Nuland expressed who was dictating the policies of NATO members succinctly in 2014: “Fuck the EU.” That was said as she told the U.S. ambassador to Ukraine that the State Department was backing the puppet Arseniy Yatsenyuk as Ukrainian prime minister (removed after two years in a corruption scandal), and U.S. political agencies backed the bloody Maidan massacre that ushered in what are now eight years of civil war. The result devastated Ukraine much as U.S. violence had done in Syria, Iraq and Afghanistan. This is not a policy of world peace or democracy that European voters endorse.

America’s Sanctions on Its Allies Hurt Their Economies, Not Those of Russia and China

What seems ironic is that sanctions against Russia and China have ended up helping rather than hurting them.

But the primary aim was not to hurt nor to help the Russian and Chinese economies. After all, it is axiomatic that sanctions force the targeted countries to become more self-reliant. Deprived of Lithuanian cheese, Russian producers have produced their own, and no longer need to import it from the Baltic states. America’s underlying economic rivalry is aimed at keeping European and its allied Asian countries in its own increasingly protected economic orbit. Germany, Lithuania and other allies are told to impose sanctions directed against their own economic welfare by not trading with countries outside the U.S. dollar-area orbit.

Quite apart from the threat of actual war resulting from U.S. bellicosity, the cost to America’s allies of surrendering to U.S. trade and investment demands is becoming so high as to be politically unaffordable. For nearly a century there has been little alternative but to agree to trade and investment rules favoring the U.S. economy as the price of receiving U.S. financial and trade support and even military security. But an alternative is now threatening to emerge – one offering benefits from China’s Belt and Road initiative, and from Russia’s desire for foreign investment to help modernize its industrial organization, as seemed to be promised thirty years ago in 1991.

Ever since the closing years of World War II, U.S. diplomacy has aimed at locking Britain, France, and especially defeated Germany and Japan, into becoming U.S. economic and military dependencies. As I documented in Super Imperialism, American diplomats broke up the British Empire and absorbed its Sterling Area by the onerous terms imposed first by Lend-Lease and then the Anglo-American Loan Agreement of 1946. The latter’s terms obliged Britain to give up its Imperial Preference policy and unblock the sterling balances that India and other colonies had accumulated for their raw-materials exports during the war, thus opening the British Commonwealth to U.S. exports.

Britain committed itself not to recover its prewar markets by devaluing sterling. U.S. diplomats then created the IMF and World Bank on terms that promoted U.S. export markets and deterred competition from Britain and other former rivals. Debates in the House of Lords and the House of Commons showed that British politicians recognized that they were being consigned to a subservient economic position, but felt that they had no alternative. And once they gave up, U.S. diplomats had a free hand in confronting the rest of Europe.

Financial power has enabled America to continue dominating Western diplomacy.

U.S. drives to keep its European and East Asian protectorates locked into its own sphere of influence is threatened by the emergence of China and Russia independently of the United States while the U.S. economy is de-industrializing as a result of its own deliberate policy choices. The industrial dynamic that made the United States so dominant from the late 19^thcentury up to the 1970s has given way to an evangelistic neoliberal financialization. That is why U.S. diplomats need to arm-twist their allies to block their economic relations with post-Soviet Russia and socialist China, whose growth is outstripping that of the United States and whose trade arrangements offer more opportunities for mutual gain.

At issue is how long the United States can block its allies from taking advantage of China’s economic growth. Will Germany, France and other NATO countries seek prosperity for themselves instead of letting the U.S. dollar standard and trade preferences siphon off their economic surplus?

Oil Diplomacy and America’s Dream for Post-Soviet Russia

U.S. oil diplomacy aims to control the world’s oil trade so that its enormous profits will accrue to the major U.S. oil companies. It was to keep Iranian oil in the hands of British Petroleum that the CIA’s Kermit Roosevelt worked with British Petroleum’s Anglo-Persian Oil Company to overthrow Iran’s elected leader Mohammed Mossadegh in 1954 when he sought to nationalize the company after it refused decade after decade to perform its promised contributions to the economy. After installing the Shah whose democracy was based on a vicious police state, Iran threatened once again to act as the master of its own oil resources. So it was once again confronted with U.S.-sponsored sanctions, which remain in effect today. The aim of such sanctions is to keep the world oil trade firmly under U.S. control, because oil is energy and energy is the key to productivity and real GDP.

As the United States has de-industrialized, its trade and balance-of-payments deficit is becoming more problematic.

America has lost its industrial cost advantage by the sharp rise in its cost of living and doing business in its financialized post-industrial rentiereconomy. Additionally, as Seymour Melman explained in the 1970s, Pentagon capitalism is based on cost-plus contracts: The higher military hardware costs, the more profit its manufacturers receive. So U.S. arms are over-engineered – hence, the $500 toilet seats instead of a $50 model. The main attractiveness of luxury goods after all, including military hardware, is their high price.

This is the background for U.S. fury at its failure to stop European dependence on Russian heating oil – and at seeing Russia also break free militarily to create its own arms exports, which now are typically better and much less costly than those of the U.S. Today Russia is in the position of Iran in 1954 and again in 1979. Not only do its oil sales rival those of U.S. LNG, but Russia keeps its oil-export earnings at home to finance its re-industrialization, so as to rebuild the economy that was destroyed by the U.S.-sponsored shock “therapy” of the 1990s.

The line of least resistance for U.S. strategy seeking to maintain influence over  the world’s oil supply while maintaining its luxury-arms export market via NATO is to xry “wolf” and insist that Russia is on the verge of invading Ukraine – as if Russia had anything to gain by quagmire warfare over Europe’s poorest and least productive economy. The winter of 2021-22 has seen a long attempt at U.S. prodding of NATO and Russia to fight – without success.

U.S. Dreams of a Neoliberalized China as a U.S. Corporate Affiliate

America has de-industrialized as a deliberate policy of slashing production costs as its multinationals have sought low-wage labor abroad, most notably in China. This shift was not a rivalry with China, but was viewed as mutual gain. The rivalry was between U.S. employers and U.S. labor, and the class-war weapon was offshoring and, in the process, cutting back government social spending.

Similar to the Russian pursuit of oil, arms and agricultural trade independent of U.S. control, China’s offense is keeping the profits of its industrialization at home, retaining state ownership of significant corporations and, most of all, keeping money creation and the Bank of China as a public utility to fund its own capital formation instead of letting U.S. banks and brokerage houses provide its financing and siphon off its surplus in the form of interest, dividends and management fees. The one saving grace to U.S. corporate planners has been China’s role in deterring U.S. wages from rising by providing a source of low-priced labor to enable American manufacturers to offshore and outsource their production.

The Democratic Party’s class war against unionized labor started in the Carter Administration and greatly accelerated when Bill Clinton opened the southern border with NAFTA. A string of maquiladoras were established along the border to supply low-priced handicraft labor. This became so successful a corporate profit center that Clinton pressed to admit China into the World Trade Organization in December 2001, in the closing month of his administration.

Walmart, Apple and many other U.S. companies organized production facilities in China, which necessarily involved technology transfers and creation of an efficient infrastructure for export trade. Goldman Sachs led the financial incursion, and helped China’s stock market soar. All this was what America had been urging.

Where did America’s neoliberal Cold War dream go wrong? For starters, China did not follow the World Bank’s policy of steering governments to borrow in dollars to hire U.S. engineering firms to provide export infrastructure. It industrialized in much the same way that the United States and Germany did in the late 19^thcentury: By heavy public investment in infrastructure to provide basic needs at subsidized prices or freely, from health care and education to transportation and communications, in order to minimize the cost of living that employers and exporters had to pay. Most important, China avoided foreign debt service by creating its own money and keeping the most important production facilities in its own hands.

U.S. Demands Are dDriving Its Allies Out of the Dollar-NATO Trade and Monetary Orbit

As in a classical Greek tragedy, U.S. foreign policy is bringing about precisely the outcome that it most fears. Overplaying their hand with their own NATO allies, U.S. diplomats are bringing about Kissinger’s nightmare scenario, driving Russia and China together.

While America’s allies are told to bear the costs of U.S. sanctions, Russia and China are benefiting by being obliged to diversify and make their own economies independent of reliance on U.S. suppliers of food and other basic needs. Above all, these two countries are creating their own de-dollarized credit and bank-clearing systems, and holding their international monetary reserves in the form of gold, euros and each other’s currencies to conduct their mutual trade and investment.

The United States cannot simply reverse its de-industrialization and dependence on Chinese and other Asian labor by bringing production back home. It has built too high a rentier overhead into its economy for its labor to be able to compete internationally, given the U.S. wage-earner’s budgetary demands to pay high and rising housing and education costs, debt service and health insurance, and for privatized infrastructure services.

That is not a way for national economies to grow. The alternative to neoliberal doctrine is China’s growth policies that follow the same basic industrial logic by which Britain, the United States, Germany and France rose to industrial power during their own industrial takeoffs with strong government support and social spending programs.

The United States has abandoned this traditional industrial policy since the 1980s. It is imposing on its own economy the neoliberal policies that de-industrialized Pinochetista Chile, Thatcherite Britain and the post-industrial former Soviet republics, the Baltics and Ukraine since 1991. Its highly polarized and debt-leveraged “prosperity” is based on inflating real estate and securities prices and privatizing infrastructure.

This neoliberalism has been a path to becoming a failed economy and indeed, a failed state, obliged to suffer debt deflation, rising housing prices and rents as owner-occupancy rates decline, as well as exorbitant medical and other costs resulting from privatizing what other countries provide freely or at subsidized prices as human rights – health care, education, medical insurance and pensions.

The success of China’s industrial policy with a mixed economy and state control of the monetary and credit system has led U.S. strategists to fear that Western European and Asian economies may find their advantage to lie in integrating more closely with China and Russia. The U.S. seems to have no response to such a global rapprochement with China and Russia leverage except economic sanctions and military belligerence. That New Cold War stance is expensive, and other countries are balking at bearing the cost of a conflict that has no benefit for themselves and indeed, threatens to destabilize their own economic growth and political independence.

Cutting back that spending, and indeed recovering industrial self-reliance and competitive economic power, would require a transformation of American politics. Such a change seems unlikely, but without it, how long can America’s post-industrial rentier economy manage to force other countries to provide it with the economic affluence (literally a flowing-in) that it is no longer producing at home?

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