284 China's outplaying US could see Transition from Empire to Republic - James Petras

China's outplaying US could see Transition from Empire to Republic - James Petras

From: James Petras <jpetras@binghamton.edu> Date: 29.04.2010 11:58 AM

Rising and Declining Economic Powers: The Sino-US Conflict Deepens

By James Petras

http://axisoflogic.com/artman/publish/Article_59611.shtm

Introduction

Will the intensified conflicts between the US and China inevitably lead to a global conflagration? If recent past history is any indication the answer is a resounding yes. The most destructive wars of the 20th century were the result of confrontations between established (EIP) and rising (RIP) imperial powers. The practices and policies of the former serve as guides to the latter.

England's colonial exploitation of India, its markets, treasury, raw materials and labor served as a model for Germany's war and attempted conquest of Russia . The enmity between Churchill and Hitler had as much to do with their common imperial visions, as it did their conflicting views of politics. Likewise, European and US colonial plunder of Southeast Asia and China's coastal cities served as a model for Japan's drive to colonize and exploit Manchuria, Korea and mainland China.

In each instant the conflict between early established, but stagnant, imperial powers and late developing dynamic empires led to world wars in which only the intervention of another rising imperial power, the United States (as well as the unanticipated military prowess of the Soviet Union), secured the defeat of the RIP. The US emerged from the war as the dominant imperial power, displacing the established European imperial powers, subordinating the RIP of Germany and Japan and confronting the Sino-Soviet bloc . With the demise of the USSR and the conversion of China into a dynamic capitalist country, the stage was set for a new confrontation between an established imperial power (EIP) the US and its European allies and China, the newly emerging world power.

The US empire covers the world with nearly 800 military bases , multi-lateral (NATO) and bi-lateral military alliances, a dominant position in the self-styled international financial institutions (World Bank, International Monetary Fund) and with multi-national banks, investment houses and industries in Asia, Latin America, Europe and elsewhere.

China did not challenge or borrow the US model of military driven empire building. Even less does it look at the previous Japanese or German approach to challenging established empires. Its dynamic growth is driven by economic competitiveness, market relations guided by a developmental state and a willingness to borrow, learn, innovate and expand internally and overseas displacing US market supremacy in regions and countries in Latin America, the Middle East and Asia, as well as inside the US and the European Union .

Established Imperial States

World and regional wars, insofar as they involved EIS (and most wars directly and via proxies engaged the imperial states) resulted from efforts to retain privileged positions in established markets, accessing raw materials, exploiting labor via mercantile, colonial, bilateral and multilateral agreements. Frequently trading zones linked the imperial and dependent country and region and excluded potential competitors. Military bases were "super-imposed" over imperial controlled economic zones. Networks of political clients favored imperial countries.

Given the privileged and early establishment of their imperial domains, EIS portrayed later emerging imperial powers as "aggressors" who threatened "peace", namely, their hegemonic position. Like the EIS the later states followed a pattern of military conquests of colonial and non-colonial client states of the established imperial states followed by plunder . Lacking the networks, satraps and clients of the EIS, they relied on military power, separatist movements and "fifth columnists" (local movements whose primary loyalty was to the rising imperial power). The RIP claimed that its "legitimate" quest for a share of world power was blocked by illegal economic boycotts of access to raw materials and colonial style mercantile systems which closed potential markets . The EIS defeat of the RIP (Germany and Japan) with the essential backing of the USSR and the USA established the bases for a new set of empires which competed and conflicted on a new bases. The USSR established a military-ideological group of satellite states confined to Eastern Europe in which the imperial center economically subsidized its clients in exchange for political control. The US replaced the European colonial powers via a worldwide network of military treaties and the forceful penetration of former colonial states with a system of neo-colonial dependencies .

The collapse of the Soviet empire and the implosion of the USSR briefly opened new vistas in Washington, for a unipolar empire without competitors or challengers, a 'pax Americana' . This 'vision' based on a superficial one dimensional analysis of US imperial military supremacy ignored several crucial weaknesses.

1.) The relative decline of US economic power faced with stiff competition from the EU, Japan, the newly industrializing countries and beginning in the early nineties from China.
2.)
3.) The fragile foundations of US imperial power in the Third World based on highly vulnerable client collaborators whose economies, subject to pillage, were not sustainable.
4.)
5.) The de-industrialization and financialization of the US economy leading to a decline of merchandise trade and an increasing dependence on income from financial services. The almost complete specularization of the financial sector led to great volatility and the pillage of productive assets as collateral for the mounting debt overhang.
6.)
In other words, the 'external edifice' of a unipolar empire obfuscated the deepening internal rot and deep contradiction between greater external expansion and domestic deterioration. The rapid military expansion of the US, replacing the USSR's Warsaw pact with the incorporation of the Eastern European countries into NATO created the image of an irrepressible dynamic empire. The pillage and transfer of wealth from Russia, Eastern Europe and the former Soviet Republic gave the appearance of a dynamic economic empire.

 There were several problems with this viewpoint insofar as the pillage was a one-shot windfall; the plunder, mostly enriched Russian gangster oligarchs; and the privatized public firms passed mostly into the hands of Germany and the countries of the European Union. The US Empire which bore the cost of promoting the downfall of the USSR was not the prime economic beneficiary – its gains were mostly military, ideological and symbolic.

The fateful long term consequences of the post Soviet, US military victories occurred during the Bush senior and Clinton regimes of the early and mid 1990's. The US invasion of Iraq and rapid fire smash-up of Yugoslavia gave an enormous impetus to US military driven empire building. The rapid military victories, the subsequent de facto colonization of Northern Iraq and control over its trade and budget revived the idea that imperial rule via colonization was a viable historical project. Likewise, the establishment of the Kosova entity (subsequent to the bombing of Belgrade) and its conversion into a massive NATO military base reinforced the idea that military driven global expansion was the 'wave of the future' . Even more disastrous, the military primacy over economic directed empire building, led to the ascendancy of hard line militarist ideologues deeply embedded in the Israeli-Zionist military metaphysic of unending colonial wars . As a result by the beginning of the new millennium all the political, military and ideological pieces were in place for the launching of a series of imperial-zionist driven wars, which would further sap the US economy, profoundly deepen its budget and trade deficits and open the way for the rise of new dynamic economic-market driven empires .

Unlike earlier RIP, China has relied from the beginning on developing the domestic productive forces, building on the fundamental achievements of the Chinese social revolution. The social revolution created a unified country, ousted colonial enclaves, created a healthy educated labor force, basic infrastructure and industry. The new capitalist leaderships turned the economy outward and invited foreign capital to provide technology, open overseas markets and capitalist managerial skills, while retaining control over the financial system and strategic industries. Most important its semi-privatized agriculture, created a multi-million surplus work force of low paid wage workers for intense exploitation in labor intensive coastal assembly plants. The new capitalist rulers eliminated the social safety net of free health and basic education forcing high rates of savings to cover medical bills and tuition and increasing the rates of investments to astronomical levels. Initially at least , China, in contrast to earlier RIP, intensified the exploitation of domestic labor and resources, instead of engaging in overseas military conquests and the pillage of resources and exploitation of "forced labor'.

China's overseas expansion was market driven based on a triple alliance of state, foreign and national capital, in which over time, the role of each actor varied according to political and economic circumstances and the realignment of internal capitalist forces.

From the beginning the internal market was sacrificed in the pursuit of external markets. Mass consumption was postponed in favor of state and private elite investment, profits and wealth. Rapid and massive accumulation widened inequalities and concentrated power at the top of the new state-capitalist hybrid class system .

In contrast to the EIP of the past and the US today, China as a RIP, subordinated banks to financing industry-manufacturing especially the export sectors. Unlike EIP like the US, China abjured big military spending on overseas bases, colonial wars and costly military occupations. Instead its goods penetrated markets, including that of the EIP. In a sui generis situation of borrowing technology and marketing expertise from imperial based multi nationals and then turning around and using the acquired skills to rise up the production cycle from assembly plant to manufacture, to design and innovative high value products .

The RIP increased its merchandise exports while sharply limiting the penetration of financial services, the new driving force of the EIP. The result overt ime was a ballooning of a merchandise trade deficit not only with China but with nearly 100 other countries around the world. The pre-eminence of the financial military driven imperial elite inhibited the development of higher tech merchandise development capable of penetrating the market of the RIP and reducing the trade deficit. Instead the backward under developed and uncompetitive manufacturing sector were not able to compete with lower wage Chinese products and together with a backward looking overpaid bureaucratic trade union elite complained of unfair competition and "undervalued Chinese currency". They overlooked the fact that the US deficit was a product of domestic economic configurations and gross imbalances between finance and manufacturers and producers. An army of financial writers, economists, pundits, experts and other ideological experts linked to dominant financial capital provided the ideological gloss to the confrontational campaign against China's economic driven rising imperial power .

In the past EIP powers organized a "division of labor". In the colonial model the dependencies of colonial produced raw materials and imported finished manufactured goods from the EIP. In the early post-colonial period the division of labor was the production of labor intensive goods in the newly independent countries in exchange for more technologically advanced goods from the EIP. A "third stage" division of labor was propagated by the ideologies of finance capital in which the EIP would export services (financial, technological, entertainment, etc.) for both labor intensive and more advanced manufactured goods. The ideologies of the third phase division of labor assumed that the invisible earning resulting from repatriated earnings of finance capital would "balance" the external accounts of the deficits in merchandise trade. The financial monopoly of Wall Street and the City in London would ensure returns to retain a balance of payments surplus. This mistaken assumption was based on the earlier colonial and post-colonial model in which the agro-mineral and manufacturing countries did not control their own financing, insuring and transportation of international and domestic commodities. Today that is not the case. Unable to dominate financial markets in merchandise trading countries like China, finance capital intensified its internal and intra-imperial speculative activity. This led to a spiraling of the fictitious economy, its inevitable collapse and the accumulation of external debt and trade deficits.

In contrast China expands its industrial sector balancing imports of semi-finished commodities for assembly, technology to set-up its own manufacturing production and capital linked to majority nationally owned plants with sales of finished goods to the US, EU and the rest of the world. Through state banks it retains control over the financial sector hence it lowers the outflow of 'invisible earnings' paid out to the EIP.

EIP engages in vast non-productive and inefficient (with billion dollar cost overruns) military expenditures and high cost colonial wars without 'imperial returns' . In contrast a RIP like China pours hundreds of billions, building up its domestic economy as a springboard for conquering external markets. The brutal imperial-colonial wars of the EIP savage millions of conquered peoples but at the cost of the disaccumulation of capital. In contrast the RIP, like China, harshly exploits hundreds of millions of migrant workers, in the process of accumulating capital for extended reproduction in the home and overseas markets. Unlike the past, it is the EIP which resort to military aggression to retain markets while the RIP expands overseas via market competitiveness.

The 'economic disease' of the EIP is their tendency to overextend their financial sector and shift their policies from promoting industry and trade to speculative and other malignant activity that feeds on itself and self-destructs. In contrast the RIP shift bank capital from financing domestic manufacturing to securing overseas raw materials for industry.

Differences Between Imperial Centers and "Diasporas"

There are important differences between past and present Imperial countries and various overseas Diasporas. In the past the imperial centers generally dictated policy to their overseas dependencies, securing mercenaries, conscripts and volunteers for their imperial wars, as well as profitable returns on investments and favorable trade relations. In some cases, settler colonies via their representatives in parliaments did influence imperial policy, in some cases up to and including devolution of power. Moreover, in some cases repatriated colonists did receive political support from the imperial center in securing financial compensation for expropriated properties. However, the imperial center always overrode the resistance of overseas settlers when it came to fashioning a pact with the ex-colonies which preserved larger economic and political interests .

In contrast the US imperial state pays a multi billion dollar tribute and submits to war policies dictated by its apparent "dependency" Israel as a result of the Zionist power configurations pervasive penetration of strategic policy making. We have the extra-ordinary circumstances of the "Diaspora" (ZPC) of a foreign state (Israel) trumping the interests of strategic economic interests (oil industry) and top imperial field commanders and intelligence agencies of the imperial center in setting Middle Eastern policy . Unlike any previous EIP, in the US the entire mass media propaganda apparatus, most academic centers, the majority of heavily funded think tanks churn out thousands of programs, publications and policy papers annually reflecting an Israeli-Zionist centric view of the Middle East, censoring black-listing and purging any dissidents or forcing them into a groveling recantation.

The new rising imperial powers like China have no such "hegemonic" dependency. In contrast to the disloyal role of ZPC which serves as a political-military instrument of Israel, the Chinese Diaspora serves as an economic ally of he Chinese state. Overseas Chinese facilitate market opportunities for mainland business groups, engage in joint ventures inside and outside of China, but do not shape the foreign policy of the state in which they reside. The Chinese Diaspora do not act as a "fifth column" against the national interest of their countries of residence, unlike American Zionists whose mass organization put all of their efforts into the singular goal of subordinating US policy to maximize Israel's colonial policies.

The differences in the relations between past and present imperial centers and their external and internal diasporas' have enormous, multifaceted consequences in the competitive context for global power. Let us enumerate them 'telegraphically'.

The European EIP, by sacrificing colonial diaspora demands for the continuance of racial-colonial forms of imperialism in favor of a negotiated transition to independence, retained and then expanded long term, large scale lucrative investment, trade and financial links and in some cases even military bases. The settlers were sacrificed to promote a new type of imperialism.

The RIP today, China, is not shackled by overseas racist colonial settlers.They are free to advance their economic interests anywhere in the world, particularly in regions and countries and among peoples targeted by the fifth column, ZPC, embedded in its rival EIP (USA) .

China has over $24 billion in lucrative investments in Iran and is its principle oil importer. The US has zero investments and trade. China has displaced the US as the principle importer of Saudi oil, as well as a major trading partner in Syria, Sudan and other Muslim countries where the Zionist promoted sanctions policy minimize or eliminate US economic activity . While China's nationally and market determined policies have been the motor force for enhancing Chinese global economic position, the US harnessed to the needs of a tributary colonial power is a huge economic loser. Equally significant while China's diaspora is strictly interested in expanding economic ties, the Israeli diaspora – the ZPC – is strictly tied to militarizing US policy, engaging in extraordinarily costly prolonged wars and antagonizing almost every major Islamic population with blatant Islamophobic rhetoric and hate propaganda.

The turn to a totally "unbalanced" militarized foreign policy, promoted on behalf of Israel, has completely unhinged the link between US military policy from its overseas economic interests. Paradoxically Israel's fifth column has been an important factor facilitating China's displacement of the US in major world markets. What had been historically a "stateless" people (citizens of secular non-Jewish states) primarily defined by their entrepreneurial capacities, has in present day America, been redefined by its mainstream leaders as the principle upholders of a doctrine of offensive wars ("preventive wars") linked to Israel, the most militarized country in the world . As a result of their influence and in alliance with rightwing extremists, Washington has forsaken important economic opportunities in favor of projections of military power. ...

US Strategies to Undermine, Weaken and Outcompete China as an Emerging Imperial Power

At the first signs of China's potential as a global competitor, Washington promoted a liberal economic strategy hoping to create a 'dependency' relationship. Subsequently, when liberalization failed to induce dependency, but rather accelerated China's growth, Washington resorted to more punitive policies.

During the eighties and nineties, Washington encouraged China to pursue an "open door" policy toward US multi-national corporations (MNC) and provided tax incentives to encourage MNC to 'colonize' strategic growth sectors of China. Washington successfully promoted China's entry into the World Trade Organization, with the idea that "free trade" would favor US MNC in capturing Chinese markets. The strategy failed: China harnessed the MNC to its own export strategy, capturing US markets; it forced the MNC into joint ventures which accelerated the transfer of technology and advanced China's industrial learning curve in the course of increasing its own productive capacity. The WTO agreement undermined barriers to US trade and facilitated the flow of US capital into Chinese productive sectors, while eroding the US productive base and undermining its competitiveness. Over time, Chinese enterprises, state and private, grew out from and overcame, in part, its "dependence" and assumed greater control over joint-ventures and developed their own centers of innovation, marketing and finance .

The liberal strategy of creating a dependency failed; it was China which accumulated trade surpluses and subsequently assumed the role of creditor while the US turned "debtor" state. Liberalization may have worked for the US in Latin America and Africa. There weak states run by corrupt rulers oversaw the pillage of their countries raw materials, the ruinous privatization and denationalization of strategic firms and the massive outflow of earnings. But in China, their rulers harnessed the MNC to their own national projects, ensuring control over the dynamic process of capital accumulation. They sacrificed short term excess profits to the MNC for the long term goal of gaining markets, know-how and the spread and deepening of new productive lines via 'content rules' and technology transfers. Liberalization favored Chinese merchandise export boom, while the economy gained autonomy, upgrading the product cycle.

China retained the reins of the financial sector, blocking a takeover by the US "leading sectors" in finance, media, real estate and insurance . By limiting penetration, speculation and volatility, China avoided the periodic crises which affected the US in 1990 – 01, 2000 – 02, 2008 – 2010. China's version of the "open door" was not a repeat of the earlier version which led to the foreign dominance of coastal enclaves. Rather the foreign own MNC's became 'islands of growth' harnessed to furthering Chinese state controlled and directed overseas expansion.

By the early years of the new millennium, Washington realized that the liberal strategy had failed to block China's ascent to global power and increasingly turned toward a punitive strategy. ...

Economic Strategies

Washington, backed by the major financial press as well as most economists and 'experts', advocates intervening into China's domestic economic policy in pursuit of measures designed to disarticulate its dynamic growth model. The most widespread demand is that China overvalue its currency to erode its competitive edge and weaken its dynamic export industries .

In the past, between 2000 – 2008 Chinese revalued its exchange rate by 20% and still doubled its export surplus with the US . They did this by increasing productivity, lowering rates of profit and improving quality control. Moreover, the problem of US negative trade balances is chronic and global – it has negative balances with over 90 countries, including Japan and the EU .

The anti-China coalition, led by the Washington-Wall Street complex, has been pressing Beijing hard to deregulate its financial sector to facilitate the takeover of China's financial markets, claiming 'trade and investment' violations. The White House sees the powerful financial sector as the only real lever to capture the commanding heights of China's economy, through mergers and acquisition. This campaign lost steam, in the face of the financial crises of 2008 -2010 induced by Wall Street's speculative activity. China's financial system was barely affected thanks to its public regulatory structure and constraints on the entry of US banks.

Washington has imposed protectionist measures, contrary to WTO rulers, in the form of tariffs on Chinese exports of steel and tires and Congress has threatened an across the board 40% tariff on all Chinese exports to the US – a call for a 'trade war'.

The US has blocked several large scale Chinese investments and buyouts of oil companies, technology firms and other enterprises. In contrast, China has allowed US MNC to invest tens of billions and to subcontract in the most diverse sectors of the Chinese economy. China as a rising world power is confident that its dynamic economy can harness US MNC to its continued growth while the US in the face of its deteriorating position is fearful of any acceleration of "Chinese takeovers", a fear borne of economic weakness, couched and disguised in the rhetoric of a "security threat".

Washington encouraged China's sovereign investment fund and overseas investors to link-up with US financial houses engaged in speculative activity, hoping to strengthen outflows to the US and creating a 'speculator culture' in China, to weaken the power of productive capital in the state planning apparatus. ...

Political Offensive

Established empires in decline, like the US today, have a repertoire of levers designed to discredit, seduce, isolate and contain rising world powers like China and put it on the defensive.

One of the longest standing political ploys is Washington's human rights propaganda campaign, highlighting China's human rights violations, while ignoring its own massive offenses and downplaying those of its allies like the Jewish state of Israel. By discrediting China internal politics, the State Department hopes to inflate US moral authority, deflect attention from its worldwide long term and large scale violation of human rights accompanying its global empire building and build an anti-China coalition.

While human rights propaganda serves as the stick to beat back China's economic advance, Washington also attempts to induce China's cooperation in slowing down its decline. US diplomats frame this approach by emphasizing "treating China as an equal", recognizing it as a "world power" which has to "share responsibilities" . Behind this diplomatic rhetoric is an effort to harness China to a policy of collaborating and following US empire building strategies as a junior partner, at the expense of China's economic interests. For example, while China has invested billions in joint ventures with Iran and has developed a growing lucrative trading relation, Washington demands China support sanctions to weaken and degrade Iran to enhance US military power in the Gulf . In other words, China should give up its market driven economic expansion to share "responsibility" in policing the world in which the US is supreme. Likewise, if we translate the meaning of the White House's demand for China to "assume responsibility" for "rebalancing the world economy" it boils down to telling Beijing to reduce its dynamic growth, to allow the US to gain trade advantages to reduce ("rebalance") its trade deficit. ...

The US has a trade deficit with at least 91 other countries besides China, demonstrating that the problem is embedded in the structure of the US economy. Any punitive measure to restrict China's exports to the US will only increase Washington's deficit with other competitive exporters. A decline of US imports from China will not result in an increase for US manufacturers because of the under-capitalized nature of the latter, directly related to the pre-eminent position of finance capital in capturing and allocating savings. Moreover, "third countries" can re-export Chinese made products, putting the US in the unenviable position of starting trade wars across the board or accepting the fact that a finance –commercial led economy is not competitive in today's world economy.

China's decision to incrementally divert its trade surplus from the purchase of US Treasury notes to more productive investments in developing its "hinterland" and to strategic overseas ventures in raw materials and energy sectors will eventually force the US Treasury to raise interest rates to avoid large scale flight from the dollar. Rising interest rates may benefit currency traders, but could weaken any US recovery or plunge the country back into a depression. Nothing weakens a global empire more than having to repatriate overseas investments and constrain foreign lending to bolster a sliding domestic economy. ...

The US has a trade deficit with at least 91 other countries besides China, demonstrating that the problem is embedded in the structure of the US economy. Any punitive measure to restrict China's exports to the US will only increase Washington's deficit with other competitive exporters. A decline of US imports from China will not result in an increase for US manufacturers because of the under-capitalized nature of the latter, directly related to the pre-eminent position of finance capital in capturing and allocating savings. Moreover, "third countries" can re-export Chinese made products, putting the US in the unenviable position of starting trade wars across the board or accepting the fact that a finance –commercial led economy is not competitive in today's world economy.

China's decision to incrementally divert its trade surplus from the purchase of US Treasury notes to more productive investments in developing its "hinterland" and to strategic overseas ventures in raw materials and energy sectors will eventually force the US Treasury to raise interest rates to avoid large scale flight from the dollar. Rising interest rates may benefit currency traders, but could weaken any US recovery or plunge the country back into a depression. Nothing weakens a global empire more than having to repatriate overseas investments and constrain foreign lending to bolster a sliding domestic economy.

The bellicose trade rhetoric on Capitol Hill and confrontational policies adopted by the White House are dangerous posturing, designed to deflect attention from the profound structural weaknesses of the domestic foundations of the empire. The deeply entrenched financial sector and the equally dominant military metaphysic which directs foreign policy have led the US down the steep slope of chronic economic crises, endless costly wars, deepening class and ethno-racial inequalities as well as declining living standards. ...

Transition from Empire to Republic?

In the face of the US's demonstrable economic decline, can the ruling elite recognize that its empire is not sustainable (let alone desirable)? The US can increase its exports to China and its share of world trade to balance its accounts, only if it carries out deep political and economic changes.

Nothing short of a political and economic revolution can reverse the decline of the US. The key is to rebalance the US economy from finance driven to industrial centered: but any such shift requires class warfare against entrenched power on Wall Street and in Washington . What passes for the current US private manufacturing sector shows no appetite for such a historic change. Up to now manufacturers have bought into or been bought out by financial institutions: they have lost their distinct character as a productive sector.

Even assuming that there is a political shift toward re-industrializing the US, industry would have to lower its profits, increase its investments in applied research and development and vastly improve the quality of its products, to become competitive in domestic and overseas markets. Vast sums need to be re-allocated from wars, 'marketing' and speculation into social services like comprehensive national health plans high skill engineering and advanced industrial training to increase efficiency and competitiveness in the domestic market.

The transfer of a trillion dollars in military spending from colonial wars could easily finance the reconversion to a civilian economy producing quality goods for local and overseas consumption, including merchandise and commodities reducing toxic chemical and environmentally damaging sources of energy.

Substituting trade missions for military bases, could increase inflows to the US and reduce outflows abroad. Ending political links and billion dollar subsidies to militarized states like Israel and lifting sanctions on major economic markets like Iran will decrease outflows from the US treasury and enhance economic inflows and opportunities for productive sectors throughout the 1.5 billion muslim world.

Focusing investment on the growing market for clean energy and technology for domestic and overseas economies, will create new jobs and lower the cost of living while enhancing living standards. Confiscatory taxes on the millionaire/billionaires especially the entire 'Wall Street" ruling elite, and a cap on all income over one million dollars can finance social security and comprehensive public national health system, which would reduce charges to industry and state. The transition from empire to republic requires a profound rebalancing of social power and a deep restructuring of the US economy. Only then will the US be able to compete economically with China in the world economy.

The transition from a militarist imperialist power, corroded by a corrupt political elite beholden to a parasitic speculator economic elite, to a productive republic with a balanced economy and competitive sector requires fundamental political changes and a profound ideological revolution. To bring about this political and economic revolution requires a new configuration of the state which pursues public investments creating competitive industries, deepens the domestic market and expands social services.

To expand overseas markets, Washington must end boycotts and military subservience to Israel, pushed by the pro-Israel fifth column embedded in top financial and political institutions and in control of the legislature .

Ending military directed empire building will open the flow of public financing toward civilian technological innovations; ending restrictions on overseas technology sales can further reduce trade deficits, while upgrading local production to competitive levels.

To more forward requires a head-on confrontation with the ideologues of finance capital and a rejection of their efforts to deflect attention from their role in destroying America. The "blame" China campaign for what are in reality internally caused US structural imbalances must be confronted before it leads us into new, costly and self-destructive trade wars or worse.

China's internal "imbalances" are profound and pervasive and over time can weaken the pillars of external expansion. China's class, inequalities, uneven regional development, private wealth and public corruption and discriminatory treatment of migrants as second grade citizens (a dual citizenship system) will be resolved internally as the socio-economic divisions translate into class struggle. Fundamental changes in the privatized health system toward a comprehensive national public health system are essential, but these changes require a revival of the class struggle against state and private vested interests.

Conclusion

As in the past, a declining imperial power faced with profound internal imbalances, a loss of competitiveness in merchandise trade and an overdependence on financial activities looks to political retribution, military alliances and trade restrictions to slow its demise.  Propaganda, whipping up chauvinist emotions by scapegoating the rising new imperial state and forging military alliances to "encircle" China have absolutely no impact. They have not stopped all of China's neighbors from expanding economic ties with it. There are no prospects that this will change in the near future. China will push ahead with double digit growth. The US Empire will continue to wallow in chronic stagnation, unending wars and increased reliance on the tools of political subversion, promoting separatist regimes which predictably collapse or are overthrown. The US unlike the established colonial powers of an earlier period cannot deny China access to strategic raw materials as was the case with Japan. We live in a post-colonial world where the vast majority of regimes will trade and invest with whoever pays the market price. China, unlike Japan, depends on securing markets via economic competitiveness – market power – not military conquest. Unlike Japan it has a vast multitude of workers; it need not conquer and exploit foreign colonized labor.

China's market driven empire building is attuned to modern times, driven by an elite free to engage the world on its own terms, unlike the US plagued by financial speculators who eat away and erode the economy, ravaging industrial centers and turning abandoned houses into parking lots.

If the US imperial elite at present is at a loss as to how it can contain China's rise to world power, the mass of the US working class is at a loss as to how it can move from a military driven empire toward a productive republic. The economic decay and the entrenched political and social elites have effectively depoliticized discontent; systemic economic crises have been converted into private individual maladies. Over the long run, something will have to break; militarism and Zionist power will so bleed and isolate the United States that necessity will induce a forceful response … The longer it takes the more violent the rebirth of the republic. Empires do not die peacefully; nor do financial elites embedded in extraordinary wealth and power surrender their privileged positions peacefully. Only time will tell how long the American people will endure the dispossession of homes, employer servitude, fifth column colonization and military driven empire building based on domestic decay.

Comment (Peter M.):

The debate over China's trade & currency policies is occurring at two levels - Imperial and Nationialist. Petras  targets the Imperial level: the Empire, which has pioneered Globalization in the belief that this would entrench and extend its power, now cries foul that China has outsmarted it. On this basis, Petras opposes protective tariffs.

At the National level, the debate is occurring not "on the Bridge" of the economy - the Command area - but "on the Street", among the workers and unemployed people who see that most of the good jobs have been offshored (by those "on the Bridge"). This is where I locate my own position. We need to restore the Nation and jettison the Empire.

Petras depicts China as underdog; yet implies its own Imperial ambitions - which, if realized, would be no preferable to the current US dominance. What is needed is change in both the US and China - and Petras foresees it in both.

However, I disagree with Petras on Trade.

I believe that countries with persistent Current Account Surpluses should be forced to allow their currencies to rise. They should not be allowed to use persistent Surpluses to buy the assets of Deficit countries, whether through Equity purchases or by getting them into Foreign Debt.

I advocate Tariffs, because without Protection, Governments have little control over their economies; and there is no Democracy without Economic Democracy. Tariffs do not mean that there is no international Trade; each country still exports its surpluses and imports what it has insufficient of. The Protectionist 1950s & 60s were a time of widespread prosperity, contrary to Liberal propaganda that Protection causes Depressions.

In those years, manufactured goods were imported, but not allowed to wipe out domestic industries. Without Protection, that happens, and the productive base of many countries narrows to just a few main goods or services. The country is then at the mercy of international markets - especially the Finance market.

When Export Surplus countries manipulate exchange rates to keep their currency from appreciating, they are engaging in a covert form of Protection. They keep their exchange rate down by buying the assets of Defict countries. This is much more manipulative than Tariffs, which, at least, are up-front and public.

The "Asia Model" pioneered by Japan seeks to capture Value-Adding, reducing other countries to the status of Quarries, Farms and Holiday destinations. But then, as Petras points out, the Established Empires did the same.