricken countries, for the Japanese knew that the Americans would not actually do anything as long as the marines were still comfortably housed in Okinawa. China remained largely untouched because its currency is not freely convertible and it had paid no attention to APEC calls for deregulation of capital flows. And Taiwan survived because it had been slow in removing its financial barriers. It also maintains a relatively low ratio of investment to gross domestic product, is shifting further toward a service economy whose capital needs are less, and has maintained export diversity—unlike, for example, Korea’s overconcentration in products such as semiconductors destined for the American market. Foreign holdings of Taiwanese currency are negligible because its peculiar political status makes it unattractive to the hedge funds. Thus, it has been able to offer some of its own huge foreign currency holdings to help bail out countries in Southeast Asia.
After the big investors had pulled their money out of East Asia and left the area in deep recession, they turned to Russia. They calculated that there was little or no risk in buying Russian state bonds paying 12 percent interest because the Western world would not let a former superpower armed with nuclear weapons default. But the situation was further gone in Russia than these investors imagined, and so, in August 1998, the Russians defaulted on the interest payments (they still owe foreign investors perhaps $200 billion). If Russia does not repay these loans, it will be the largest default in history. These developments so scared the finance capitalists that they started pulling their money in from all over the world, threatening even well-run economies that had implemented all the economists’ nostrums on how to get rich like the North Americans. The Brazilian economy was so destabilized that in mid-November 1998 the IMF had to put together a $42 billion “precautionary package” to shore it up. Needless to say, the IMF has also helped plunge millions of poor Brazilians deeper into poverty. In order to meet the IMF’s austerity requirements, the Brazilian government even had to cancel a $250 million pilot project to save the Amazon rain forest. The result was that other countries withdrew their matching funds for the Amazon, and the degradation of an area that contributes 20 percent of the globe’s fresh-water supply resumed.19
In speeches in Russia and East Asia during the second half of 1998, President Clinton warned the peoples of these areas not to “backslide” and urged them to open their nations even further to American-style laissez-faire capitalism. But he had lost his audience. By now his listeners understood that the cause of their misery could not also be its cure. Many remembered that the Great Depression started as a financial panic then made worse by deflationary policies similar to those prescribed by the IMF in 1997 and 1998 for East Asia, Russia, and Brazil. The result in the early 1930s was a general collapse of purchasing power. That has not happened so far this time, largely because the United States went on a consumption binge and provided virtually all growth in demand for the excess output of the world. Can American “shop till we drop” be sustained indefinitely? No one knows.
The economic crisis at the end of the century had its origins in an American project to open up and make over the economies of its satellites and dependencies in East Asia. Its purpose was both to diminish them as competitors and to assert the primacy of the United States as the globe’s hegemonic power. Superficially it can be said to have succeeded. The globalization campaign significantly reduced the economic power and capitalist independence of at least some of the United States’ “tiger” competitors—even if, as with Russia and Brazil, the crisis could not be kept within the bounds of East Asia. This was, from a rather narrow point of view, a major American imperial success.
Despite such immediate results, however, the campaign against Asian-style capitalism (and the possibility that America’s satellite states in the area might gain independent political clout as well) was ill-founded and included serious blowback consequences. The United States failed to acknowledge that East Asian success had depended to a considerable extent on preferential, Cold War–based exports to the American market. By cloaking its campaign in the rhetoric of market opening and deregulation instead of the need to reform outdated Cold War arrangements, the United States both destroyed the credibility of its economic ideology and betrayed its Cold War supporters. The impoverishment and humiliation of huge populations from Indonesia to South Korea was itself blowback enough, even if the blowback for the time being spared ordinary Americans. But if and when the stricken economies recover, they will almost certainly start to seek leadership elsewhere than from the United States. At a bare minimum, they will try to protect themselves from ever again being smothered by the American embrace. In short, by refusing to reform its Cold War structures and instead insisting that other peoples emulate the American way, the United States gave itself an unnecessary, possibly terminal case of imperial overstretch. Instead of forestalling global instability, it helped make such instability inevitable.
The triumphalist rhetoric of American leaders basking in their economy’s “stellar performance” has also alarmed foreigners. When Alan Greenspan asserted to Congress that the crisis meant the world was moving toward “the Western form of free market capitalism,” almost no one thought that was either true, possible, or desirable. Economics has not displaced culture and history, regardless of the self-evaluation of the economics profession. Many leaders in East Asia know that globalization and the crisis that followed actually produced only pain for their people, with almost no discernible gains.20 Globalization seems to boil down to the spread of poverty to every country except the United States.
Clearly on the defensive, Richard N. Haass and Robert E. Litan, directors respectively of foreign policy and of economic studies at the Brookings Institution in Washington, lamented, “In some quarters [globalization] is seen as having caused the rapid flows of investment that moved in and out of countries as investor sentiment changed and were behind the Mexican [1995] and Asian financial crises.” But to them this would be a wrong conclusion. To accept it would be to “abandon America’s commitment to the spread of markets and democracy around the world at precisely the moment these ideas are ascendant.”21 But whether such ideas are actually ascendant is, thanks to the crisis, now in doubt, and such doubts are generating more blowback. The duties of “lone superpower” produced military overstretch; globalization led to economic overstretch; and both are contributing to an endemic crisis of blowback.
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THE CONSEQUENCES OF EMPIRE
American officials and the media talk a great deal about “rogue states” like Iraq and North Korea, but we must ask ourselves whether the United States has itself become a rogue superpower. In November 1998, Tom Plate, a columnist on Pacific Rim affairs for the
We Americans deeply believe that our role in the world is virtuous—that our actions are almost invariably for the good of others as well as ourselves. Even when our country’s actions have led to disaster, we assume that the motives behind them were honorable. But the evidence is building up that in the decade following the end of the Cold War, the United States largely abandoned a reliance on diplomacy, economic aid, international law, and multilateral institutions in carrying out its foreign policies and resorted much of the time to bluster, military force,
