In the post WWII period, the power of the US Dollar was put to good use with the Marshall Plan to rebuild Western Europe and the Dollar underwrote an amazing world wide economic integration that has brought material prosperity to many. What is more, analysts like Harvard professor Stephen Pinker argue that there has been a Pax Americana and that war and violence have been declining (The Better Angels of our Nature, 2011).
But Pax Americana or not, the US has been almost constantly involved in some kind of military operation or other since WWII. Indeed, to deal with the financial train wreck that was the War in Vietnam, President Richard Nixon completely detached the US Dollar from gold in 1971, making the dollar itself a fiat currency. The Nixon diktat had a significant impact on international politics as it made the liberated US Dollar an even more flexible instrument of imperial reach. The Dollar is used globally for commercial exchange and so the Department of the Treasury (USDT), the Cerebus of the Dollar, has amazing powers, much like a super-hero. And the Treasury Department and its satellites (International Monetary Fund, the World Bank, …) know how to wield those powers – the Treasury Department even has a division dedicated to controlling the capital of other countries, the Office of Foreign Assets Control (OFAC), a division that can dramatically impact the economic life of foreign individuals and nations. Today, as the wars in the Middle East linger on and as that in Ukraine heats up, the sanctions game is in full swing against Venezuela and Cuba in one Hemisphere and China, North Korea, Iran, Belarus, Russia and Afghanistan in the other. The power of the US Treasury is used to interfere with the commerce of these nations most effectively. In Afghanistan’s case, money of theirs is actually frozen in New York by OFAC decree – a similar sanction was applied for a time to Iran but was lifted by the Obama Administration at the time of the promising Nuclear Deal between Iran and the West, an agreement petulantly revoked by Trump. And the sanctions can be fine tuned – for Russia the sanctions game is played out even at the level of individual oligarchs.
But this sort of thing in not new. Dollar Diplomacy has long been a trademark of US policy; the term itself goes back to the pre-WWI presidency of William Howard Taft and the government’s commitment to defend American corporate interests in the Caribbean (with military occupations if necessary – Haiti, Nicaragua, Dominican Republic). Even earlier, in order to further US economic interests, a revolution was fomented in Panama in 1903 establishing a new country independent from Columbia and one ready to sign a deal creating the Panama Canal Zone as an unincorporated US territory, over which Washington would have sovereignty for three-quarters of a century.
Overthrowing governments to benefit the economic interests of corporations continued to be SOP and was expanded outside the Caribbean and beyond even the range of the Monroe Doctrine. In 1953, the US and the UK combined efforts to overthrow the duly elected government of Mohammed Mosaddegh in Iran after the Anglo-Iranian Oil Company was nationalized – that government’s other sins included higher taxes on the wealthy, land reform and the beginnings of a social safety net. In its place, the autocratic Shah Reza Pahlevi was installed in power. Alas, we all know how this turned out, what with US Embassy workers held hostage as a theocracy replaced a police state.
In 1954, the Cold War merged with the classic defense of United Fruit and US corporate interests in Guatemala where an army of mercenaries overthrew the democratically elected government who were discussing land reform and were thus castigated as Communists by the US media; all this is the subject of Nobelist Mario Vargas-Llosa’s most recent book Tiempos Recios (Harsh Times, 2021). On the other hand, defense of the interests of United Fruit (and likely of organized crime in this case) fell short in Cuba with the failure of the Bay of Pigs invasion (1961).
In 1960, a trade embargo was applied to Cuba – and still remains in effect, despite repeated calls by the UN and others for it to end on humanitarian grounds if not others; but few would claim it has “proved effective” other than by making things all the harder for ordinary Cubans. To his credit, Barack Obama eased some of these restrictions but Trump sadistically re-instated them as soon as he could and they remain in place. Note too that travel to Cuba by American tourists is actually still prohibited by OFAC.
The next stop for Dollar Diplomacy was Chile. In 1970, the citizens of Chile – long the model for democracy in South America – elected the Socialist Party candidate Salvatore Allende to the presidency. As the Allende government began a series of nationalizations which included several US corporations, Nixon and Kissinger were paranoid that Chile would become the next Cuba; a US financed military coup followed and the country was thrown into the hell-hole of the Pinochet regime. In a capitalist black-mass, the US sent “the Chicago Boys,” teams of economists associated with money-supply guru and University of Chicago professor Milton Friedman, to “reorganize” the economy.
In the 1980s the raw power of money was unleashed on the US itself as the Reagan regime saw the move from Industrial Capitalism to Financial Capitalism (where the dollars in the deal become more important than the products, where financial derivatives yield more profit than assets), tax cuts for the wealthy, the offshoring of manufacturing, the weakening of labor unions, and the extraordinary growth of income inequality.
Of course, the great triumph for the US Dollar came with the fall of the Soviet Union (1991). With liberal capitalism dominant, the world entered a new historical age; Francis Fukuyama, a history professor at Johns Hopkins, published his famous essay “The End of History,” declaring this to be the final victory of democracy and capitalism on the planet Earth. Here again, American academic economists were sent forth, this time to guide the re-structuring of the Russian economy which only hastened the emergence of the oligarchs as the true victors. As for History, the failure of the West to take advantage of the peace dividend to build relations of trust (military and economic) with the Russian Federation might well go down as Europe’s last great mistake.
An important role of money in this period was the funding of political organizations and think tanks by big donors such as the Koch Brothers. The Heritage Foundation provided Ronald Reagan and Newt Gingrich with game-plans and the Federalist Society provided the right wing a road map for the take over of the Supreme Court – hot off the presses The Scheme: How the Right Wing Used Dark Money to Capture the Supreme Court by Rhode Island Senator Sheldon Whitehouse!
Dollar driven diplomacy continues to be used in the 21st Century to advance the cause of US corporations with interests abroad. A miserable example is the Bush-Cheney war in Iraq, waged for Halliburton and the oil giants – extra-foolishly, it turned out, as US oil and gas production soon rose to the point that Middle East oil was no longer needed at home – but US forces remain in the region to this day.
In 2010, dark money’s investment in the Federalist Society paid off with the Supreme Court’s indefensible 5-4 ruling in the Citizens United case. To use Mitt Romney’s formulation, the 5 majority justices decreed “Corporations are people, my friend”: thus giving such organizations faux “First Amendment rights” to spend unlimited money on lobbying and politics – whence the current composition of the Supreme Court and the fragile state of US Democracy today.
The Almighty Dollar will protect itself if an attempt is made to get out from under its yoke. A recent example is the fate of Muammar Gadaffi, late long-time dictator of oil-rich Libya. To liberate oil from the tyranny of Western banks, in 2009 Gadaffi proposed the African Dinar as a new standard for trading in oil on the African continent – a gold based counterweight to the US Dollar and also to the French post-colonial “franc CFA” (le Franc de la Communauté Financière Africaine). As Hillary Clinton’s emails and other sources have revealed, this set off a storm of opposition in New York and other Western financial centers; as some domestic opposition to Gaddafi formed, NATO simply anointed itself the White Knight and invaded the country. Gaddafi was summarily eliminated in 2011 by NATO allied forces after the Battle of Sirte.
But too much war has proved lethal to currencies and nations in the past. Look at Spain in the 16th Century! The Spanish crown controlled the Holy Roman Empire in Europe, the greater part of the New World, and possessions in Asia and Africa. The Spanish Dollar (aka the “piece of 8”) had become the first global currency. But in addition to continuing conquests in the New World, Spain was fighting the Muslim Ottoman Turks and the Protestant upstarts of England and Holland – and they were also at war with France and its Protestants. At the death of Phillip II at the very end of the Century (1598), the Spanish treasury was empty and a long decline set in. The lesson of Phillip II’s reign was apparently not learned by his fellow royals; indeed, as he lay dying in 1715 with the French treasury depleted, The Sun King, Louis XIV lamented “I loved war too much.” (J’ai trop aimé la guerre.)
Rather more recently, in order to bring Ukraine and its resources firmly into the Western economic orbit, the US and the European Union (EU) supported a coup in 2014 (the Maidan Revolution) which ejected a duly elected president who preferred an economic deal with Russia and Belarus to “partnership” with the EU – a coup followed by a classically dramatic Russian reaction and the takeover of Crimea and the Donbas region. (For the long historical view going back to 1052 A.D., click HERE .) But matters continue to escalate and there is no end in sight. As noted, war is bad for currencies and the war in Ukraine today is already causing dangerous inflation in the EU and the US, especially weakening the Euro (and the British Pound as well).
However, from PACs and campaign contributions to international intrigue and wars hot and cold, the Almighty Dollar continues to make its weight felt. But too much of that power flows into the military: today military spending is half the US budget, rising year after year, president after president, dangerously to maintain a world wide military presence and some 750 foreign bases – and it was precisely the presence of infidel forces on the sacred Arabian peninsula that motivated Osama Ben Laden and his Saudi fanatics to attack the USS Cole and the World Trade Towers. As other imperial currencies have been humbled by endless warfare, the US Dollar itself is under strain. All this has come about despite George Washington’s admonition about foreign entanglements and Dwight Eisenhower’s warnings about the Industrial-Military Complex.
As the US has spent considerable blood and treasure for the last 20 some odd years – the Middle East, Afhanistan and now Ukraine (though only treasure so far) and elsewhere – the Chinese Empire has grown into a full-fledged international, military, industrial, commercial and financial rival. Chinese military spending is only one third that of the US – instead China is busy establishing a global network with its Silk Road initiative across Central Asia and on into Europe; its economic imperialism in Africa has made it the continent’s leading trading partner etc. Ominously, China is waiting in the wings as America risks decline. Things are really heating up what with the military tension building around Taiwan, Chinese support for Iran in dodging US sanctions, quiet Chinese support for Russia in its Ukrainian misadventure and most awesome the increasing power of the Chinese currency, the yuan: as the Wall Street Journal reported on March 15 of this year:
Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales
Don’t expect anything good to come of this. One can hear echoes of the guns of August 1914. This time China plays the role of the Austro-Hungarian Empire, Taiwan plays the role of Serbia and the US that of Tsarist Russia. But that can’t happen – people always learn from History, don’t they?