The
Bottom Dollar
By George
Monbiot
The Guardian
24 April, 2003
The problem
with American power is not that it's American. Most states with the
resources and opportunities the US possesses would have done far worse.
The problem is that one nation, effectively unchecked by any other,
can, if it chooses, now determine how the rest of the world will live.
Eventually, unless we stop it, it will use this power. So far, it has
merely tested its new muscles.
The presidential
elections next year might prevent an immediate entanglement with another
nation, but there is little doubt about the scope of the US government's
ambitions. Already, it has begun to execute a slow but comprehensive
coup against the international order, destroying or undermining the
institutions that might have sought to restrain it. On these pages two
weeks ago, James Woolsey, an influential hawk and formerly the director
of the CIA, argued for a war lasting for decades "to extend democracy"
to the entire Arab and Muslim world.
Men who think
like him - and there are plenty in Washington - are not monsters. They
are simply responding to the opportunities that power presents, just
as British politicians once responded to the vulnerability of non-European
states and the weakness of their colonial competitors. America's threat
to the peace and stability of the rest of the world is likely to persist,
whether George Bush wins the next election or not. The critical question
is how we stop it.
Military means,
of course, are useless. An economic boycott, of the kind suggested by
many of the opponents of the war with Iraq, can never be more than symbolic:
US trade has penetrated the economies of almost all other nations to
such an extent that to boycott its goods and services would be to boycott
our own. Until recently, as Bush's government sought international approval
for its illegal war, there appeared to be some opportunities for restraint
by diplomatic means. But now it has discovered that the United Nations
is unnecessary: most of its electors will approve its acts of aggression
with or without a prior diplomatic mandate. Only one means of containing
the US remains. It is deadly and, if correctly deployed, insuperable.
It rests within the hands of the people of the United Kingdom.
Were it not
for a monumental economic distortion, the US economy would, by now,
have all but collapsed. It is not quite a West African basket case,
but the size of the deficits and debts incurred by its profligacy would,
by any conventional measure, suggest that it was in serious trouble.
It survives only because conventional measures do not apply: the rest
of the world has granted it an unnatural lease of life.
Almost 70% of
the world's currency reserves - the money that nations use to finance
international trade and protect themselves against financial speculators
- takes the form of US dollars. The dollar is used for this purpose
because it is relatively stable, it is produced by a nation with a major
share of world trade, and certain commodities, in particular oil, are
denominated in it, which means that dollars are required to buy them.
The US does
very well from this arrangement. In order to earn dollars, other nations
must provide goods and services to the US. When commodities are valued
in dollars, the US needs do no more than print pieces of green paper
to obtain them: it acquires them, in effect, for free. Once earned,
other nations' dollar reserves must be invested back into the American
economy. This inflow of money helps the US to finance its massive deficit.
The only serious
threat to the dollar's international dominance at the moment is the
euro. Next year, when the European Union acquires 10 new members, its
gross domestic product will be roughly the same as that of the US, and
its population 60% bigger. If the euro is adopted by all the members
of the union, which suffers from none of the major underlying crises
afflicting the US economy, it will begin to look like a more stable
and more attractive investment than the dollar. Only one further development
would then be required to unseat the dollar as the pre-eminent global
currency: nations would need to start trading oil in euros.
Until last week,
this was already beginning to happen. In November 2000, Saddam Hussein
insisted that Iraq's oil be bought in euros. When the value of the euro
rose, the country's revenues increased accordingly. As the analyst William
Clark has suggested, the economic threat this represented might have
been one of the reasons why the US government was so anxious to evict
Saddam. But it may be unable to resist the greater danger.
Last year, Javad
Yarjani, a senior official at Opec, the oil producers' cartel, put forward
several compelling reasons why his members might one day start selling
their produce in euros. Europe is the Middle East's biggest trading
partner; it imports more oil and petrol products than the US; it has
a bigger share of global trade; and its external accounts are better
balanced. One key tipping point, he suggested, could be the adoption
of the euro by Europe's two principal oil producers: Norway and the
United Kingdom, whose Brent crude is one of the "markers"
for international oil prices. "This might," Yarjani said,
"create a momentum to shift the oil pricing system to euros."
If this happens,
oil importing nations will no longer need dollar reserves to buy oil.
The demand for the dollar will fall, and its value is likely to decline.
As the dollar slips, central banks will start to move their reserves
into safer currencies such as the euro and possibly the yen and the
yuan, precipitating further slippage. The US economy, followed rapidly
by US power, could then be expected to falter or collapse.
The global justice
movement, of which I consider myself a member, has, by and large, opposed
accession to the euro, arguing that it accelerates the concentration
of economic and political power, reduces people's ability to influence
monetary policy and threatens employment in the poorest nations and
regions. Much of the movement will have drawn comfort from the new opinion
polls suggesting that almost 70% of British voters now oppose the single
currency, and from the hints dropped by the Treasury last week that
British accession may be delayed until 2010.
But it seems
to me that the costs of integration are merely a new representation
of the paradox of sovereignty. Small states or unaffiliated tribes have,
throughout history, found that the only way to prevent themselves from
being overrun by foreign powers was to surrender their autonomy and
unite to fight their common enemy. To defend our sovereignty - and that
of the rest of the world - from the US, we must yield some of our sovereignty
to Europe.
That we have
a moral duty to contest the developing power of the US is surely evident.
That we can contest it by no other means is equally obvious. Those of
us who are concerned about American power must abandon our opposition
to the euro.