Greece’s former Finance Minister Yanis Varoufakis explains the US system of “neo-imperialism” based on the dollar, an “IOU issued by the hegemon”, which finances a huge trade deficit by letting foreign capitalists “extract colossal surplus value from their workers and then stash it away in America’s rentier economy”.
By Ben Norton of Geopolitical Economy Report
Economist and former Greek Finance Minister Yanis Varoufakis said in a speech this January that the United States is leading a “new, audacious imperialism”, which he calls “neo-imperialism”.
“Neo-imperialism’s highest form” is “globalization, financialized capitalist globalization”, Varoufakis added, stressing that this system is based on the dominance of the US dollar.
When President Richard Nixon ended the convertibility of the dollar into gold in 1971, it became merely an “IOU issued by the hegemon”, Varoufakis explained.
This dollar “IOU” financed the United States’ huge trade deficit by letting foreign capitalists “extract colossal surplus value from their workers and then stash it away in America’s rentier economy”.
The US trade deficit became a “huge vacuum cleaner” that “was sucking into America the net exports of Germany, Japan, and China, Varoufakis continued.
But deficit countries in the Global South “had to borrow from Wall Street to import medicines, energy, and the raw materials necessary to produce their own exports for earning the dollars with which to repay Wall Street”.
When Global South countries could no longer pay their debts to the bondholders on Wall Street, “the West sent in the bailiffs, the International Monetary Fund”, which imposed mass privatizations and neoliberal economic policies, Varoufakis pointed out.
Economist Michael Hudson first exposed this system back in 1972, in his book “Super Imperialism: The Economic Strategy of American Empire”. (Hudson published an updated, third edition in 2021.)
Varoufakis provided his analysis of the US dollar hegemony scheme in a speech he delivered in Cuba in January 2023, at the “International Conference for the Balance of the World”, a meeting organized to advocate for the New International Economic Order.
In his remarks, Varoufakis also condemned the new cold war, and called for a new non-aligned movement.
At the same conference, a German member of parliament from Die Linke (the Left Party), Sevim Dagdelen, denounced the NATO proxy war in Ukraine and warned that European Union members states have become “servile vassals” that are “pursuing the interests of US corporations and following foreign policy instructions from Washington”.
Yanis Varoufakis explains the US dollar hegemony scheme
An extended excerpt from Yanis Varoufakis’ speech follows below:
Why did the original Non-Aligned Movement fall prey to neo-imperialism’s highest form, which is of course globalization, financialized capitalist globalization? The short answer is because capitalists, in practice, proved better internationalists than we were. Because they understood the nature of neo-imperialism better than we did, and that’s why they won.
What did they understand better than we did? They understood better than we did the new, audacious imperialism that was born in 1971, when Bretton Woods collapsed, and the United States dollar was no longer convertible to gold, prompting [President] Richard Nixon to send a message to Europeans, European governments, and the world’s capitalists, saying: “The dollar, as of today, is your problem”.
And how right Nixon was. As the American – the US, I shouldn’t say American – as the US deficit skyrocketed, the world was flooded with American dollars. And the banks, the central banks outside the United States, were forced to use these American dollars, since they could not be converted to gold anymore, as the reserves with which they backed their own currency.
The dollar suddenly became something like an IOU issued by the hegemon. Before long, the global financial system was backed by IOUs issued by a hegemon who decided what foreigners holding those IOUs could do or couldn’t do with the IOUs issued by the hegemon.
America was now a fully fledged deficit country, with a big trade deficit. But it was nothing like any other deficit country in the world. You see, Argentina, France, India, Greece needed to borrow dollars. America didn’t need to borrow dollars to back up its currency. It didn’t need to raise interests rates in order to prevent an exodus of dollars. The exodus of dollars was the foundation of American hegemony.
Capitalists in surplus countries – countries like Japan, Germany, and later of course China – saw the American trade deficit as a great savior.
It was a huge vacuum cleaner, the American trade deficit, that was sucking into America the net exports of Germany, Japan, and China.
And what did the Japanese, German, and later Chinese capitalists do with all these dollars that they earned? They sent them back to the United States – they couldn’t do anything else with them – to buy property in the United States, American government bonds, and a few companies that the American government allowed them to buy – not Boeing, not Microsoft, none of the crucial ones.
Meanwhile, the deficit countries in the Global South, in Asia, in Latin America, they constantly agonized over a shortage of dollars, which they had to borrow from Wall Street to import medicines, energy, and the raw materials necessary to produce their own exports for earning the dollars with which to repay Wall Street.
Inevitably, every now and then, as you all know, the Global South deficit nations ran out of dollars and could not repay Wall Street. That is when the West sent in the bailiffs, the International Monetary Fund, that lent the dollars on condition that the debtor government handed over the country’s land, water, ports, airports, electricity, telephone networks, even its schools and hospitals to the local [oligarchs] and to the international oligarchs, who grabbed this treasure, took rents – and what did they do with the rents? Sent them to American rentier capitalism, to invest them.
Washington, comrades, had found the magic formula that no other empire had discovered before, of how to make wealthy foreigners, and wealthy governments, and poor governments, and the poor of the world finance the American government and the net imports of the American economy.
A Chinese official once described to me globalization as something that was founded on a “dark deal” – that’s how the Chinese official put it to me: a dark deal.
Why did he call it dark? Because it was founded on a dark, unspoken, implicit pact between America’s ruling class and foreign capitalists and rentiers.
Let me put it slightly differently: Suppose you could end American hegemony today. There is a button here; you can press it and end US hegemony. Who would stop you form pressing it? OK, the US authorities, the military, the CIA, Wall Street, Silicon Valley, they would try to stop you pressing this button.
But they are not alone! A crowd of non-Americans would stop you from pressing it, including German industrialists, Saudi sheiks, Greek oligarchs, European bankers, and, yes, Chinese capitalists.
In other words, the supremacy of the dollar has been just as functional to the interests of US rentier capitalism as it was to German, Argentinian, Nigerian, Korean, and Chinese capitalists.
Without the dollar’s and America’s global dominance, Chinese, Japanese, Korean, or German capitalists would not have been able continually to extract colossal surplus value from their workers and then stash it away in America’s rentier economy.
Meanwhile, Argentinian, Greek, Russian, Ukrainian, and Indian oligarchs would not be able to loot our countries, take their public assets, liquidate them, and turn them into property rights in the United States.
Varoufakis challenges EU/IMF austerity, forms political movement, campaigns to free Assange
Yanis Varoufakis briefly served as Greek’s finance minister in 2015, when the leftist Syriza party was voted into power.
Following the 2008 financial crash, Greece had been trapped in unpayable debt denominated in foreign currencies.
To try to negotiate debt relief, Varoufakis led negotiations with the European Commission, European Central Bank, and International Monetary Fund (IMF), known collectively as the “Troika”.
The Troika demanded brutal austerity measures and neoliberal economic reforms that Varoufakis said would make it impossible for Greece to repay the debt.
He rejected the Troika’s proposal as a “New Versailles Treaty” and “coup” that amounted to a “complete annulment of national sovereignty”. He condemned it as “Greece’s Terms of Surrender” and said it would make his country into a “vassal of the Eurogroup”.
Varoufakis then resigned from his position in protest. Since then, he has founded a leftist political movement, DiEM25, and party, MeRA25.
He has also campaigned for the release of imprisoned WikiLeaks journalist Julian Assange.
After speaking at the conference in Cuba, Varoufakis traveled to Mexico, where he met with progressive President Andrés Manuel López Obrador.
“Wonderful meeting with Mexico’s inspiring President. I thanked him for his steadfast support of our campaign to Free Julian Assange. We also discussed how the New Cold War begets an urgent need for a New Non-Aligned Movement & a New International Economic Order”, Varoufakis tweeted.
Wonderful meeting with Mexico’s inspiring President. I thanked him for his steadfast support of our campaign to Free Julian Assange. We also discussed how the New Cold War begets an urgent need for a New Non-Aligned Movement & a New International Economic Order pic.twitter.com/ptLcQsgWHM
— Yanis Varoufakis (@yanisvaroufakis) January 31, 2023
