[A-List] Fwd: from A G Frank

[Mark Jones <markjones011@xxxxxxxxxxxxx>]

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ANDRE GUNDER FRANK
Senior Fellow Residence World History Center One Longfellow Place
Northeastern University Apt. 3411 270 Holmes Hall Boston, MA 02114 USA
Boston, MA 02115 USA Tel: 617-948 2315 Tel: 617 - 373 4060 Fax: 617-948
2316 Web-page:csf.colorado.edu/agfrank/ e-mail:franka@xxxxxxx
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This essay is the draft of the closing chapter for a book in preparation on
REORIENT THE NINETEENTH CENTURY

by Andre Gunder Frank

Chapter 8 SOME PRSENT AND FUTURE PROSPECTS

Can this review of global developments in the nineteenth century - even
without also yet examining the twentieth century - afford us any guides to
what prospects the future may hold ? I believe YES! For the following
reasons: 1. A main thesis has been that there has been more continuity in
global history than the discontinuities that most observers attribute to
new events most of the time. John McNeill [2001] has argued persuasively
that the SOMETHING NEW UNDER THE SUN of the twentieth century was really
its duplication of world population and its and its economic /
technological vastly increased ravages of the environment. Never mind the
hot and cold wars, depressions, and socio-political experiments. It seems
plausible that the underlying historical continuity will continue still. 2.
The analysis was purposefully constructed through the use of fundamental
analytic categories that have survived the twentieth or are being
resurrected at the beginning of the twenty-first century. The conclusions
we drew from them and their renewed application to examine the present and
to peer into the future should therefore throw some light also on that.
There are some parallels to the hegemonic position of Great Britain before
and the United States now, which can throw some light on the prospects of
the latter. The most important of these is that ''hegemony'' was never as
hegemonic then or now as it has been made out to be - perhaps primarily by
the ''hegemons'' who sought to create a self-fulfilling prophesy. Moreover,
even to the limited extent that anybody was hegemonic, it did not last long
and was soon replaced in the case of Britain by NO hegemony at all, and in
the case of the United States probably also.

With the end of the cold war in 1989 and the subsequent decline of Russia
as a serious immediate contender, as well as the decline during the 1990s
of the hype of JAPAN AS # 1 [Vogt 19xx] , two other regions, states and
powers came into contention, rising Asia and particularly China, and the
United States whose fortunes and prospects seemed to have declined after
1970 but recovered in the 1990s. In global terms, we could regard this as a
process of continued shift of the world center of gravity west-ward around
the globe, from East Asia/China to Western Europe, then across the Atlantic
to the United States, and there then from the eastern to the western
seaboard, and now onwards across the Pacific back to East Asia, as observed
in my "Around the World in Eighty Years" [Frank 2000]. Let us inquire
further into the so far last part of this historical process.

CHINA IN EAST ASIA
In that process, a financial and economic crisis erupted in East Asia in
1997 and brought evident relief to many observers in the West. As a result
and mis-led by day-to-day press media reports and short term business and
government analysis and policy, even "informed" public opinion in the West
changed again. Now the former "East Asian Miracle" is said to have been no
more than a mirage, a dream for some and a nightmare for others. The
previously supposed kxplanations and sure-fire strategies of success are
being abandoned again as quickly as they had come into fashion. We hear
less about Asian values or guarantees from the magic of the market and no
more security from state capitalism . So much the better I would say, since
these supposed explanations and correct policies were never more than
ideological shams anyway.

The historical evidence presented in this book shows that no one particular
institutional form or political economic policy offers or accounts for
success [nor failure!] in the competitive and ever changing world market.
The contemporary evidence shows the same. In that respect, Deng Xiaoping's
famous aphorism is correct. The question is not whether cats are
institutionally, let alone ideologically, black or white; the real world
issue is whether or not they catch economic mice in competition with others
in the world market. And that depends much less on the institutional color
of the cat than it does on its opportune position in the world economy at
each particular place and time. And since the obstacles and opportunities
in the competitive world market change over time and in place, to succeed
the economic cat, no matter what its color, must adapt to these changes or
fail to catch any mice at all. Among these different institutional forms
including relations among state-finance- productive and sales
organizations, perhaps the most attention and positive evaluation has been
devoted abroad to those of Korea and then of Japan but also of Greater
China including its vast network of overseas Chinese. But the very fact
that they differ, and in Taiwan, Singapore, Malaysia, Indonesia and
elsewhere as well, should already forewarn us against privileging one
institutional form over all others.
At best and that is already very much, the evidence is that none of these
institutional forms is necessarily an impediment or insurmountable obstacle
to success on the domestic, regional and world market. Most noteworthy
perhaps in view of the widespread Western propaganda about its own alleged
virtues is the demonstrated fact that no Western model need or should be
followed by Asians in Asia or even elsewhere.

The significance of position and flexible response in the world economy is
particularly important during periods of economic crisis B phase that is in
Chinese of [negative] danger and [positive] opportunity. In the present
economic crisis so far, the focus has been far too predominantly on its
undoubtedly serious negative consequences. But the opportunities it poses
have received insufficient attention, except perhaps in the United States
and China, both of which are seeking to reap competitive advantages from
the political economic problems and alleged meltdown of Japan, Korea, and
Southeast Asia.
But the dismissal of East Asian and particularly Chinese economic strengths
and prospects may be premature and certainly is based on a shortsighted
neglect of the historical evidence as presented in ReORIENT and further
pursued inthis book and on a serious misreading of the contemporary
evidence. I believe that this latest quick dismissal of Asia is mistaken
for the following reasons among others:

1] Since Asia and especially China was economically powerful in the world
until relatively recently, and new scholarship now dates the decline as
really beginning only in the second half of the nineteenth century, it is
quite possible that it may soon be so again. Contrary to the Western
mythology of the past century, Asian dominance in the world has so far been
interrupted by an only relatively short period of only a century or at most
a century and a half. The oft-alleged half century or more decline of China
is purely mythological.

2] Chinese and other Asian economic success in the past was not based on
Western ways; and much recent Asian economic success was not based on the
Western model. Therefore, there is also no good reason why Japanese or
other Asians need or should copy any Western or other model. Asians can
manage their own ways and have no good reason to now replace them by
Western ones as the alleged only way to get out of the present economic
crisis. On the contrary, Asian reliance on other ways is a strength and not
a weakness.

3] The fact that the present crisis visibly spread from the financial
sector to the productive one does not mean that the latter is fundamentally
weak. On the contrary, the present crisis of overproduction and excess
capacity is evidence of the underlying strength of the productive sector,
which can recover. Indeed, it was excess capacity and productivity leading
to over-production for the world market that initiated the financial crisis
to begin with when Asian foreign exchange earnings on commercial account
were no longer able to finance its service of the speculative short run debt.

4] Not that economic recessions will or can be prevented in the future.
They never have been prevented in the past even under state planning in
China or the Soviet Union. More significant is that this is the first time
in over a century that a world recession started not in the West and then
moved eastward, but that instead it started in the East and then moved
around the world from there. And that was precisely because as per # 3 East
Asian and particularly Japanese, Korean and then Chinese productive and
export capacity had grown so MUCH. This recession can therefore be read as
evidence not so much of the temporary weakness as of the growing basic
economic strength of East Asia to which the center of gravity of the world
economy is now shifting back to where it had been before the Rise of the West.

5] The recession in the productive sector was short, especially in Korea.,
and so far absent in China. But it was also severe, especially in
Indonesia. And the shock-waves from the financial sector to the productive,
consumer and political ones were visibly - and to all but the totally
blind, intentionally - exacerbated by the economic shock policies imposed
on Asian governments by the IMF as usual following the dictates of the U.S.
Treasury, which systematically represents American financial interests at
the expense of popular ones elsewhere around the world. The former World
Bank Vice-President, member of the US President's Council of Economic
advisers and now Nobel Prize laureate in economics, Joseph Stiglitz [2002],
has given us an insider's view of these intentional events in his
GLOBALIZATION AND ITS DISCONTENTS.

That also permitted Western interests to take advantage of declines in
productive and financial strength in Korea and elsewhere to buy up assets
at bargain-basement fire-sale prices. Even so the underlying strength of
the Korean economy was such that the foreigners were even then unable to
alter the financial, productive, ownership and state structure
significantly to their favor. The Korean productive and financial machine
soon recovered again to forge ahead, but now with a costly lesson well
learned. The lesson must have been learned elsewhere as well by comparing
how relatively unscathed China and Malaysia [and as already mentioned for
different reasons Korea] emerged from the financial crisis. They maintained
controls over capital exports, compared to those countries that succumbed
to the IMF and its lethal medicine by permitting a speculative capital
outflow, which destroyed their productive apparatus and multiplied
unemployment into an unbearable economic, social, and political problem,
especially in Indonesia.

6] That underlying political economic strength also puts East Asia, and
especially China, Japan and Korea in a much more favorable position than
the rest of the Third World and even Russia and Eastern Europe to resist
Western blackmail as it is now exercised by the U.S. Treasury Department
through the International Monetary Fund, the World Bank, the World Trade
Organization, Wall Street and other instruments.

7] The very act and cost of East Asian concessions to this Western pressure
during the past recession makes it politically more likely, since it is
economically possible, that East Asia will take measures, including
especially a new financial bloc and banking institutions, that can prevent
a recurrence of the present situation in the future by escaping from the
strangle-hold of Western controlled capital markets. Stiglitz observes such
efforts already in his recent private discussions with Asian officials as
reported in his book.

8]. Indeed, one of the present battles, first by the Japanese and now also
by the Chinese, is to remodel the world financial and trade institutions
that were designed by the United States to work in its favor. Thus, Japan
wanted to establish an Asian monetary fund to prevent the East Asian
recession from deepening as it has thanks to the International Monetary
Fund based in and subservient to Washington. And China wishes to join the
World Trade Organization but also seeks to have this Western dominated
institution reformed to its advantage.

9] A related political economic struggle is the competition between the
United States and China to displace Japan, Korea and Southeast Asia in the
market by taking advantage of their bankruptcies. American capital is
buying up some East Asian productive facilities at bargain basement prices,
while China is waiting for them either to be squeezed out of the
competitive market altogether, and if not to engage in joint operations.
Indeed it had been the devaluation of the Chinese currency before 1997 that
reduced the world market share of other Asian economies and helped generate
the financial crisis itself. Only time will tell which strategy will be
more successful, but the Chinese and perhaps also some Southeast Asians
seem like the better bet over the long term. Moreover, no matter how deep
the recession in Japan; it is not for that eliminated as an economic power,
especially in Asia. However, there is evidence that China is trying to
reconstruct the East Asian trade and tribute system at whose center it was
in the eighteenth and that the ern colonial powers dismantled in the
nineteenth century.

10] Equally significant is that India and to recently to a lesser extent
China have remained substantially immune from the present recession, thanks
in part to the inconvertibility of their remin ribao and rupee currencies
and the valve in their capital markets that permits the inflow but controls
the outflow of capital. The currency devaluations of China''s competitors
elsewhere in East Asia and the reduced inflow into China of Overseas
Chinese and Japanese capital that is negatively affected by the recession
in East Asia may oblige China to devalue again as well to remain
competitive. Nonetheless and despite their serious economic problems, the
Chinese and Japanese economies appear already to have and to continue to be
able to become sufficiently productively and competitively strong to resist
and overcome these problems. In Southeast Asia, Malaysia has successfully
followed the Chinese model of opening its capital market to inflows but
restricting especially speculative capital outflows from the same. Korea
did not need such emergency measures, since it had received relatively
little foreign capital to begin with.

11] It is noteworthy that the economically most dynamic regions of East
Asia today are also still or again exactly the same ones as before 1800 and
which survived into the nineteenth century. 1. In the South, Lingnan
centered on the Hong Kong - Guangzhou corridor, 2. Fujian, still centered
on Amoy/Xiamen and focusing on the Taiwan straits and all of Southeast Asia
in the South China Sea; and between them, 3. the Yangtze Valley, centered
on Shanghai and trade with Japan that is already taking the lead away again
from the southern and northern regions.

4. But already then there was also a fourth economic region around the
North China Sea, the quadrangular trade relations among Manchuria and
elsewhere in Northeast China, Siberia/Russian Far East, [northern?] Japan,
and Korea, but also including Mongolia.. Although the first three
above-named regions are already again undergoing tremendous economic growth
[and political power?] in the absolute sense, the fourth one around Korea
seems to enjoy the greatest relative boom, and within it that of Korean
capital as well. It is helping to develop resources in the Russian Far East
and as far west as Central Asian Khazhakstan. The Chinese population on the
Russian side of the Amur River has been estimated already to exceed 5
million people as a pool of cheap labor. Probable political change in the
DRNK may well add a new source of cheap labor for this growing pool of
labor in the Northeast Asian Region and for its Far East Russian also cheap
base of ample metallurgical, forestry, agricultural and even petroleum
resources. Korean and Japanese capital could make that a very attractive
regional growth pole in itself and a highly competitive region on the world
market.

All of these in turn were and still or again increasingly are important
segments of world trade and of the global economy. In that sense also and
although its story ends in 1800, the examination of the world economy and
of the predominant place in it of the East Asian including Korean economies
points to the most fundamental bases of contemporary economic developments
in the region and also presages important world economic ones for the
foreseeable future.

THE UNITED STATES IN THE WORLD
Where does that leave the United States? It still has the world's largest
economy, which saw boom times during much of the 1990s,; and its has
unrivalled military power exceeding the total of the next half dozen
military powers combined. Moreover, the present Bush administration makes
use of both of them in unilateral policies to impose its will on the rest
of the world, friend and foe alike, to all of which Bush threw down the
gauntlet of ''you are either with us or against us." With means you do as
we say, and against means you are under threat to be destroyed economically
and poiitically, as well as militarily if we wish. In case there be any
doubt about our intentions and capabilities, Russia and Argentina are prime
examples on the economic front as are Iraq through the boycott, Serbia and
I Afghanistan are so on the military front as well. The latter - but really
both - are what President Bush father called THE NEW WORLD ORDER when he
bombed Iraq in 1991. I termed it THIRD WORLD WAR in two senses, one that it
takes place in THE THIRD WORLD and secondly that this war against the Third
World constitutes a THIRD World War [Frank 1991].

The prosperity and welfare of the American people rests primarily on its
position in the world today as Britain's did in the nineteenth century.
That observation is fundamentally different from the political and media
hype about the sources of American exceptionalism that are supposedly in
its genious, morality, productivity, and other characteristics that
allegedly differentiate America from the rest of the world. On the
contrary, America rests on two - maybe three- pillars: 1.The DOLLAR as the
world currency whose monopoly privilege the US has to print at will, and 2.
The PENTAGON with its unrivalled military capacities. 3. A third pillar
perhaps is the government, educational and media fed IDEOLOGY that obscures
these simple facts from public view. Moreover each supports the other: It
costs dollars to maintain the Pentagon, its bases in 80 countries around
the world, and the deployment of its military forces around the globe.
Military expenditures are the prime causes of the twin American deficits,
in the federal budget and in the balance of trade. Conversely, Pentagon
strength helps sustain global confidence in the dollar.
But this same mutual reliance for strength therefore also constitute two
mutually related American Achilles heels. The dollar is literally a Paper
Tiger in that it is printed on paper whose value is based only on
confidence in the same. That confidence can decline or be withdrawn
altogether almost from one day to the next and cause the dollar to lose
half or more of its value. Aoart from cutting American consumption and
investment as well as dollar-denominated wealth, any decline in the value
of the dollar would also compromise US ability to maintain and deploy its
military apparatus. Conversely, any military disaster would weaken
confidence in and thereby the value of the dollar. Indeed, at the 2003
World Economic Forum in Davos, the assembled world political and business
elites expressed very serious fears that the mere deployment of the US
military, e.g. against Iraq, would bring on a world depression. TIME
Magazine this week reports on a comprehensive study of the US airline
industry, which concludes that a war against Iraq would drive half of it
into immediate bankruptcy. If so, what of still weaker non-American
airlines? And no amount of ideology is sufficient completely to obscure
that economic situation.

In fact, the world already is in depression, from which so far only the
United States is substantially and Canada and Western Europe partially
exempt. And the latter is so, because of the privileged position of
especially the American economy within the global one, from whose
mis-fortune Americans have been deriving the benefits of that position,
which to repeat is essentially derived from the privilege of printing the
world currency with which Americans can first buy up the production of the
rest of the world at depressed deflationary prices and then have the same
dollars be returned from abroad to be invested in Wall Street and US
Treasury certificates for safe-keeping and/or higher earnings than are
available elsewhere.

I n the mid 1980s James Tobin [the inventor of the Tobin tax on financial
transactions] and I were to my knowledge the only ones already to published
predictions of DE-flation as the coming world economic danger. Economic
policy makers however ignored these warnings and this risk [not really
risk, but necessary consequence] while continuing their policies designed
to fight IN-flation. Nonetheless, since then commodity prices have fallen
sharply and consistently and more recently industrial prices have fallen as
well. Moreover in WORLD economic terms, high inflation in terms of their
national currencies [pesos, rubles, etc.] and their sharp DEVALUATION
against the DOLLAR world currency has been an effective de facto major
DE-flation in the rest of the world. That has reduced their prices and made
their exports cheaper to those who buy their currencies with dollars,
primarily of course consumers, producers and investors in - and from ! -
the United States. These additionally, which is hardly ever mentioned!, can
and do buy up the rest of the world with dollars that ''cost'' only their
printing and distribution, which for Americans have virtually no cost. [The
$ 100 dollar bill is the world's most used cash currency on which runs the
entire Russian economy, and there are two to [now?] three times as many of
them circulating outside as inside the US]. The American boom and welfare
and then ''balanced'' federal budget 1992-2000 Clinton administration,
contrary to its populist claims, only happened to coincide with this boom
and the also same 8 year long prosperity of the United States was entirely
built on the backs of the terrible depression, deflation and thus generated
marked increase in poverty in the rest of the world [during this one
decade, production declined by over half in Russia and Eastern Europe and
life expectancy in Russia declined by 10 - ten - years, infant mortality,
drunkenness, crime and suicide increased as never before in peacetime.
Since 1997, income in Indonesia declined by half and generated its ongoing
political crisis. If that is not dissipation of entropy and its export
abroad to those who are obliged to absorb it in ever greater DISorder, it
would be difficult to find better examples - except the destruction of the
entire society in Argentina, Rwanda, Congo, Sierra Leone, previously
prosperous and stable Ivory Coast - not to mention the countries that have
been visited by destruction through American military power

All this has among others the following consequences: in the US. it can
export inflation that would otherwise be generated by this high supply of
currency at home, whose low rate of inflation in the 1990s was therefore no
miracle result of domestic ''appropriate'' Fed monetary policy. The US has
been able to cover twin its balance of trade and budget deficits with cheap
money and goods from abroad. The US trade deficit is now approximately 400
billion dollars a year and still growing. Of that, 100 billion are covered
by Japanese investment of their own savings in the US, which they may have
to repatriate to manage their own banking crisis. Another $ 100 billion
Comes from Europe in the form of various kinds of investment, including
direct real investment, which could dry up as the European recession
continues. A third 100 billion is supplied by China, which first sells the
US its cheap manufactures for dollars and then accumulates those dollars as
foreign exchange reserves - thus in effect giving away its poor producers'
goods to rich Americans. China does this to keep its exports flowing and
its industries going, but if it decided to devote these goods to expanding
its own internal market more, its people would gain in income and wealth,
and the United States would be out of luck. The remaining $ 100 billion of
deficit are covered by other capital flows, including debt service from the
poor Latin Americans and Africans who have paid off the principal of their
debts already several times over and yet keep increasing the total amount
owed by rolling it over at higher rates of interest. Declaration of chapter
11 or 9 type insolvency is however finally catching on.

Thus, deflation / devaluation elsewhere in the world has like a magnet
attracted speculative financial capital from the rest of the world - both
American owned and foreign owned - into US Treasury certificates [ stopping
up the US budget deficit] and into Wall Street. That is what fed and
supported its 1990s bull market, which in turn has increased, supported and
spread wider a speculative and illusory in increase in wealth for American
and other stock holders and through this also illusory ''wealth effect''
has supported higher consumption and investment. The subsequent and present
bear market decline in stock prices nonetheless is a still a profit boon
for enterprises who issued and sold their stocks at bull market high and
rising stock prices and are now buying back their OWN stocks at what for
them are bargain basement low prices, which represent an enormous profit
for them at the expense of small stock holders who are now selling these
stocks at low and declining prices. The US ''prosperity'' now rests on the
knife edge not only of an unstable enormous domestic corporate and consumer
[credit card, mortgage and other] debt.

Moreover, the US is also vastly over-indebted to foreign owners of US
Treasury certificates, Wall Street stock and other assets, which can be
called in by foreign central banks who have been keeping reserves in US
dollars and other foreign owners of US debt. Indeed, it is the very US
policy that has contributed so much to destabilization elsewhere in the
world [e.g. through the destabilization of Southeast Asia that undermined
the Japanese economy and financial system even more than it would otherwise
have been] that now threatens and now soon makes much more likely that
especially Japanese and European holders of US debt must cash it in to
shore up their own ever more unstable instable economic and financial systems.

Another major consequence is that the US - and world! - economy is now in a
bind from which it most probably can NOT extricate itself by resorting to
Keynesian pump priming and much less to full scale macro-economic policy
and support of the Us and Western/Japanese economy, as the Carter and
Reagan administrations did. Military Keynesianism, disguised as
Friedman/Volker Monetarism and Laffer Curve Supply-Sideism, was begun by
Carter in 1977 and put into high gear in 1979, when Carter the Fed was run
by Carter appointee Paul Volker, who in October 1979 switched Fed monetary
policy from high money creation / low interest price thereof to attempted
low money creation / high interest [ to 20 percent monetary! ] to rescue
the dollar from its 1970s tumble and attract foreign capital to the poor
US. At the same time, Carter began Military Keynesianism in June 1979.,
which was then escalated further by President Reagan In that they then
succeeded..

It is highly unlikely however that analogous policies could succeed again
now. The US would need to invoke the same re-flationary policy again for
itself and its allies, now. but it can not do so! The Fed has already
lowered the interest rate so far that it cannot go much lower and is not
likely to stimulate investment by doing so. On the other hand, raising the
interest rate to continue to attract funds from abroad would risk choking
off all domestic investment and working capital. Brazil tried that,
admittedly with extravagant monetary interest rates at 60 percent to
attract foreign capital, and ruined its domestic economy.

The US may [should? must ??] now attempt a repeat performance of the 1980s
to spend itself and its allies [now minus Japan but plus Russia?] out of
the present and much deeper world recession and threatening globe
encompassing depression. The US would then again have to resort to massive
Keyenesian deficit [ using September 11 as a pretext for probably military]
RE-flationary spending as the locomotive to pull the rest of the world out
of its economic doledrums. However, the US is already the world consumer of
last resort, but it can be so with the savings, investments and cheap
imports from abroad, which themselves form part of the global economic problem.

Moreover, to settle its now enormous and ever growing foreign debt, the US
may chose also to resort to IN-flationary reduction of the burden to itself
of that debt and its also ever growing foreign debt service. But even the
latter could - in contrast to the above summarized previous period- NOT
avoid generating a further SUPER trade balance particularly if market
demand falls further and pressure increases abroad to export to the US
demand/er of last resort. But this time, there will be NO capital inflows
from abroad to rescue the US economy. On the contrary, the now downward
pressure to devalue the US dollar against other currencies would spark a
capital flight from the US, both from US Government bonds and from Wall
Street where significant stock price declines generate further price
declines and deflation in world terms even if the US attempts domestic
inflation.

The price of oil is yet another fly in the political economic ointment,
whose dimension and importance is inversely proportional to the health or
illness of the ointment itself. And today that is quite sick and
deteriorating already. The world price of oil has always been a two edged
sword whose double cutting edges can be de-sharpened with the help of
successful alternative economic and price policies. On the one hand, oil
producing economies and states and their interests need a minimum price
floor to produce and sell their oil instead of leaving it underground and
also postponing further oil productive investment while waiting for better
times. Thus, a high oil price is economically and politically essential for
important states like Russia, Iran and especially Saudi Arabia, as well as
US oil interests. On the other hand, a low price of oil is good for oil
importing countries, their consumers including oil consuming producers of
other products, and supports state macro economic policy, eg in the US,
where low oil prices are both good politics and good for the economy. These
days, the high/low price line between the two seems to be around US$ 20 a
barrel - at the present value price of the dollar! But nobody seems to be
able to rig the price of oil at that level. The present conflict, long
since no longer within OPEC, is primarily between OPEC that now sells only
about 40 percent of the world supply and other producers that supply 60
percent, today especially Russia but also including the US itself as both a
significant producer and a major market, although that is increasingly
shifting to East Asia. Recession in both and the resultant decline in
demand for oil drags its price downward. US strategy and wars against
Afghanistan and Iraq. is to gain as much CONTROL of oil as it can and for
now to share as little of it as it must with Russia in Central Asia,
Caspian Sea and Persian Gulf regions. And that control, even if it cannot
control the price of oil, is to be used as an important geo-political
economic lever to manipulate against US oil import dependent allies in
Europe and Japan and ultimately its strategic enemy in China.

For US Keynesian spending re-flation as well as in-flation can no longer
put the floor under the price of oil needed today and tomorrow. No policy,
but only recovery generated world market demand I- and/or limitations in
the supply of oil -can now provide a floor to and prevent a further fall in
the price of oil - and its deflationary pull on other prices. And further
deflation in turn will increase the burden of the already vastly
over-indebted US, Russian and East Asian, not to mention some European and
Third World, economies.

Thus the political economy of oil is likely to add to further deflationary
pressure. That would - indeed already does - again significantly weaken oil
export dependent Russia. But this time it would also weaken US oil
interests and their partners abroad, especially in Saudi Arabia and the
Persian Gulf. Indeed, the low price of oil during the 1990s has already
transformed the Saudi economy from erstwhile boom to a bust. That has
already generated middle class unemployment and a significant decline in
income that has also already generated widespread dissatisfaction and now
threatens to do so even more at precisely the time when the Saudi monarchy
is already facing destabilizing generational transition problems of its
own. Moreover a low oil price would also make new investment unattractive
and postpone both new oil production and eliminate potential profits from
laying new pipelines in Central Asia.

All of these present problems and developments now threaten to [will?] pull
the rug out from under US domestic and international political economy and
finance. The only protection still available to the United States still
derives from its long since and still only two pillars of the ''NEW WORLD
ORDER'' established by President Bush father after ''Bush's Gulf War"
against Iraq and the dissolution of the Soviet Union in 1991. President
Bush son is now trying to consolidate his father's new world order [no
doubt with the latter still as a power behind the throne] beginning with
the WAR AGAINST AFGHANISTAN and threatening once again against Iraq, and
the Bush-Putin effort now also to construct a US-Russian Entente - or is it
Axis.

The dollar pillar is now threatening to crumble, as it already did after
the Vietnam War but has so far remained standing through three decades of
remedial patch work. But as we have seen, the US is now running out of
further economic remedies to maintain the dollar pillar upright. It's only
protection would be to generate serious inflation in the short run by
printing still more US dollars to service its debt, which would then
undermine its strength and crack the dollar pillar and weaken the support
it affords still more.
That would leave only the US military pillar to support US political
economy and society. But it and reliance on it also entails dangers of its
own. Visibly, that is the case for such as Iraq, Yugoslavia, and
Afghanistan and of course all others who are thereby deliberately put on
notice to play ball by US rules in its new world order on pain of eliciting
the same fate for themselves. But the political blackmail to participate in
the new world order on US terms also extends to US - especially NATO -
allies and Japan. It was so exercised in the Gulf War [other states paid US
expenses so that the US made a net profit from that war], the US war
against Yugoslavia in which NATO and its member states were cajoled to
participate, and then by the War against Afghanistan as part of President
Bush's new policy pronouncement. He used the early Cold WAR terminology of
John Foster Dulles] that ''You Are Either With Us Or Against Us"] But US
reliance on this, the then only remaining, strategy of military political
blackmail can also lead the US to bankruptcy as the failing dollar pillar
fails to support it as well; and it can come also to entail US
''OVERSTREETCH'' in Paul Kennedy terms and ''BLOWBACK'' in CIA and Chalmers
Johnson terms.

In summary and plain English, the US has only two assets left to rely on,
both admittedly of world importance, but perhaps even so insufficient. They
are the dollar and its military political assets. For the first, the
economic chickens in the US Ponzi scheme pyramid of cards are now coming
home to Roost even in the united states itself.

The second pillar is now in use to prop up the new order the world over.
Most importantly perhaps is the now proposed US/Russia entente against
China instead of [or to achieve?] a US defense against a Russia/China[and
India?] entente. The NATO War against Yugoslavia generated moves toward the
latter, and the US War against Afghanistan promotes the former]. God/Allah
forbid that any of these nor their Holy War against Islam blow us all up or
provoke others to do so.
However that may be, US imperial political military blackmail may still
blowback on the united states also, thus not out of strength but out of
weakness.