Trump is trying to square a globalized world through a national-based American capitalism. It won’t work.
Former President Teddy Roosevelt (1901-09) described the essence of US foreign policy as “speaking softly while carrying a big stick”. Under the incumbent president, Donald Trump, it seems to be all about “speaking loudly”.
What Trump is carrying in reserve is a moot question.
The difference comes down to a question of credibility. A century ago, America was a formidable military, diplomatic and economic power. Hence, Roosevelt could afford to speak softly because there were other indisputable means at his disposal to reinforce US power.
Today, the US is still a formidable military power, that’s for sure. But as for its economy and the role of the American dollar as a global payment mechanism the evidence suggests that it has lost much of its former dominance.
President Trump seems to be trying to compensate for the decline in US power overall by way of adopting more bellicose and foghorn rhetoric for others to comply with American demands.
This week saw a record fall in the American stock market. That suggests that the supposed strength of the US economy is not what it has been cracked up to be under Trump. A major factor in the collapse of the US stock market is reported to be the uncertainty prompted by the growing US trade war with China.
Last week, Russian President Vladimir Putin lamented the US policy of imposing sanctions against other nations and its over-reliance on the dollar as the main global currency exchange tool. Putin said the US was making a “strategic mistake” by using the dollar as a weapon with which to punish other nations to comply with Washington’s diktats.
“This is a typical mistake of any empire,” he said at the Russian Energy Week Conference, in Moscow.
Implicit in Putin’s comments was that the US is acting like a failing empire. Unsure of its former dominance, the US is resorting to brute force to shore up its otherwise declining power. But in doing so, America is acting above its credibility and thereby compelling others to seek ways around Washington’s overextended writ.
When the dollar replaced gold as the global financial standard in the early 1970s, the American currency assumed a privileged position in international trade. But with such a privilege comes the responsibility to be a universally respected banker, which entails a certain apolitical character of the dollar.
America’s loss of national economic power has resulted in the US abusing the global dollar system for its own selfish interests. That in turn results in loss of confidence by other nations. Washington is politicizing the dollar system in order to pursue its national interests.
The over-reliance by Washington on economic sanctions against other nations is forcing them to seek ways of circumventing the US-dominated global system of trade and commerce.
We see this in the European Union setting up a non-dollar system to continue trade relations with Iran after Trump abandoned the international nuclear accord with Tehran. We see it in the way Russia and China are setting up a payment system for oil and other commodities which obviates the use of dollars.
So much for “free-market capitalism” for which America is supposed to be the global exponent. If America doesn’t get its way over markets then sanctions are imposed to “correct” the way. The gas energy supply from Russia to Europe is a classic example. Russian-suppled gas is commercially viable to meet European demand. Yet the US wants to supplant that market with its own more expensive gas, and the only way it can do that is to slap sanctions on Russia and European companies. That is not market economics. It is imperialist hegemonic diktat. That undermines the US dollar and principles of supposed American capitalism.
Slowly but surely the world is moving away from the dollar as a universal currency. Because of Washington’s abuse of the dollar and its preeminence in banking as a political weapon to exert its national objectives.
Putin said that US sanctions policy towards many countries and abuse of the dollar as global reserve currency is a “strategic error” committed by a waning empire. As more countries increasingly drop the dollar to circumvent US sanctions, the result will be a continual undermining of international standing of the US currency and banking system. A classic case of over-reach by Washington leading eventually to its own economic demise.
If history tells us one thing it is that every empire has its day. Imperial over-reach is the sign of a declining empire.
President Trump is clashing loudly over trade with China and almost every other nation, including the Europeans and Canada. Trump is shouting about “unfair” trade because he doesn’t have a big stick in reserve in terms of inherent American strength. The dollar is no longer the only show in town.
Russia is “de-dollarizing” its economy, meaning it is moving towards trade with other nations in bilateral currency exchange. The same goes for China and other nations. The upshot is the dollar is losing its international power, and, with that, the US economy is losing its former standing. The empire is waning. And the only one to blame for that is the US itself from its abuse of power.
The ominous resort is the only stick left to Washington – military power. That is why the world is facing a dangerous situation. If America doesn’t get its way, it seems to be pushing the world to war.
It could be all very different of course. If the US were to stop trying to assert itself as a unipolar power and begin to engage with others on the basis of a multipolar world.
Trump is trying to square a globalized world through a national-based American capitalism. It won’t work. And the more the US government tries to achieve that the more the dollar and American power falls into decline. Which makes US militarism a greater compensatory danger.