Geopolitics in the 21st Century

© 2003 Dennis Redmond


The dawn of the 21st century has had the singular privilege of witnessing not just one or even two, but three world-historical revolutions, all at once. In the political sphere, the European Union and East Asia have emerged as autonomous geopolitical actors, with both the means and motive to push aside the US and its Cold War alliances for the sake of their own interests. In the cultural field, the decades-long hegemony of Hollywood and US consumerism has given way to an enormously diverse multinational media and consumer culture. In the economic realm, the US has declined from the world’s leading creditor nation to the single largest debtor on the planet, while Continental European banks utterly dominate the global banking system.1

To compress four decades of social history into a sound bite, the US pioneered multinational capitalism in the 1960s, but the EU and East Asia perfected such in the 1990s. At the factory level, Toyota’s production-system remains the most efficient in the auto biz, Daimler continues to make the finest cars and trucks on the planet, while Nokia and DoCoMo are the mightiest players in the cellphone biz. The all-important machine-tools sector – the DNA of industrial society – is utterly dominated by the new metropoles. While Microsoft retains its monopoly over the field of personal computer software, the EU’s SAP has become the dominant provider of corporate intranet software, and Japan’s Nintendo has excelled in portable entertainment software. In the aerospace industry, Airbus has risen to become the coeval of Boeing, while even that last bastion of US dominance, the media and entertainment biz, has to contend with ferocious competition from the likes of Sony and Bertelsmann.

            To be sure, this hegemonic shift did not occur all at once. To simplify a long and complex history, whereas the twin motors of the world economy during the initial post-WW II period were US military Keynesianism and US consumerism, the key drivers of the 21st century economy are EU expansion and East Asian industrialization. In the 1950s, the US was a huge, self-financing economy with no serious competitors, and could easily afford to spend 8-10% of its GDP on its military. At that time, US citizens were anywhere between two to eight times as wealthy in per capita terms than their European and Japanese counterparts, which meant that the US pioneered many of the characteristic features of the modern consumer society (malls, cars, TVs, mortgages, etc.). By the 1970s, however, postwar Europe’s welfare capitalism and Japan’s mercantile capitalism began to catch up with the US, and the institutional underpinnings of this model – the Bretton Woods accords, the hegemony of the US dollar, and US cultural dominance – began to erode. Not only did US firms face increasingly nimble, well-financed and efficient competitors in virtually every industrial sector, but the future EU and East Asian economies began to construct a wide variety of unique state institutions, which slowly but surely began to displace many of the key structural levers of US hegemony.

Alice Amsden, Robert Wade and Thomas Friedman have described in copious detail how East Asia’s developmental states controlled domestic financial markets, recycled savings into the industrial base, invested heavily in education and R & D, and in general rigged their economies to succeed.2 Over time, East Asia fleshed out this economic strategy with key elements of the welfare state (most notably state pension plans, universal health insurance, and job-creating infrastructure projects). The EU’s strategy was slightly different: rather than exerting direct control over financial markets, the EU’s welfare states preferred to invest in a highly skilled, motivated workforce, while buffering the EU’s local economies from the lash of the market forces via a vast expansion of the state (e.g. the various EU states currently intermediate 48% of total EU GDP). Thanks to the non-market power of the state, EU citizens enjoy free schools, universal health insurance, the longest vacations in the world and civilized pensions. The growth of this state apparatus went hand in hand with the qualitative expansion of EU democracy, ranging from parliaments elected by various forms of proportional representation to workplace codetermination. At the same time, strong unions and vast networks of non-governmental organizations and civic groups provided a key counterweight to the lobbying efforts of big business.

These economic and political changes have a precise analogue in the cultural field, where the dominion of Hollywood, Madison Avenue and Tin Pan Alley has given way to a complex, polycentric cultural landscape. The national culture industries continue to exist, but are increasingly tied to multinational markets, audiences, and narratives. The cinema industry is a case in point: though US films continue to draw the lion’s share of box office receipts, the EU and Japan have developed thriving media cultures all their own. In the late 1990s, Hong Kong produced around 140 films each year while Japan produced an average of 300 films per annum; a study by Eurostat noted that the EU produced 604 films in 2000, while the US produced 764 that same year.3 Currently, the EU is investing heavily in European-wide media initiatives, while Japan has become the unquestioned market leader in the fastest-growing entertainment industry of them all, namely videogames.


I. The New Metropoles


How wealthy are the new metropoles? Based on 2001 data from the European Commission and 2003 exchange rates (€1 = $1.07), the core continental European (defined as the Eurozone plus Sweden, Norway, Switzerland and Denmark, but minus the UK) have 329 million people and a GDP of €7.7 trillion, while the East Asian core region (defined as Japan, Singapore and Hong Kong) has 138 million people and a GDP of €4.2 trillion. At first glance, both regions seem outclassed by the US, which has 280 million people and a GDP of €9.4 trillion,

However, these figures understate the economic muscle of the new metropoles, for three main reasons. First, the US has consistently run vast current account and trade deficits with continental Europe and East Asia. Though short-term deficits are nothing to worry about, the US has been accumulating such deficits since 1982, and has become the single largest debtor nation in the world (the largest creditors are, unsurprisingly, East Asia and continental Europe). The current net international investment position of the US is minus $2.6 trillion, or roughly 25% of US GDP.4 Such deficits suggest that the real value of the dollar is somewhere between $1.10 and $1.20 per euro, rather than its current $1.07 per euro.

Second, the new metropoles invest significantly more in their own economies, expressed as a percent of GDP, than the US. According to OECD figures, EU investment rates averaged 20-21% of GDP during the 1990s, the East Asian core economies averaged roughly 30% and the US averaged 17-18%.5 While the investment rate for any given year isn’t terribly significant, sizeable investment deficits over time matter a great deal. Since inflows of foreign capital make up a huge chunk of US investment – foreign direct investment in the US totaled $307.7 billion in 2000, or about one-eighth of all domestic US investment that year – the US economy is vulnerable to the sort of capital flight which devastated Southeast Asia in 1997-1998 and Argentina in 2001.6

Third, official measurements of total GDP can obscure the true measure of an economy’s productivity, namely labor-time or value per hour worked. The US has one of the longest workweeks of any industrialized country, but this fact is not reflected in its official GDP figures. According to the ILO, Central Europeans work approximately 20% fewer hours (about two and a half months) each year compared to their US counterparts. To make a long story short, Central Europe is at least 20% more productive per hour than its nominal GDP figures indicate.7

Even granting these points, there is an argument to be made that the US will remain the single most dominant economic power for some decades to come, due to sheer institutional inertia, the accumulated symbolic and political capital of the US, a fearsome military machine and a range of preexisting alliances and networks. This was certainly true during much of the 1990s, mostly because the European Union was still in gestation and Japan was immobilized by the fallout of a busted financial bubble. What has changed since then, however, is the posthaste arrival of multinational geopolitics.



II. The EU Semi-periphery


One of the clearest examples of this is the planned EU enlargement of May 2004. The result will be a continental European economy (defined as the 10 new accession countries, the 12 existing Eurozone countries, plus Sweden, Norway, Switzerland and Denmark, but minus the UK)8 with 403 million people and a GDP of €8.1 trillion. Nine new languages will be added to the roster of official EU languages, while the total EU population will increase by 20%. The EU also has the potential to expand by an additional twelve members. Here are the twelve likeliest candidates, with their earliest estimated date of entry:



Table 2. Potential Accession Countries 2007-2015

Data: Eurostat, European Commission

Potential Accession


Population in 2001

GDP in 2001

Per capita GDP


Croatia, Bulgaria, Romania

34.6 million

€71 billion



Macedonia, Bosnia-Herzogovina, Albania, Yugoslavia, Turkey

87.1 million

€125 billion



Russia, Belarus, Ukraine, Moldova

204 million

€326 billion



In the not-too-distant future, the EU may encompass anywhere from 437 million to 739 million citizens. Though these 336 million potential new citizens currently produce only €522 billion of annual output, it’s entirely possible the former Eastern bloc countries could become the hub of an extended wave of accumulation, similar to the 1950-1975 boom which transformed Central Europe from a bombed-out heap of rubble into an industrial powerhouse. The present and future accession countries are well-educated, urbanized societies with a long history of industrialization and outstanding traditions of science and innovation; what they lacked in the past were accumulation structures capable of effectively utilizing those skills.

One of the central goals of the EU is the creation of such structures, by means of the so-called “acquis communautaire”. The acquis is not a single, uniform set of national laws, so much as an enormously complex and multi-layered assemblage of legislation, social protections, juridical bodies and procedures – the juridical endoskeleton of modern, democratic welfare states. Drawing the appropriate lessons from the integration of Ireland, Greece, Spain, Portugal and eastern Germany into the EU during the 1980s and 1990s, the EU is taking pains to match the superstructural transformation of its new members step for step with formidable amounts of economic investment.

This investment program takes three main forms. First, the EU structural funds program directly redistributes money from the richer to the poorer countries. Second, the European Investment Bank offers low-cost loans to EU countries and their neighbors. Third, the Europe Agreements offer preferential market access to the EU via a dense network of trade, aid and finance covenants. Though the Agreements do somewhat limit the economic options of the semi-periphery, the EU has provided generous compensation, via a tidal wave of low-cost loans and grants. In 2002 alone, the EIB disbursed €42.89 billion in loans to EU countries, €6.589 billion in the accession countries, and €3.344 billion in partner or pre-accession countries. Beginning in 2004, these loans will be supplemented by grants from the EU structural funds, which will funnel €23 billion to the accession region during 2004-2006 (about €7.67 billion a year, or 1.9% of accession GDP). All told, EIB loans plus EU structural funds will equal 3.5% of accession GDP.

This may seem unduly low, but there are quite sensible reasons for limiting total EU support to this level: any less would not have the desired impact, but any more would overwhelm indigenous accumulation structures or spawn the sort of ruinous financial bubbles which pummeled Southeast Asia during 1997-1998. This level of public-sector assistance is consciously designed to balance the private-sector flow of remittances and foreign direct investment: at least 1% of GDP will be sent to the accession countries from emigrants who have settled in the EU and the US, while Eurostat figures show that annual foreign direct investment into the accession region averaged 3-4% of accession GDP during 1997-2001. All in all, the total public and private fiscal stimulus to the accession countries from EU membership will amount to somewhere between 6.5-7.5% of annual GDP. In proportional terms, this is approximately the same amount which Greece, Ireland, Spain, Portugal and eastern Germany received from the EU in the 1990s – resulting in above-average growth in all of these countries and regions, and a genuine boom in Ireland.

The EIB is not only the single largest source of capital to the accession countries, it is also financing the reconstruction of the Balkans: total EIB loans to Croatia, Yugoslavia, Albania, Bosnia-Herzegovina and Macedonia tripled from 1998 to 2001, from €92 million to €319 million. Thanks to the European Commission’s Euro-Med initiative, the EIB has also embarked on an extremely far-sighted strategy of pumping significant amounts of capital into the Maghreb and Mashreq regions:



Table 3. EIB Loans in the Maghreb and Mashreq

Data: Eurostat, EIB

Region or Country

EIB Loans in 2001

Loans as % GDP

Loans as % recipient investment

Morocco, Tunisia and Algeria

€730 million         




€370 million         




€115 million         




€180 million




€146 million




€66 million




€40 million




€20 million





All told, the EIB is providing €1.5 billion of annual assistance to the Maghreb/Mashreq region, a total which will increase to 2 billion in the near future. It’s important to stress that all of these countries have significant numbers of immigrants living in the EU, who remit large quantities of funds (at least 1% of the host countries’ GDP). These funds, plus EU foreign direct investment, total somewhere between 3-4% to 5-6% of the host countries’ GDP. The net result is to give these countries the sort of access to stable, long-term financing which only one other major semi-periphery on the planet currently enjoys, and that is East Asia.



III. The East Asian Semi-periphery


Over the past three decades, a vast semi-periphery has emerged around the East Asian core economies of Japan, Singapore and Hong Kong. Based on per capita GDP figures, financial links and trading flows, the current semi-periphery can be defined as South Korea, Taiwan, Malaysia, Thailand, the ten richest Chinese provinces, and the metropolitan areas of Jakarta, Manila, Hanoi and Ho Chi Minh City. Though not quite as wealthy as its European equivalent, the region has compensated by spawning a sophisticated array of developmental states and regional trade networks. All in all, the East Asia core plus the semi-periphery has a population of 620 million and an impressive GDP of €5.8 trillion.

The main distinction between the East Asian semi-periphery and its European counterpart is the former’s far greater exposure to US markets. The EU economy is relatively sheltered from external trade, while the euro has created a vast internal market which is immune to foreign exchange fluctuations. Though East Asia is highly integrated in terms of trade, it lacks a common currency or multinational institutions capable of protecting its smaller, weaker members against fickle markets. Classified by individual countries and regions, East Asia’s trade patterns are as follows:


Table 4. Shares of Total Trade (Imports + Exports) by Region, Average during 1990-2000

Data: Eurostat, IMF Direction of Trade Statistics


Country or Region

Total Trade w/ East Asia

Total Trade w/US

Total Trade w/EU (excl. UK)













Hong Kong








South Korea


























While Japan and China are both autonomous economies blessed with powerful developmental states and massive foreign reserves, South Korea and other East Asian semi-peripheries are heavily exposed to the vagaries of US markets. However, it’s important to stress that the absolute amount of total trade in these economies is smaller than one might think. Here are the figures for total trade, expressed as a percent of country or regional GDP (note that Singapore and Hong Kong are excluded from the following chart, due to their status as entrepot economies, which makes trade-to-GDP figures virtually meaningless).



Table 5. Trade Exposure as % Country/Region GDP in 2000, By Region

Data: Eurostat, IMF Direction of Trade Statistics


Country or Region

Trade Exposure, East Asia

Trade Exposure, all non-East Asia

of which:


of which:

EU (excl. UK)











South Korea




































Using the same data source, the continental EU’s total trade exposure to East Asia is only 4.9% of EU GDP, while the comparable US figure is 6.1% of US GDP. Japan is consequently far less integrated vis-à-vis East Asia than, say, Germany is vis-à-vis the European Union, suggesting that the semi-peripheries and entrepot economies – in particular, the developmental states of China, Korea, Malaysia, Singapore and Vietnam – have a key role to play in driving the East Asian integration process.



IV. The Three Rings of the Triad


Based on investment flows and regional trade integration, the world-system of the early 21st century can be mapped out in terms of three core regions, each with their own center, semi-periphery and true periphery, as follows:


Table 6. The Global Core Economies

Data: Eurostat, ECB





€9.4 trillion

280 million

Continental Europe (Eurozone + Norway, Sweden, Denmark, Switzerland, excl. UK)

€7.7 trillion

329 million

East Asia (Japan, Hong Kong, Singapore)

€4.2 trillion

138 million



Table 7. Global Core + Semi-periphery

Data: Eurostat, ECB




North America (US, Canada, Mexico)

€10.6 trillion

(89% US)

412 million

(68% US)

EU-2004 (excl. UK) + Future accession

€8.6 trillion

729 million

East Asia Core + Semi-periphery (South Korea, Taiwan, Malaysia, Thailand, 10 richest Chinese provinces, metro areas of Manila, Jakarta, Hanoi, HCM City)

€5.8 trillion

(67% Japan)

754 million

(56% China)



Table 8. Global Core + Semi-periphery + Periphery

Data: Eurostat, ECB




North America (US, Canada, Mexico)

€10.6 trillion

(89% US)

412 million (68% US)

EU-2004 + Future accession (excl. UK) + Maghreb/Mashreq periphery

€8.9 trillion

(91% EU)

909 million

East Asia Core + Semi-periphery + Periphery (Rural regions of Cambodia, China, Indonesia, Laos, Philippines and Vietnam)

€6.4 trillion

(61% Japan)

2,037 million (64% China)



Three main geopolitical conclusions can be drawn here. First, the EU already has the sheer size and economic muscle to challenge the US for position of top dog; it is only a question of mustering the necessary political will. Second, East Asia’s relatively narrow core and broad semi-periphery means that it will need another decade of trade-led integration before it can declare its full financial-industrial autonomy. Third, huge swathes of the planet – Latin America, Africa and much of Asia – are located outside of these three main zones, and must use this fact to their own strategic advantage.



V. Trade Exposure in the Triad


At the peak of the Wall Street Bubble, you couldn’t walk down the street without tripping over yet another breathless account of the wondrous weightless information economy, the disappearance of the nation-state, and the globalization of trade and capital flows. What the New Economy boosters forgot to mention was that capital wasn’t simply wandering freely throughout the electronic wilds, it was accumulating in quite specific places – for the most part, in Japan and the continental EU. During most of the 1990s, Japan’s current account surplus averaged 2% of its GDP, the continental EU surplus averaged 1.5% of EU GDP, while the US ran annual deficits of around 3% of US GDP. Over time, such surpluses and deficits do add up, which is why the EU and East Asia are now the world’s biggest creditors and the US is the world’s biggest debtor. What was true for capital flows also applied to trading flows, but with an added twist. One of the most counterintuitive features of the multinational era is the fact that most trade takes place within each triad, rather than between triads. Here are the IMF statistics for the total trade (imports plus exports) for each of the three regions, expressed as a percentage of the GDP of that region:


Table 9. Trade Exposure by Region (Total Trade as % GDP, 2000)

Data: IMF Direction of Trade Statistics, 2000

Economic Region

Trade Exposure to US

Trade Exposure to continental EU

Trade Exposure to East Asia





Continental EU




East Asia





In a sound bite, the era of financial globalization was really the era of trade localization. Put another way, 94% of the EU economy and 91% of the East Asian economy are sheltered from US trading patterns. There are of course important regional variations – it’s clear the EU has the greatest relative autonomy of the triad, while East Asia is more exposed to US markets. Still, the EU trades more with its Eastern European, Russian and Maghreb/Mashreq neighbors (4.3%) than with the US (4.0%).



VI. Models: Euro-evangelion, Geofront Dialectics, and Sand in the Gears



A. Euro-Evangelion. We may thank Hideaki Anno’s epochal anime series, Neon Genesis Evangelion for providing us with aesthetic symbols capable of expressing the sheer scale of multinational geopolitics. The Evangelions are skyscraper-sized robots, designed to repel off the attacks of mysterious alien invaders called “angels”. During the course of the series, however, the angels gradually become ciphers of an aggressive, ruthless neoliberalism, while the Evangelions become symbols of the collective resistance to that neoliberalism. The EU is uniquely positioned to become the first multinational superpower of the 21st century – the first Evangelion, as it were, capable of defeating the US oiligarchy on its own global turf. This presents the Euroleft with some unique challenges and opportunities, which can be divided into short-term and longer-term tasks:


Short term (next 5 years): The European Parliament needs to continue to expand its powers and responsibilities. The new European constitution must balance the neoliberal freedoms of the marketplace with the freedoms of workers, consumers and citizens from the marketplace. Finally, the Euroleft should think seriously about the task of creating a democratic, egalitarian and emancipatory Euroculture. One of the most important tasks of such a Euroculture will be expanding the current vision of a “Europe of the regions” into a full-fledged commitment to multiculturalism. The EU has to face up to the reality that it has become a permanent immigrant society, and pass EU-wide juris solis laws and immigration reform.

This has the important corollary that the Euroleft and Left movements in other countries need to work together, to push the EU towards a policy of proactive support and solidarity with other potential developmental and welfare states around the world. One example: a quarter of Brazil’s total trade in 2000 was with the EU, about the same share as total trade with the US. However, Brazil still has a great deal of relative trade autonomy: its total trade with the US is only 4.4% of its GDP, while Brazil’s total trade with the EU is only 4.7% of Brazilian GDP. Argentina is another example: total EU and US trade are only 4% and 3%, respectively, of its GDP.


Long term (5-10 years from now): The EU needs a proactive politics to flesh out the details of the multiple accession processes of 2004, 2007, 2010 and 2015. This will mean expanding the role of the European Investment Bank, assisting the creation of community and local banks and credit unions, and a wide variety of fair trade deals. This also means building on the MEDA II program, which is pumping €1.5 billion in annual aid and loans from 2000-2007 into the Maghreb/Mashreq region. Based on the experience of previous EU expansions, each accession wave will need its own unique matrix of institutions and agreements, to maximize the benefits and minimize the disruption of EU membership. At the same time, the EU must continue to expand its commendable foreign policy track record of fair trade, cultural dialogue, democratization and peace-keeping around the globe.



B. Geo-front dialectics. East Asia has the sheer economic muscle and latent potential to become an EU-style superpower. This will not happen, however, without a significant expansion of its core and the creation of EU-style multinational institutions. In Hideaki Anno’s tale, the production-site of the Evangelions is a massive underground cavern called the “geofront”, and we will argue that East Asia will have to construct a similar base of operations to house its own multinational state apparatus. Possible policy options include:


Short-term (next 5 years): East Asian urgently needs its own multinational financial institutions. The Japan Bank of International Cooperation has made a promising start here, by bailing out vast tracts of Southeast Asia during 1998. In the future, however, East Asia must move beyond bailout Keynesianism and generate a long-term strategy to facilitate another long wave of accumulation. East Asia’s annual current account surplus with the US is somewhere around 2.5% of its GDP (four-fifths of this surplus is piling up in Japan). Over the course of the next decade, East Asia will have to mobilize these funds to create its own developmental bank, its own long-term bond market, and in the not too distant future, its own common currency.

Since the sunset of the US Empire in the mid-1980s, US commercial elites have pursued a short-sighted agenda of maximum self-interest, with little regard for the long-term health of the region. The EU, by contrast, has been content to play the role of the neutral, disinterested power, intent on a policy of multilateralism and regional stabilization. During the 1997-1998 crisis, footloose Wall Street capital fled Southeast Asia, nearly bankrupting South Korea, Thailand, Malaysia and Indonesia, while the Eurobanks and Japan stepped in to finance the recovery.

One of the important lessons here is that East Asia has much to gain and nothing to lose by diversifying its foreign reserves into euros. This will not only create a welcome counterweight to the agenda of US finance capital, it will also protect East Asian firms from market fluctuations and preserve their access to EU markets. One corollary: as long as Hong Kong diversifies its foreign reserves into euros, it might be possible to retain the US dollar peg, since the deflationary effects on the Hong Kong economy ought to be mitigated by the long-term decline of the dollar vis-à-vis the euro and yen.


Long term (5-10 years from now): The process of European integration offers two key lessons for East Asia’s integration. First, the task of building multinational institutions must start at the local and regional level first, and then gradually scale up to the transregional and international level (“nurture the pillars, before building the bridge”). Second, Asia’s economic and cultural diversity should not be regarded as a weakness, but rather as a strength. The political alliance between France and West Germany was crucial to the formation of the European Community, while the economic alliance of Central Europe and the accession countries powered the evolution of the EU in the late 1990s.

            One possible model for East Asian integration is a strategic alliance between Northeast and Southeast Asia. The basic formula can be summarized as 1 + 2 + 3 = 6: the northeastern constellation of Japan plus the two Koreas plus the three Chinas must develop in harmony and balance with the six major southeastern economies (Malaysia, Thailand, Indonesia, Vietnam, the Philippines, and Singapore). Due to the relatively self-contained nature of the Chinese and Japanese economies, the East Asian semi-peripheries and future core regions have a unique role and responsibility to serve as agents of intermediation, dialogue and consensus-building. Korea’s developmental state, for example, is in a unique position to intermediate between Japan and China, while assisting the reintegration of North Korea into the East Asian economy. Similarly, Singapore is in an excellent position to provide a similar role in the Southeast Asian region, by serving as a regional center of technological and managerial expertise to Malaysia, Thailand, Indonesia and Vietnam.



C. Sand in the gears. Structurally speaking, the US is no longer a global Empire, but is instead a relative wealthy but increasingly vulnerable semi-periphery, racked by social polarization and chronic underinvestment. The November 2000 coup, when an unelected gang of petro-fundamentalists hijacked the Federal Government without a pipsqueak of protest from the Democrats, was not an unfortunate exception to an otherwise healthy democracy; it was the logical end-result of the neoliberalization of the Democratic Party, as well as a viciously provincial political culture and a hopelessly archaic and undemocratic 18th century system of governance.


Short term (next 5 years): If the US oiligarchy ignites a major war, the geopolitical consequences will play out in weeks, not decades. The best-case scenario is a decades-long Argentinization and a more or less peaceful transfer of authority from the US to the new metropoles; the worst-case scenario is a catastrophic fall into the Land of Mordor. While outright war between the US and the new metropoles is simply not a possibility, thanks to China and Russia’s capacious nuclear weapons stockpiles and the civilizing effects of the multinational consumer culture, the US oiligarchy will be keen to demonize the EU and East Asia as part of its global war on the petro-periphery. To head this off, the US Left must dump as much sand as possible into the gears of the oiligarchy, via protests, marches, and nonviolent direct action.

This may seem depressingly minimalistic, but in fact there are three good reasons to be optimistic about such a strategy. First of all, time is running out on the oiligarchy. Every single day, the US goes a little deeper into the red on its net international investment position, and loses that much more freedom of action to Japanese and European creditors. Second, the one geopolitical entity currently capable of reining in the US – namely the EU – also has the greatest incentive to do so, for quite pragmatic reasons: the Middle East is located perilously close to the EU’s Maghreb/Mashreq semi-periphery. Third, the EU’s vast welfare states and democratic traditions have created a roster of savvy, charismatic and capable political leaders such Chirac, Schröder, Fischer and Prodi, who fully understand what is at stake in standing up to an unelected, dismally stupid and pathologically violent US oiligarchy.

It’s worth emphasizing that if worst came to absolute worst and the US chose the path of total self-immolation, the EU could unleash the economic version of an orbital satellite pulse weapon: capital and trade sanctions. Though this would create unpleasant side-effects for the European economy, the EU could ride out the storm with a hefty domestic stimulus package – 5% of its GDP, or €400 billion, would do the trick. But the effect of such sanctions on a US economy already reeling from a collapsed financial bubble and chronic underinvestment is literally too horrible to contemplate (although the US exposure to EU trade is only 3.3% of US GDP, the US depends on €400 billion annual inflows of capital to finance its economy, about half of which comes from continental Europe).


Long term (5-10 years from now): No progressive movement of any kind will ever come to power in the US without a progressive union movement committed to organizing the US service sector. Fortunately, there are promising signs that the unions which make up the heart of the AFL-CIO are, at long last, on the verge of doing just that. Once the union movement raises its total density in the workforce from 13% to at least 15% or 16%, the critical mass will be on hand for the development of a new mass Left party, possibly on the Brazilian model of a Workers’ Party. Obviously, the Labor Party and Green Party organizations will need to think long and hard about what it will take to make this happen. Rather than simply electing candidates, this new party or coalition of parties must press for a broad range of social and political changes, including the abolition of the electoral college, direct popular election of the President, the replacement of the Senate by some form of parliamentary system based on proportional representation, universal health insurance, the drastic expansion of the welfare state, immigration reform and so forth. If the European Union can sit down and write itself a 21st century constitution, so can the US.












1. Below are the latest (mid-2002) BIS statistics on consolidated foreign banking claims, classified by region in billions of US$. Data: Bank of International Settlements, quarterly report on international loans (


Debtor region

Total debt

% owed to European banks(excl. UK)

% owed to UK banks

% owed to Japanesebanks

% owed to US banks

% owed to other banks

Latin America/ Caribbean





















Middle East/Africa







Total developing countries







Developed countries







Offshore banking centers







World total









2. Robert Wade, Governing the Market. Alice Amsden, South Korea: Asia’s Next Giant. David Friedman, The Misunderstood Miracle.


3. Eurostat. Statistics in Focus: Industry, Trade and Services, Theme 4 – 4/2002. “Cinema statistics: Growth in cinema-going continues in 2000 and 2001.” ISSN 1561-4840. Catalog number KS-NP-02-004-EN-N


4. Federal Reserve data 2002.


5. OECD National Accounts, European Central Bank Monthly Report (1998-2002).


6. These numbers were compiled from Flow of Funds data by a report from the Financial Market Center:


7. “Annual Hours Worked Per Person in Employment”, in: Key Indicators of the Labour Market. International Labor Organization, 2001. Web:


8. The UK is excluded from the EU economy mostly it occupies an ambiguous geopolitical position, halfway between the US and continental Europe. Although Britain trades almost three times as much with the EU than with the US (58% versus 17%), its accumulation structure is far more similar to the US than to continental Europe. For similar reasons, I exclude Australia from the East Asian semi-periphery, even though 48.5% of Australia’s trade is with East Asia and only 15.1% is with the US. There is no such ambiguity with Canada: the overwhelming majority of its foreign trade (76.7%) is with the US.