March 21, 2018 "Information Clearing House" - In this paper we will challenge the notion that overseas economic exploitation has transferred income to ‘buy-off’ the domestic working and middle classes, in the course of consolidating imperial hegemony.

We will argue that the empire is no longer based on robust overseas growth but rather the empire today is a costly and declining proposition.

We will proceed to outline the costs of militarized imperialism and the relative economic decline of the empire.

We will then turn to analyzing how the US imperial state has resorted to financing the empire though its regressive tax, regulator and budgetary policies.

We will conclude by refuting the notion that the US turn to protectionism will revive the US economic empire.

Empire: Past and Present

From the end of WWII to the end of the Cold War, the US empire was driven by the wealth and power of the multi-national corporations to extract and transfer profits to the domestic economy and sustain a ‘trickle’ down effect on a partially unionized labor force, and to fund its military guardians of global capital.

The US dominated world trade, and led global investments, as well as acting as the leading force creating the international financial institutions (World Bank, the IMF). Free trade and neoliberal doctrine flowed from the ‘Washington Consensus’ designed to induce the denationalization and privatization of targeted national economies around the world.

US empire further ensured global ascendance with the demise of the USSR, the absorption of the ex-Soviet client states and the pillage of the Russian economy. Washington declared that the world had become a ‘unipolar state’, in which the US was the sole dominant power, free to invade, conquer and exploit any rival.

To sustain and further its global military dominance, Washington declared a world-wide ‘war on terrorism’ which accentuated the military dimensions of ‘unipolarity’. The US empire was redefined through its military capacity to overthrow independent regimes, to carry on multiple wars, and to simultaneously fund overseas economic conquests while maintaining dynamic domestic growth.

The empire builders pillaged Russia but failed to build a viable productive satellite. Instead it poured billions of dollars into expanding NATO to Russian borders. In contrast, Germany profitably incorporated the post-Communist economies into the European Union.

The empire builders unipolar vision led them to endless billion-dollar wars, which did not finance themselves and reduced the US global economic presence as a source of profits. The empire’s pursuit of the unipolar world, through global wars ‘on terror’, led to a highly militarized imperial state which greatly reduced US economic competitiveness and the exponential growth of its commercial deficit.

In response to military demands for state financing, MNC sought lower taxs, cheap labor and lurative overseas markets. De-industrialization was accompanied by the financialization of the US economy.

The imperial state was a two-faced Janus: militarized foreign policy and financialized domestic policy. Military induced deficits and multiple and inconclusive wars led empire builders to make further demands on the economy.

Financialization led to a deep economic crisis in 2008/09 and a decade long trillion-dollar bailout.

The financial-military empire was a cost not a benefit to the economic empire. Imperial empire builders found few overseas ‘partners’ willing or able to share the costs. The empire builders turned to intensifying the exploitation,of the domestic labor market, reallocating the federal budget and reducing taxes for economic elite. The US redefined empire building as exploiting the domestic economy to militarize the empire.

Washington debated two parallel options: one based on further internationalizing the US economy hoping to regain markets and capital; the second option was turning the US into a ‘fortress Americana’ by creating walls around a protectionist state and preparing a ‘trade war’. Both options depended on lowering labor costs, concentrating wealth and reducing labor and welfare.

President Obama opted for ‘internationalization’, linking economic and military imperialism. President Trump chose a protectionist-militarist strategy designed to bring overseas capital to the US domestic market through military and trade threats in order to intimidate adversaries. Both approaches were basically premised on domestic colonialism.

The Elements of Internal Colonialism

The run-up to the financial crises of 2008-09 and the trillion-dollar bail-out led to the pillage of the state and deepened the financialization of the economy. The large-scale transfer of profits from domestic manufacturing to overseas’ markets and to banking, real estate and insurance (FIRE) sectors contributed to the growing polarization of the economy and deepening social inequalities.

Theses shifts in the economy were accompanied by regressive changes in the tax burden: the multi-nationals avoided hundreds of billions in taxes through overseas tax havens (FT 3/12/18 p. 1) and paid less domestic taxes as the effective tax rate declined (FT 3/12/18 p.3.

National states competed to lower taxes for the elite which led to reducing welfare spending; deregulation of the banking and energy sector led to the rise of speculative capital.

Global capital grew at the expense of the domestic economy; the growth of financial capital reduced the income of the working and middle class; costly imperial wars increased the commercial deficit; low paid, temporary employment in the services became the norm.

Health and environmental conditions deteriorated. Empire building intensified and domestic ‘under development’ to finance a rising commercial deficit and a declining empire. Popular dissent grew.

The imperial state faced two choices to further marginalize the majority or to turn toward a protectionist policy which in effect sought to direct mass discontent outwardly toward economic and military competitors.

The Democrats sought to blame Russia, the Republicans pointed to China and Iran.

The election of Trump led to the adoption of a policy of deepening deregulation, increasing the concentration of wealth, massive tax reductions for the MNC , a trade war for local capital , a protectionist policy for labor unions and a war policy to satisfy the ideological warlords.

The Obama regime’s resort to military and financial imperialism based on internal colonialism had reached its limits. The Trump regime sought to externalize enemies, first and foremost directing its “national imperialism” against China.

President Trump: China and the Commercial Deficit

The Trump regime backed by the Democrats sought to sustain at militarized imperialism by fabricating a Russian war threat in Syria, Ukraine, UK (the toxin spy caper) The Democrats promoted the Russian conspiracy to control the US presidential elections.

Trump sought to avoid facing the impending failure of its trickle down economic policy, by blaming China, of unfairly exploiting the US via one-sided trade, investment and technology relations - all leading to large trade deficits.

Contrary to Trump, the tradedeficit has everything to do with the perverse economic structure and policies of the US, which its ruling elites created .

The US trade deficit is a result of the MNC moving to China and exporting back to the US. US exports from China account for nearly one-third of the deficit. Washington is unable and unwilling to coerce or attract the MNC to return to the US even with generous tax incentives.

Secondly, the trade deficit is a result of growing US military spending in multiple and continuing wars, instead of increasing investment in export sectors. In contrast, China increases its public investments in high growth export sectors which add value and secure new markets.

Thirdly, the US restricts exports of high tech and military technology to China to further the interests of the warlord economy, leading to the loss of markets and the ability to lower the deficits.

Fourthly, the US restricts Chinese investments in sectors that would finance export industries that could rebalance trade relying on the fake argument of ‘national security’.

Fifthly, US, MNC are allowed - receive incentives from the state- to retain 2.5 trillion dollars abroad in tax havens, thus reducing the capacity of the US to finance its export sector and ‘balance trade’ with China (and the rest of the world).

Sixthly, the US accuses Beijing of insisting that US corporations which invest in China transfer technology. This is a win-win situation: US MNC reap profits, China gains know-how. If the US invested their profits in constantly upgrading its technology it could continue to retain markets, and profits and its export advantages.

In a word China is not ‘cheating’ it is learning and growing; it’s up to the US to do the same, instead of taking profit and moving to tax havens and the financial sector.

The US threat of a trade war against China will devastate US exports in technology, transport, agriculture and advanced industries, while undermining the domestic consumer sectors.

The net result will be the reduction of employment, income and trade. The US will have to squeeze the domestic income to sustain the primacy of its military and financial elite - provoking greater domestic discontent.

One thing is clear: in the face of a trade war China will adapt to its global infrastructure investments and secure alternative trading partners - it will survive a trade war .

Conclusion

US military and financial imperialism was a temporary and short lived success based on the demise of the USSR, and a mono-polar world, and the launch of the global war on terror . With the military rise of Russia, and China’s dynamic economic growth, these short term advantages disappeared and all the vulnerabilities resounded. Trillion-dollar bank bailouts and prolonged military losses undercut whatever temporary advantages existed. The pillage of the domestic economy deepened domestic discontent. Trump style “national” imperialism increased profits but lost trade wars.

A speculative economy, a plundered public treasury and a militarized empire cannot restructure the economy not even with trade war rhetoric and trillion dollar tax handouts. Time is running out President Trump; the economy is preparing to plunge and the voters are turning their backs.