Global Political Economy 101: Decolonisation, World Capitalism, and Neoimperialism

Foreword

It is common to hear in public discourse that the world has never been as interconnected and interdependent as it is today. Technological progress in the fields of communication and transport has promoted giant leaps in the last 100 years in terms of the internationalisation of the economy. The term globalisation, in fact, has become of common use, and national economies can no longer be studied without facing their embeddedness in the world economy. The series of articles Global Political Economy 101 strives to address the complexity of the global economy by historicising the process that led to the present situation, providing an overview of the different academic approaches, and finally coming up with critical interpretations of the global economy and globalisation. The study of global political economy as a coherent subject of inquiry provides valuable insights into the big issues of our days, such as poverty, inequality, development, and sustainability. The pieces will maintain a humanities-based approach. Therefore, the economy will be seen as the intertwining between several factors like politics, society, culture, and human agency rather than the result of mathematical calculations. The set of articles will be divided into three blocks, each one composed of three articles. The first block will analyse the world economy from a historical perspective. The second one will provide an overview of the main theoretical interpretations of the world economy. The third one will address some of the main questions of today’s global political economy with the analytical tools previously provided.

Global Political Economy 101 is divided as follows:

1. Global Political Economy 101: From the Discovery of the Americas to Imperialism

2. Global Political Economy 101: Decolonisation, World Capitalism and Neoimperialism

3. Global Political Economy 101: Neoliberalism and Globalisation

4. Global Political Economy 101: Liberal and Neoclassical Interpretations

5. Global Political Economy 101: State-centric & Developmentalist Interpretations

6. Global Political Economy 101: Critical Approaches and Dependency Theory

7. Global Political Economy 101: Why Few Have Much, and Many Have Little - Inequality

8. Global political Economy 101: The Wretched of the Earth - Development and Poverty

9. Global Political Economy 101: The Mantra of Our Times - Sustainability

Introduction

The previous piece of this series anticipated the decline of Great Britain’s world hegemony, in favour of an extra-European great power: the US. As anticipated in the conclusions of the last article, this transition would not flow smoothly, but it would consist of a period of crisis, war, and conflict. Exploring the transition is crucial to understanding the world we live in today, as it paved the way for the constitution of the current economic arrangement. The period of deep transformation that lasted from the late 19th century to the end of WWII led to the geopolitical reshaping of the world, and imperialism — in the form of “free market imperialism” proposed by Great Britain — gradually faded, and gave way to a new global arrangement under the aegis of the US. The outburst of WWI and its aftermath irremediably changed the world and fostered a period of transition finishing with WWII (Hobsbawm, 1997). This piece will begin by addressing the decadence of GB-led imperialism. Afterwards, it will explore the rise of the US as hegemonic power and the post-WWII arrangement, its economic specificity and development. Finally, it will address the contradictions that this system had to face leading to the decline of US hegemony.

Image 1: Daniel Immerwahr. (n.d). How to hide an empire. [Illustration].

30 years of war and crisis: the decline of British Hegemony

As explained in the previous article of this section, British “free-trade imperialism“ was based upon the compresence of territorial domination — e.g., overseas colonies — and capitalist entrepreneurship, reinforcing one another. Subjugating new lands served the purpose of expanding the market in which the British growing industry could sell its products and of obtaining more cheap commodities needed in the internal market. Such a scheme started to be threatened on two fronts in the late 19th century by two growing powers that aspired to reach a dominant position: Germany and the USA (Arrighi, 1994). In Europe, the German Empire constituted in 1871 with the unification of most German-speaking principates with Prussia, began to emulate the British model of imperial expansion (Arrighi, 1994). Notably, German territorial expansionism would culminate with the tragedy of WWI (Hobsbawm, 1997). At the same time, the United States in the 19th century, after obtaining independence from Britain, started a territorial expansion toward the west. The colonial dimension of such phenomenon is often downplayed, but according to Arrighi (1994), it was characterised by dispossession and seizure of land no less than British and German imperialism. The territorial size of the US fostered the expansion of its economy, and soon the US would become:

“A sort of “black hole” with a power of attraction for the labor, capital, and entrepreneurship of Europe with which the United Kingdom, let alone less wealthy and powerful states, had few chances of competing” (Arrighi, 1994, pp. 60-61).

Image 2: Lewis Hine. (1932). Lunch atop a skyscraper. [Picture].

In Europe, the growing economic and military power of Germany, together with the German obsession for the “vital space”, this being the need to find or create the geographical space that Germany needed to freely develop its political and economic potential, led the latter to pursue territorial expansion first out of Europe and afterwards in Europe itself. The tensions in the European context between Germany and Britain, together with the intricated alliances, paved the way for the outburst of WWI.

During the War, the US remained initially neutral, and due to its growth in economic terms, they were able to be the primary lender for European powers, passing from being the largest debtor in the world economy in 1914 to being the leading lender in 1919 (Frieden, 2012). In other words, while Europe was being devasted by a tremendous war and economic resources were being directed towards the war effort, the US — which could rely on an internal market that was big enough to foster economic growth — played the role of the financial sponsor, intervening at the end of the conflict by the winning side, asserting its role as a world power both politically and economically (Frieden, 2012).

Image 3: Unknown. (1923). Using banknotes as wallpaper for inflation. [Picture].

At the end of WWI, the British world hegemony was seriously threatened by the rise of the US as an economic power. The peace treaties signed in Versailles were an attempt to restore the imperial model perpetrated by Great Britain. The promotion of international institutions such as the League of Nations, which on paper were aimed at fostering cooperation and avoiding another war, was only an attempt to re-establish the imperial arrangement and make it stronger. For this reason, the US withdrew from the League of Nations and congress did not ratify the peace treaties, leading the US towards a season of international isolation (Frieden, 2012). Europe was left with a hegemonic power, Great Britain, clearly not able to govern the system it had created, as the tensions between and within European states grew. The crisis of 1929, from which the US recuperated relatively fast by introducing the nucleus of Keynesian economic provisions that would later become the cornerstone of their economic policy, exacerbated the tensions in Europe. In this regard, one must mention the paramount event of the Russian revolution in 1917 and the founding of the USSR and the third International in 1921. Such an event played a major role in the development of Marxist movements in all of Europe, where the contradictions of capitalism emerged because of the recession after WWI (Hobsbawm, 1997). The years between the wars were anything but peaceful; social unrest was spurred by the economic crisis. Italy was on the verge of a socialist revolution in the 1920s, and Germany would follow the 1929 crisis (Hobsbawm, 1997). The political instability in Europe, fueled by the crisis, the growth of Fascism and Nazism in response to social unrest, and the obsession of the German leadership with the “vital space” would precipitate the world into another, and more tragic, war.

The aftermath of WWII and US hegemony

The end of WWII set forth the US as a hegemonic power. The US had undergone a conspicuous effort during WWII and contributed vividly to the victory of the allied forces. During the last years of the conflict, the allied great powers — USA, GB, USSR, and to a minor extent France — began to set the rules of what would become the world economic order after WWII with the intention of not committing the same mistakes of 30 years before. This time the USA could promote their model based upon formal equality of all members of the community of nations — gathered in the United Nations. On the economic side, the system, which would be called the Bretton-Woods system after the place where the agreement was signed, pivoted on international free trade and investment, and thus was sharply in contrast with GB-led imperialism (Frieden, 2012). As well explained by Frieden (2012):

“All developed parties to the agreement shared the goal of generally free trade and investment and stable currency values. As the system evolved, the General Agreement on Tariffs and Trade (GATT, eventually succeeded by the World Trade Organization, WTO) oversaw a process of gradual trade liberalization. The International Monetary Fund (IMF) supervised monetary relations among member nations, providing balance of payments financing and encouraging generally stable exchange rates” (p.17).

Image 4: Unknown. (n.d). The Bretton Woods conference. [Picture].

This new arrangement of the world economic order, clearly in contrast with colonialism and imperialism both on the ideological and economic levels, paved the way for decolonisation. Although, as argued by Hobsbawm (1997), Great Britain and France were not keen on abandoning their imperial dominions, it was clear in the early 1950s that colonialism was coming to an end. Bretton-Woods established the clear predominance of the US model, and hence of the US as a hegemonic power. The United States became the world’s most developed industrial power and the dollar was the world’s always convertible international currency. Nevertheless, the US needed new markets in which such an economic superiority could be poured, and in which capital could be invested in a profitable way. According to Varoufakis (2015), the project of building a European Economic Community — that would later become the EU — fostered by the US since the years of the Marshall plan, was aimed at establishing a trade bloc in which the commercial surplus of the USA could flow. Therefore, as argued by Arrighi (1994), the reorganisation of the “free world”, as opposed to the USSR and the socialist block, was secured by the economic and military hegemony of the US. The US hegemony was both a continuation and an opposition to the British hegemonic phase:

“A continuation because, like the latter, it re-established and expanded the Westphalia System after a period of increasing chaos in both inter- and intra-state relations. But a negation because it was neither “imperialist” nor “free tradist,” at least not in the sense in which British free-trade imperialism was” (p.70).

In summary, The Bretton Woods agreement established a world economic order completely reliant on the USA, based upon free trade and formal equality of all states. This system had no precedents in history, as for the first time the economic relations between sovereign states were governed by an international agreement, leaving less independence to each one of them in terms of economic policies than ever before (Arrighi, 1994). The economic model of reference was industrial capitalism, perpetrated and sustained by Keynesian principles and state interventionism to curb the effects of the free market. The USA became the hegemonic perpetrator of such a system, which gathered most of the developed countries, and provided a period of relative economic stability and growth (Frieden, 2012). However, as the next section shall explain, this period cannot be understood without mentioning the confrontation between the USA and the USSR, and the process of decolonisation of the third world.

Image 5: Philadelphia press. (n.d). US world hegemony. [Illustration].

Cold War, decolonisation, and neo-imperialism

The period of US hegemony corresponding with the Bretton Woods agreement, spanning from 1944 to 1971 may appear as a period of widespread economic growth and relative political stability among countries of the western world. However, such a period cannot be fully understood if not through the analysis of the dispute for between capitalism and socialism, leading to the Cold War, decolonisation, and American neo-imperialism. Thus, the post-WWII appears a much less steady and balanced period if the focus shifts from the western bloc to the rest of the world.

The Soviet Revolution of 1917 had paramount implications in the history of the 20th century. According to Hobsbawm (1997, p. 73), its implications were far more important than, for example, those of the French revolution. In fact, not only did the emergence of the first communist state change the regime that for centuries had governed the Russian Empire, but it fostered a world revolution that would lead to the spread of socialism throughout a considerable share of the world population (by the 1950s one-third of the world population lived under communist regimes). Therefore, the Soviet Revolution was more than a regime change in one of the most important and powerful countries in the world, but it was a source of inspiration and a living example that the socialist revolution was realistically possible for socialist parties all over the world (Hobsbawm, 1997). The Soviet Union would become, in a considerably short lapse of time, a superpower able to dispute the world hegemony with the US, not from within the capitalist system, but by proposing a radical alternative: socialism.

Image 6: Unknown. (n.d). Soviet poster calling for solidarity with third world countries in decolonisation. [Illustration].

The history of the Cold War is dense with events, and it would be impossible to address all of them in the reach of this article, as it would require a detailed historical analysis. However, this article aims at stressing its importance in the global economy of such confrontation. The clash between the USA and USSR took place mostly in the peripheral countries, in other words, those countries not yet economically developed that gathered in the Bandung conference (1955) and named themselves “the third world”. The system put in place by the US, based upon formal equality of all states and free trade, fostered a certain degree of stability among developed countries but reproduced the same dynamics of GB-led imperialism of free trade. Underdeveloped countries, by the end of WWII, were still relegated to the role of exporters of primary goods and providers of the cheap labour force, forcing them to a subsidiary role in the world economy (Wallerstein, 2000). This situation was addressed by many governments of developing countries with strong state control of the economy, in the attempt to promote industrialisation, hence economic growth (Hobsbawm, 1997). The Soviet Union was an inspiration in this regard, as it had managed to achieve unprecedented economic growth with a state-centred economy, and many countries of the third world, already independent or in process of decolonisation, were willing to engage in some sort of cooperation with the USSR (Hobsbawm, 1997). State-directed economies, in fact, were recognised as more efficient in escaping underdevelopment if compared with the world free market upheld by the USA. This inclination of many countries of the third world to cooperate with the USSR led the US to give up their formal opposition to colonialism and sustain the most conservative sectors within third world countries, often nostalgic of the colonial experience, to counter Soviet influence. This was the case of the support provided to pre-revolutionary Iraq, Turkey, the Sha of Iran, and a considerable number of conservative parties in Latin America (Hobsbawm, 1997).

Image 7: Unknown. (n.d). Dollar hegemony. [Illustration].

This attitude of the USA has often been interpreted as neo-imperialist, for the system of free trade established in Bretton Woods served mainly the economic purpose of developed countries and their firms (Foster, 2003). The attempts of the third world to achieve development through economic policies oriented rather toward state control than the free market was often opposed by the US both with peaceful and violent means. US foreign policy, in the years of the cold war, was dominated by the imperative of not allowing the spread of communism. On the other hand, it also involved a considerable dedication to defending and protecting the interests of US firms abroad (Foster, 2003). Echoing Lenin’s (1936) view of imperialism as the latest stage of monopoly capitalism, the engagement of the US in fighting back against communism and, at the same time, protecting its economic interest, can be seen as a form of neo-imperialism. Global Capitalist accumulation after WWII did tend towards the formation of big firms holding a position of monopoly, meaning that a small number of big companies tended to acquire a dominant position in the world market. The engagement of the US in defending the interests and the investments of such firms abroad was notable (Foster, 2003). Perhaps the most striking example was the support provided by the US to the neo-colonial dictatorship of Fulgencio Batista to counter the revolutionary movement in Cuba, and the efforts to restore such regime with the attempt of invasion of the “Pigs’ Bay” in order to protect the interests of the powerful United Fruit Company (Foster, 2003). As emphasised by Magdoff (1978), US militarism that was highly influenced by the Cold War was rooted in the need of keeping “the doors open for profitable investment” (p.16) for US firms, and an ever-increasing market in which they could expand their businesses. Therefore, the apparent stability that Bretton Woods brought to the countries of the Western world, must be pitted against the social unrest accompanied by the official and unofficial intervention of the US, in the context of the Cold War, to protect free-market, western interests around the world, and counter social change that threatened the US hegemonic status quo. The intervention in Guatemala in 1954 to overthrow the democratically elected government of Jacobo Arbenz and protect the interests of the United Fruit Company, the numerous attempt to destabilise Castro’s government, and the restoration of the Persian Shah in Iran against a democratically elected government are only three of the many operations that the US undertook to protect their hegemonic position (Dietz, 1984). All these experiences have the common denominator of US neo-imperial attitude (Foster, 2003).

Image 8: Unknown. (n.d). US intervention in Guatemala to protect the United Fruit Company. [Illustration].

The Bretton-Woods system would stay in place for almost 30 years, and the US managed to keep control and govern the inter-state system they had created. At the same time, in the late 1960s, economic growth slowed down in most developed countries, and the Keynesian approach underlying Bretton Woods had to face its structural contradictions. In the international realm, the third world movement gained importance and, despite US interventionism, many countries had achieved decisive economic independence. The two factors led to a crisis in the developed countries, characterized by stagnation and inflation — commonly known as stagflation. This would lead to a deep reshaping of the world economy that will be the core of the next article of this series: neoliberalism.

Conclusion

The transition from British to US hegemony entailed a period of unprecedented tragedies. The 30 years-long transitions from one to another brought two World Wars and billions of deaths. WWI consolidated the US as a world economic and military power, the post-WWI was characterised by the resistance of Great Britain to its own decline, and the US came out victorious from WWII assuming the role of hegemonic world power. The hegemonic arrangement put forward was the one established at Bretton Woods based upon a free market and the formal equality of all countries. This system was radically different from Great Britain’s imperialism because it erased territorial domination as a means of foreign policy. However, US hegemony also was in continuity with the previous one, as it reproduced similar dynamics of exploitation of peripheral countries. The process of decolonisation and the constitution of the third world as a political entity with the conference of Bandung seriously threatened US hegemony that was constantly challenged by the USSR. The threat of the expansion of communism led the US to perpetrate neoimperialist policies, and the protection of its economic interests abroad led the US to engage in numerous regime-change operations. The Bretton-Woods system had to face decisive difficulties by the end of the 1960s and the early 1970s, which would lead to a decisive reshaping of the world economy, often labelled as neoliberalism.

Bibliographical References

Arrighi, G. (1994). The long Twentieth Century; Money, power, and the origins of our times. Verso.

Dietz, J. L. (1984). Destabilization and intervention in Latin America and the Caribbean. Latin American Perspectives, 3-14.

Foster, J. B. (2003).The new age of imperialism. Monthly review.

Frieden, J. A. (2012).The Modern Capitalist World Economy: A Historical Overview, in D. C.

Mueller, The Oxford Handbook of Capitalism. Oxfrod: Oxford University Press.

Hobsbawm, E. J. (1997). Il secolo breve. Milano: Rizzoli.

Lenin, V. (1936). Imperialism, the Highest Stage of Capitalism, in V. Lenin, Selected works (pp. 667-776). Moscow: Progress Publisher.

Magdoff, H. (1978). Imperialism: From the Colonial Age to the Present. New York: New York University Press.

Varoufakis, Y. (2015). The global minotaur: America, Europe and the future of the world economy. Bloomsbury publishing.

Wallerstein, I. (2000). The Essential Wallerstein. The New York Press: New York.

Visual sources

Image 1: Daniel Immerwahr. (n.d). How to hide an empire [Illustration]. Retrieved 24/08/2022 from: https://warontherocks.com/2019/04/an-empire-if-you-can-find-it-american-hegemony-and-imperial-control/

Image 2: Lewis Hine. (1932). Lunch atop a skyscraper [Picture]. Retrieved 24/08/2022 from: https://commons.wikimedia.org/wiki/File:Lunch_atop_a_Skyscraper.jpg

Image 3: Unknown. (1923). Using banknotes as wallpaper for inflation [Picture]. Retrieved 24/08/2022 from: https://rarehistoricalphotos.com/banknotes-german-hyperinflation-1923/

Image 4: Unknown. (n.d). The Bretton Woods conference [Picture]. Retrieved 24/08/2022 from: https://www.dw.com/en/how-bretton-woods-reshaped-the-world/a-17747360

Image 5: Philadelphia press. (n.d). US world hegemony [llustration]. Retrieved 24/08/2022 from: https://www.e-ir.info/2016/01/09/explaining-us-hegemony-a-neo-gramscian-synthesis-of-pantich-gindin-and-konings/

Image 6: Unknown. (n.d). Soviet poster calling for solidarity with third world countries in decolonization [Illustration]. Retrieved 24/08/2022 from: https://decolonization.home.blog/category/week-2/

Image 7: Unknown. (n.d). Dollar hegemony [Illustration]. Retrieved 24/08/2022 from: http://www.chinadaily.com.cn/a/202103/10/WS60480edda31024ad0baae11f.html

Image 8: Unknown. (n.d). US intervention in Guatemala to protect the United Fruit Company [Illustration]. Retrieved 24/08/2022 from: https://vocesenelfenix.economicas.uba.ar/guatemala-el-primer-golpe-de-la-cia-en-america-latina/