The Global Gamble: Washington's Faustian Bid for World Dominance

by Peter Gowan

The collapse of the Soviet Bloc presented policy makers in Washington with a temptation reminiscent of Faust’s, opening up vistas of hitherto unimaginable global power; but the cold breath of Mephistopheles is already blowing across devastated communities from southeast Asia to the Balkan peninsula in the wake of America’s bid for world power.

In this major analysis of the new era of American domination, Peter Gowan strips away the language of humanitarian ideals that have cloaked US interventions from Baghdad to Belgrade to reveal far more cynical goals, with the real democratic hopes of the peoples of Europe, the South and East systematically trampled down in the rush to impose NATO-based US political leadership across the globe.

Gowan surveys the transformation of NATO from Cold War ‘security shield’ for Western Europe into a global vigilante force in pursuit of US interests, with European footsoldiers under American command. He explains the projected expansion of the EU into a set of first and second class countries, incapable of any political action independent of the United States; and he analyses the catastrophic social and economic effects of the neo-liberal ‘Shock Therapy’ imposed on Russia and Eastern Europe, with devastating results.

Far from being an unstoppable natural force against which every nation state is powerless, Gowan argues compellingly that the process of globalisation has been relentlessly driven forward by the enormous political power of the US state and business interests in a highly conscious bid to extend their strategic dominance over the world economy. He shows how the international finance system—the ‘Dollar-Wall Street Regime’—created out of the ashes of Breton Woods has been exploited as a political lever to open up local economies to US products and speculative flows of ‘hot’ money, and demonstrates how each financial crisis over the last ten years has been used by the Washington-Wall Street axis to force through dramatic economic and social re-engineering in the targeted countries. While posing as a benign economic education for ‘developing’ economies, US-led rescue packages in fact leave these countries seriously weakened, destroying national industrial sectors while elevating to power such local rentier interests as the Russian mafia-capitalists and leaving the already fragile social tissue of many of these companies irreparably damaged.

This masterly survey, both bold and compelling, will become a landmark in the debate on the new world order threatening the twenty-first century.

Genres: History, Economics, Politics, International Relations, American, United States

336 pages, Paperback

First published June 9, 1999

Reviews

[Elle · Rating 5 out of 5]

Given the chaos that has been visited upon Iraq, Libya, Afghanistan, Syria, Ukraine and Yemen over the past decade and half, you'd be forgiven for thinking that a book on US foreign policy written in 1999 could have little contemporary relevance. Peter Gowan's 'The Global Gamble' is different. Written in the aftermath of the Asian Financial Crisis, but coming just before the dot com bubble burst and 9/11, 'The Global Gamble' is probably the most lucid, far-sighted and incisive analysis of US imperialism I've ever come across. Much has been written, far too much, on Neoliberalism as a culture, an ideology, or as a 'mode of governmentality'; Gowan's focus is squarely on the raw power politics of it all.

Part 1 details the evolution of what Gowan calls the 'Dollar-Wall Street regime'. The tight nexus of hedge fund managers, central bankers and political elites in Washington who flourished after the overthrow of the 'financial repression' of the Bretton Woods era.

The purpose of this 'liberalisation' was 'rollback', an extraordinary attempt to preserve the privileged global financial position of the US and maintain the dollar's central international role. This would require conquering the barriers raised by the social-democratic post-war compromise in Western-Europe, the national bourgeoisie projects of the Global South/Non-Aligned countries and actually-existing socialism in Eastern Europe and China.

By the 1970's, the long post-war boom was turning into a long downturn, contender development in Germany and Japan cut into the US's share of the global market and high investment rates in fixed capital stock drove down profitability. Working class mobilisation, Keynesian demand management and the easy extension of credit to low profitability firms prevented the necessary exit and destruction of excess capacity in these lines. Inflation from Vietnam and domestic unrest also drove pressures that made the convertibility of the Dollar into Gold unsustainable.

An alternative presented itself when the OAPEC countries raised the price of oil in 1973. By guaranteeing Gulf Oil sales would be denominated in Dollars, Nixon ensured a steady supply of credit rolled into Wall Street whilst the increased cost of oil put the squeeze on competitors in Japan and Germany, who were much more dependent on imports than the US. With the lifting of capital controls, other countries were incentivised to lift theirs as well. Financial institutions were free to expand their operations across the world into ever more exotic and increasingly risky financial instruments. Before, private capital had been largely excluded from involvement in the international monetary system, now it was in the driving seat.

Tempted by the appealingly low interest rates, many countries in the Global South took advantage of this to spur development. At the time it was a reasonable and rational decision to make since it could be paid back with the proceeds of industrialisation and growth.

But the new DWSR gave the US an incredible amount of power. The Federal Reserve could weaken or strengthen the dollar at will, up and down. With the dollars world role secured, the US's trade and budget deficits were free to spiral upwards and they could be covered by simply printing the money to fund it. When Paul Volker took the decision to raise interest rates to eye watering levels, the effects would have to be shouldered by those countries least able to bear the load in what became the Third World Debt crisis of the 80's.

One by one countries found themselves insolvent and the IMF and World Bank were called in to 'restructure' their economies. There would be no forgiveness, debts were to be paid in full. Capital accounts were opened up to foreign direct investment; companies and public sector assets were sold at knock down prices to western monopolies and speculative investment was prioritsed at the expense of human development. When it was over, multinational corporations would have a pool of cheap labour and dependent economies who had few options other than export-led growth to the markets of the advanced capitalist economies. De-industrialisation transferred the centre of manufacturing from the advanced capitalist economies to the Global South, but the power of the US's financial sector ensured that the benefits would accrue largely to Wall Street.

In country-after-country, Hedge funds and Washington declared financial warfare on recalcitrant national governments. When a crisis inevitably broke out, capital would flee back to the US; giving a boost in liquidity to US financial markets, maintaining downward pressure on interest rates and stoking the stock market boom further.

It's this shift in the global political economy that went by the name of 'Globalisation' during the 90's. But what Gowan demonstrates is that 'Globalisation' wasn't an inevitable or irresistible force, this idea that it was was, more than anything, a discourse of power designed to obscure the fact that 'Globalisation' was a political choice by leading states (the US, as well as the UK with it's enormous financial sector as its satellite ). A dynamic, dialectical relationship between private international financial actors in financial markets and US government dollar policy.

However, alongside the endless optimism about the new economy that 'Globalisation' engendered was a system that was rapidly undermining its material foundations. The DWSR provided an escape from stagnation, for a while, but economic growth in the US was increasingly dependent upon high levels of public and household debt to purchase the world's manufactures, a deep structural balance of payments deficit and a business cycle dependent on asset price bubbles.

After the fallout from the East Asian financial crisis of 97, another gamble engineered to prevent the development of a rival regional bloc in China or Japan, capital fled back to the US, stoking the dot-com boom that would eventually break in 2001. Greenspan lowered interest rates even further and the 'wealth effect' from the asset price bubble in the housing sector kept the fires going until 2007.

Unleashing the financial sector allowed the US great levity in restructuring the world economy to it's advantage, but at the expense of deeply distorting the US economy itself – making it far more vulnerable than ever before to forces that it cannot fully control. One feels that the US is more than due for a 'structural adjustment' of its own.

Part 2 is a selection of essays on geopolitics and the Dollar-Wall Street regime, beginning with The Gulf War. The Gulf War is important in that it marked the beginning, made possible by the general collapse of the Soviet Union, of America's desperate and audacious attempt to unilaterally reorder the global balance of power in its favour by securing both economic and military control of the planet; starting with the destruction of Iraq and its ability to assert itself as an independent regional actor.

He breaks down the traditional arguments in favour of the war that came from liberal political theory at the time and shows them to be found wanting, at best inconsistent and at worst duplicitous, before delving into the political economy of Gulf Monarchy Petro-Dollars, Wall Street and US policy in the Middle East since the Carter Doctrine, expertly and intelligently. It remains a superb account of the opening shots of a new world-war upon the peoples of the Middle East. Rather than marking a rupture with what came before it, George Bush's War on Terror was merely the extension of a project that had been underway since the 90's.

In later chapters, the book delves into Gowan's area of specialisation, Eastern Europe. He opens with an extended essay on Neoliberalism in Eastern Europe and the geopolitics behind the merciless shock therapy that was applied to the post-Soviet states.

A strategic decision was taken to divide the countries of the former Warsaw Pact from one another, preventing them from taking advantage of their deeply interconnected economies and a more reasonable' market-socialist'/Keynesian alternative from emerging.

Many were left with few options outside of total shock therapy, setting the foundations for their later integration into the global economy in a subordinate role. Jeffrey Sachs, Washington's ideologue of the 'shock therapy' market transition finds himself incredulous that the US and EU were behaving 'irrationally' in destroying the economies of the former Soviet bloc, unaware that the development of their economies wasn't the point of the exercise.

In the face of this unconscionable decline in living standards for the working class, those imperial clerks who had spent the 80's advocating for the development of a robust, 'civil society' and liberal parliamentary democracy independent of the 'authoritarian' communist parties, like Michael Ignatieff and Timothy Garton Ash, found themselves aghast when it actually arrived in mass protests, strikes, an outpouring of support for the Left and a yearning to return to state-socialism. That which had been long awaited in theory became disagreeable in practice.

Gowan develops on this in an account of the fate of the Left in the transition countries, and how their success problematises any easy story of a popular overthrow of communism and an eager embrace of capitalism. Given the decline of left-wing forces in many of these countries in the interim, his optimism is bittersweet.

The final chapter concerns the enlargement of NATO and the EU, the driving motives behind it and its potential to sharpen conflict across the region. Of the US Gowan is bitterly critical of what he sees as the US's opportunism in expanding NATO into Poland, 'gambling with Europe's future security for the sake of something other than security'. An attempt to divide the European continent, with Western Europe remaining subordinate to America, dependent upon it for its military to advance its interests; and a weakened Russia, who had 'lost' the Cold War and was thus 'rightfully' excluded.

Linking up east with the west via a collective security agreement that would allow the whole of the continent to decide it's own affairs was off the table, sabotaged by the US. For the time being at least, America still rules the roost. It taking the lead in the bombing of Yugoslavia was 'merely' a demonstration to that effect.

He also notes that the idea that Russia poses a grave security threat is pure propaganda; rather, it was Russia's weakness in the 90's that led the drive east, something that would be less easy to pursue once it's economy began to recover.

Perceptively, he notes that 'particularly dangerous will be the onset of intense American-Russian rivalry within Ukraine. Russia has powerful levers for pursuing this struggle, not least its economic leverage over the Ukrainian economy, its links within Ukraine's political elites and the crisis of Ukraine's armed forces and state administration (not to speak of its appalling general economic crisis). At the same time, American hopes that it has a strong base of political support in Ukraine may prove unfounded and a deep internal crisis within that country could ensue.'.

On this he has been, sadly, entirely vindicated.

In his conclusion he is deeply pessimistic. America's global gamble has been not only disastrous for human development, it's a systemic breeder of economic, political and social crises in country-after-country, whilst at the self-same time undermining the West's leadership of the world economy. It's successes have filtered into the pockets of the few, whilst pauperising the many. Outside of continuing to generate more and more instability, it's unlikely that it can or will be changed by effective political intervention in the near future. These problems are deep-rooted, something that can't be fixed by a mere change in policy or the election of the 'right' political party.

'It will therefore take more than persuasion to change course in Europe. Therapies will not be applied until an exogenous shock brings home the truth that the West's interlocking structures of accumulation and governance are not acceptable. The best kind of such a shock leading to therapy would be a social movement by the peoples of Europe. The worst would be a blow-out in the globalised financial system or a full-scale breakdown of order in the big republics of the former Soviet Union'

Absent of something like a new 'Marshall Plan' for the European continent, or an effective challenge to America's dominance by the emerging capitalist economies, it just goes on like this.

[Simon Wood · Rating 5 out of 5]

GOWANS GLOBAL OUTLOOK

Peter Gowan's 1999 publication "The Global Gamble" is a book of three parts. The first looks at American attempts to retain its global position, especially vis-à-vis Western Europe and Japan, in the period from the United States unilaterally ending the Bretton Woods era of stable currencies and a gold backed dollar in the early 1970's to the Asian financial crisis of 1998. This is followed by a forty odd page look at the Gulf War of 1990-91, and finishes with a collection of articles relating to developments in Eastern Europe during the post cold war era.

The first part is a concise, comprehensive and utterly brilliant look at how the Americans unilaterally ended the Bretton Woods regime (under real economic pressures not least caused by the war in Vietnam), and what came after it. Gowan terms the successor regime the Dollar Wall Street Regime (DWSR): the Dollar is the primary currency for trade, currencies are no longer pegged to the Dollar which was no longer pegged to gold, capital controls are gradually reduced (under American pressure), and financial capital flows relatively unhindered causing untold damage to economies, especially in the developing world. And when countries get into trouble up steps the so-called multilateral institutions (the International Monetary Fund and the World Bank) to wreak further damage in forcing countries to further open their economies, deflate, and to privatise their assets at fire-sale prices. The ultimate example of this was the Asian Financial Crisis of 1998 which Gowan covers in some detail, as are those parts of the DWSR that function to keep Western Europe and the Far East (at the time of writing Japan and South Korea) in check. Overall this section is a sophisticated look at developments in the financial/monetary sphere from 1970-98 and is probably the best account of this period I have came across.

The second part "The Gulf War, Iraq and Western Liberalism" examines the Gulf War of 1990-91 in light of the precepts of Western Liberalism. Gowan cites many figures from within that canon, and finds that the self appointed Liberal Democracies of the west, led by the U.S. and the U.K. failed to meet the standards set by leading Liberal thinkers. In the second part of the article "Understanding Modern Iraq" Gowan's delivers a short though insightful look at the history of Iraq in tandem with a critique of Samar al-Khalil's (Kanan Makiya's pen name at the time this article was written) Republic of Fear: The Politics of Modern Iraq, Updated Edition where he shows up the shortcomings and limitations of al-Khalil's (Kanan Makiya) analysis and the liberal tradition in which it is rooted.

In the third part Gowan turns to the area which he specialised in (not least as a founding editor of Labour Focus on Eastern Europe). The first of the four articles "The Theory and Practice of Neo-Liberalism for Eastern Europe" examines Eastern Europe's experience under western prescribed Shock Therapy whose key theoretician was Jeffrey Sachs (among the cheerleaders in the UK were Timothy Garton Ash and John Lloyd - both of whom are politely but firmly dealt with by Gowan). Of particular interest is how the E.U. and the U.S. essentially cut off the Eastern European economies from the Soviet Union/Russia and from each other, and how the Western Europeans re-engineered the Shock Therapy programs to their even greater advantage. The dire social and economic costs of this era were an absolute catastrophe for the region. In "Neo-Liberalism and Civil Society" some fun is had looking at Liberal concepts of civil society promoted by writers such as Timothy Garton Ash and Michael Ignatieff (see Michael Ignatieff: The Lesser Evil? for a thorough dissection of the Ignatieff phenomena). During the communist era these writers (and doubtlessly others of their ilk) promoted concepts of civil society that fell within the Liberal canon. During the Shock Therapy era when popular anger was building with regards to the costs of the disastrous economic policies being foisted on them, Garton Ash, Ignatieff et al were seriously cutting back on the Liberal dimension of their analysis in order to prevent the overturning of Shock Therapy Programs in Eastern Europe.

The third article, "The Post-Communist Parties in the East" focusses on the experience of the former Communist Parties in Poland, Romania, Hungary and Bulgaria and how they changed into parties that claimed to be Social Democratic in the tradition of Western Europe and Scandinavia. Gowan delivers plenty of detail on the changing contexts within which each party developed (perhaps too much detail for some readers tastes) as well as how they met the challenges of being active in an era where Western European countries and International Institutions (such as the European Union, NATO, Organisation for Security and Cooperation in Europe, the IMF and the World Bank) were with a great deal of success setting the parameters within which each countries Social, Economic and Political Development occurred. The final article "The Enlargement of NATO and the European Union" looks at the prospects for both organisations advancing into Eastern Europe, and how the Americans were particularly keen for NATO to expand in that direction so that they could keep a hand in regarding developments in Europe. It makes particularly interesting reading in light of recent developments in Ukraine.

This book shows a writer at the height of his powers, in the first part Gowan manages to make convincing sense of developments in the global economic sphere over the last third of the twentieth century in writing that, despite his position as an academic, is clear, concise and illuminates the subject like nothing else I've read: in short utterly brilliant. The lengthy article on the Iraq Crisis/War of 1990-91, and four articles on Eastern Europe, are all of a high quality and provide an invaluable insight into the events described. In totality this book is amongst the most impressive books on Global Political Economy I have ever read. I'd also recommend the only other book length writing of Gowan's before he died in 2009 A Calculus of Power: Grand Strategy in the Twenty-First Century.

[Molly · Rating 4 out of 5]

very useful book about "The Dollar Wall Street Regime", how finance "took the driver's seat " in the Reagan era, and the immense instability of the global financial system that arose. Coming to an end in the late 90s, the book is dated now (regarding turbulence, crises, bailouts)but still valuable.

[Brecht Rogissart · Rating 3 out of 5]

Considering the fact he wrote this at the end of the '90s, I respect the way in which he was already able to take historical distance from his period of peak American cosmopolitanism and the new historical challenges ahead. However I would not specifically recommend this book now, as new work has captured the '70s-'90s period better.

In the first part of this book, Gowan describes the Dollar-Wall Street Regime, which is basically an early version of what Phenomenal World now writes about constantly and which one could summarise as the "Dollar as empire"-view. It highlights that Bretton Woods was built on two main features: gold as remaining the standard (and the dollar performing what the pound performed before it), and limitations on movement of capital. He then describes how Nixon made this system dysfunctional because he refused to let domestic interests be overruled by foreign credibility.

The main responses of dependent nations was to isolate themselves: Germany created the European Union and monetary stability on the continent, but it had to follow US liberalisation of capital markets, undermining its policy focus on expanding productive capital accumulation. Japan too tried to expand its regional market by expanding into East Asia. However, Japan was more dependent upon US market and lacked a stable monetary union with its newly expanding trading partners in the region. For the rest of the world, it was chosing between internal domestic deflation or borrowing abroad, and most went for the latter, of course. In all these setings, neomercantilist thought on the world market has increased appeal, slipping into the liberal theories of the division of labour. However, it is not only non-American countries who were transformed: the USA itself became a deeply unbalanced country lacking incentives for productive growth, instead its accumulation skewed towards Wall Street and its never ending need to profit from productive growth elsewhere through chaotic cycles of booms and busts.

In the second part of the book, he discusses some of the geopolitical questions coming out of this. I think the connection with the first part is a bit too weak. It focuses in particular on two contemporary issues: renewed American imperialism in the Middle East, and the Eastern Question of European expansion, shock therapy, and NATO enlargement in former communist countries. On the first issue he writes a long chapter, and it provides an interesting history of Iraq. It starts with the 1958 revolution and overthrow of the British backed autocratic Kingdom, going into a decade of military turmoil and eventually resulting in the Ba'athist regime of 1968. This regime was "modern" in the sense that they sought to use oil profits for economic development and the construction of a welfare state. They even gave Kurds more autonomous power and such. Gowan suggests that the regime wasn't all great, but it wasn't that bad either. In 1979, Hussein (also a Ba'athist) takes power and pushes the autocratic and military tendencies further, but retaining the Ba'athist spirit of becoming a regional power of new pan-Arabic movement (not so much for ideological reasons, but geopolitical ones). In the aftermath of the Iranian Revolution, Hussein wants to take advantage of the blow to American power in the region and wants to silence internal Islamist minority groups seeking support from Iran by launching an invasion. in 1988, after 8 years of spoiling oil money, Hussein is in debt and in troubles for not achieving his aims. In 1990, he invades Kuweit (who was being annoying about OPEC rules on quotas and prices) to counteract the slump in oil prices. Then, the US engaged in putting down this destabiliser of regional balance.

Sometimes I think he overplays the political level too much. I do appreciate his stance that the shift and power of the Dollar-Wall Street Regime is more than just economics: politics shapes the path which markets will follow. However, suggesting that Nixon manufactured the oil-crisis to push down industrialising competitors or that Clinton forced hot money out of expanding East Asian Tigers in the '90s is a bit of a stretch, and an argument I haven't read in books later published. Sometimes, a little bit of economic determinism isn't all too wrong. However, I do like his suggestion for European unification and the political possibilities: if all social democratic parties could push europeanisation, the strong euro could counterbalance the dollar and revitilise the quest for Keynesian control and new calls for a "euthanasia of the rentier".

[Ryan · Rating 5 out of 5]

Best account of neoliberalism I've read so far, even though it ends before Dubya. That's actually one of its strengths - you can't blame it all on our second-generation Lone Star. Lots of accounts tell you how neoliberalism works as a system and an ideology. This one tells you how it has worked as statecraft, for whose specific interests and according to whose vision of the world.

It's hard to find these days, so here's a pdf version of the 'meat':

http://www.marxsite.com/Gowan_DollarW...

[Lulumelon · Rating 5 out of 5]

Very penetrating observation of the neo-liberal trend and its political and economic consequences.

[Alysemac · Rating 4 out of 5]

So far, so good...

Minus one star for making claims that contradict the conventional wisdom of recent history without the necessary evidence. I'm a big believer in footnotes.