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A Tribute to Marty Nathan

This piece originally appeared at PopularResistance.org. We are reposting it on Voices for New Democracy to honor Marty Nathan, who was a comrade to many of us.

The Ku Klux Klan Murdered Five Of Her Comrades And The Father Of Her Six-Month-Old Child.

She remained undeterred in her activism for the rest of her life.

On November 3, 1979, Marty Nathan, Mike Nathan, and other members and supporters of the Communist Workers’ Party were stationed along the route of a “Death to the Klan” march in Greensboro, North Carolina. This multiracial working-class movement’s success organizing textile and hospital workers had attracted the attention of the Ku Klux Klan; “not surprisingly,” Marty explained, “the Klan began to rise in 1979 … [in places] where hard-hitting union organizing and strikes were occurring.” Not only were workers and organizers faced with resistance and threats from employers – they were also confronted with the Klan’s virulent racism, violence, and its efforts to spread fear and confusion as the Klan ran their own recruiting drives in the textile mills to split up the unions and grow its base.

The march, in Marty’s words, “was a response to a threat against unionization by the Klan, which would historically split up workers, black and white, threaten the leaders and essentially act on behalf of the corporate owners.” One of the key organizers of the march, Reverend Nelson Johnson, added that “it was absolutely necessary to have some expression of opposition to racism as manifest by the Klan in order to continue with the work of labor organizing in the textile industry and in order to continue with the work of uniting people from different racial backgrounds.” So, on November 3, 1979, the CWP organized a conference about the Klan and labor organizing, kicked off by the Death to the Klan march.

Marty and her comrades would later find out that the Klan had worked with the Greensboro police, a Bureau of Alcohol, Tobacco, and Firearms agent, and an FBI informant beforehand, which provided the Klan with the route of the march and encouraged them to carry arms while the police mandated that the protestors be unarmed. Before long, the Klan descended upon the march, at that point embedded in the predominantly black neighborhood Morningside, with no police in sight – in fact, a rank and file officer responding to an unrelated call in the neighborhood had been told to clear the area hours before the attack.

As protestors stood on the street, a caravan of nine cars decorated with confederate flags and other paraphernalia approached. The klansmen attacked the protestors, first with sticks and then opening fire, killing five of them and injuring ten others. Marty and her husband Mike Nathan were both doctors stationed at the march to provide medical assistance if needed; she was posted at a later point along the march route running the first aid car when the attack took place and survived the massacre, but Mike, stationed in Morningside, did not. She would rely on her comrades to find out what happened to her husband that day.

In Marty’s words, the premeditated attack killed people who “were organizing unions. They were revolutionaries. They were socialists. And they knew that in order to change society, you have to have an organized working class.” Not only did this movement unite white and black workers with a clear vision, but it understood the importance of internationalism; after the massacre, the survivors linked this “North American death squad” to the death squads in Central America, North America, and South Africa, up to the genocidal violence perpetrated under Jair Bolsonaro’s Brazil taking place today (later in life, Marty would at times wear a ring from Brazil’s Landless Workers’ Movement that had been gifted to her “on my middle finger, which I give to Trump,” she told me).

“After you lose somebody, there’s nothing else that you can lose. But what you can hope in all this is that you can change the future. For victims of racist violence, white supremacist violence, that’s the goal,” Marty told Democracy Now’s Amy Goodman on the 40th anniversary of the massacre. “In a time of climate change, threat of nuclear war, and increasing economic disparity, we all have to be in the streets, and we do not want to get shot,” she said. Marty continued to fight against racism and imperialism and for justice even in her last days before passing away on November 29, 2021 from lung cancer and heart disease; she was profoundly shaped by her work with the CWP and by the massacre, and those experiences continued to shape the people around her throughout her life.

Anyone who knew Marty would not be surprised to know that she was undeterred by the attack of the KKK that murdered five of her comrades and took away the father of their then six-month-old child. She fought tirelessly alongside the other survivors and their comrades to expose the direct connection between the KKK, the police, the FBI, and the Bureau of Alcohol, Tobacco, and Firearms, which also had an informant embedded in the Klan and was aware of the attack before it happened but failed to take any steps to prevent it.

Not only had the police given the protestors’ march route to the klansmen; they were present at the massacre in the tenth car following the caravan in an unmarked police vehicle but did nothing to stop the massacre. Marty and the other survivors successfully proved this and other acts demonstrating the complicity of the police, city, and FBI in the massacre, finally winning a $351,000 civil lawsuit in 1985 after having lost two criminal trials in which the prosecution was more focused on prosecuting the communist victims and survivors of the massacre than the Klan. Only in 2020 would they receive a long overdue apology from the City of Greensboro. Though Marty and her daughter were the only ones awarded money in the settlement, Marty gave her settlement to the other survivors and co-founded the Greensboro Justice Fund in 1980 and, in 2009, the Markham Nathan Fund (MNF) in Mike’s memory to fund grassroots organizations to carry the work forward.

By the time Marty passed away in November 2021, she had fundamentally shaped the organizing landscape in her home of Western Massachusetts, where she moved in 1995. Even when people couldn’t stand each other, everyone seemed to love Marty. She believed in uniting people from a wide range of perspectives, but she never compromised her politics in moments of disagreement. She canvassed for the re-election of Congressman Jim McGovern along with other local officials, and when it came time to hold people to account, she did so unapologetically.

Even as her health faltered in the months and years before she passed away, Marty joined other anti-imperialist activists to call on Congressman McGovern to shift his position on Palestine and to work to lift the sanctions against Venezuela or, in her words, “to inhabit his own skin … – an understanding and compassionate one – … and tell him that he has to follow through because this is not a theoretical issue. This is an issue of people in Venezuela dying everyday… because of the sanctions.” It is in large part thanks to Marty’s work that Congressman McGovern did just that in a letter dated the day of that rally, cited as “the best letter that we’ve ever seen out of Congress on sanctions period” by Alexander Main of the Center for Economic and Policy Research, a leading source of research and data on the sanctions.

Not only was Marty a fierce and dogged leader and mentor: she was also the people’s doctor. During her days in the CWP, she ran clinics at Duke Hospital to treat textile workers with brown lung disease caused by the cotton particles they inhaled on the job. In the weeks before her death, she stood with migrant workers at a press conference not only as a speaker but as a doctor, rushing over to a ditch to mend someone’s twisted ankle during the event. After moving to Massachusetts, she co-founded La Cliniquita, where she worked as a doctor primarily for immigrants and undocumented patients for 18 years, building an infrastructure to provide quality care that did not exist until she moved to the area for communities that had been systematically deprived of health care. At her memorial service, her former patients spoke about what she meant to them not only as a doctor but as a friend to whom she opened her home over the years. In 2012, she co-founded Climate Action Now as well as the climate justice group 2degrees and went on to help win the decades-long fight against a proposed biomass plant in Springfield, MA in 2021, always keeping climate justice at the heart of her work and revolutionary organizing at the heart of her life.

Marty’s list of accolades is unending, but those who knew her know that her ability to bring people together and lift up and mentor those around her, her refusal to give up no matter the obstacles or danger that she faced, and her unrelenting determination to fight for justice are irreplaceable. As Marty said, “after you lose somebody, there’s nothing else that you can lose. But what you can hope in all this is that you can change the future.”

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Comment on the Biden Administration’s Continued Support of Trump-Era Immigration Title 42 and Remain in Mexico Policies

| José Z. Calderón |

Biden could have broken with Trump’s anti-immigrant policies and allowed anyone who wished to apply for asylum to be able to do so at a port of entry and increase the possibilities of immigrants from Central America and from places like Haiti to obtain lawful employment (through such measures as H-2B visas).

Instead, the Biden administration has kept in place a Trump-era policy, Title 42, which does the opposite by indefinitely closing the border to “nonessential travel” (to supposedly “limit the spread of the coronavirus”) and increases the deportation of those who are seeking work or who are seeking to apply for asylum. Title 42, under both the Trump administration and now under Biden, allows for the Border Patrol to decide who can enter the process of asylum and who cannot. As a result, in the last year, border authorities applied Title 42 to more than 80% of encounters with immigrants resulting in 530,000 expulsions of which 16,000 were children migrating alone and 34,000 children-plus parents. Adding to the number of expulsions, the Biden administration has moved on speeding up deportations of some migrant families through “expedited removal,” allowing for ICE to deport them without a hearing before an immigration judge.  

In this light, our organizing efforts, in addition to supporting DACA and Temporary Protective Status measures, has to include a halt to the contradictory government policies of Title 42 and a call for humane refugee asylum policies. 

Along these same lines, it is important to organize against the Biden administration’s reinstating of a Trump-era “Remain in Mexico” policy, that is part of a deal struck with the Mexican government forcing asylum seekers to stay in that country until their U.S. immigration court date. Under this policy, about 70,000 immigrants have been returned to Mexico. Although the Biden administration justifies its actions by claiming that it is only following court orders, that it is applying “humanitarian speed-ups” of court proceedings of migrants and refugees, and that it is providing avenues for access to legal counsel, there is no getting around that the ‘Remain in Mexico’ policies are resulting in mass deportations and inhumane treatment. There are thousands of immigrants, seeking protection from increased violence in their home countries, who are being deported back to areas where they are met with brutal attacks and kidnappings perpetrated by deadly cartels and corrupt officials.  For instance, according to Human Rights First, there were at least 1,544 publicly documented cases of rape, kidnapping, assault, and other crimes committed against individuals sent back under these policies this last year. 

Meanwhile, Kamala Harris has been assigned to focus on the “root” causes of migration in Latin America, announcing that the plan will deal with issues of  economic insecurity and inequality, combating democratic corruption, and promoting respect for human rights. 

While some of us in the immigrant rights movement have promoted policies that would focus on changing the economic conditions in the sending countries that are forcing so many to migrate here, the reality is that they are meaningless in this time period when there is a need to prioritize the passage and implementation of pro-immigrant legislation here in the U. S.  These gestures by Kamala Harris, focused on the conditions abroad, affect very little in the immediate and, with the Republicans already making immigration a central issue, the prospects for building the kind of movement that is needed to ensure the defeat of the right in the mid-term elections is further damaged.

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Democracy: Rule of Law & Elections

Remembering Lani Guinier

Voices for New Democracy joins our friends across the country in mourning the passing of Lani Guinier, a tireless fighter for political and social justice.

As an educator, Guinier blazed trails as the first woman of color to be appointed as a tenured professor at Harvard Law School. As a legal scholar and theorist, she devoted much of her life to wrestling with thorny questions and innovative ideas around the structure of our democracy, the importance of social inclusion, and the centrality of racial justice in fighting for progressive change and broader social justice. And as an activist and friend, she touched many of us with her thoughtful and compassionate spirit.

As we remember Lani Guinier, we invite you to listen to her words about the lessons of the 1979 Greensboro Massacre, which she delivered at an anniversary event in 1999. While her remarks are over two decades old now, the lessons about power and community are timeless.

Click the link here or below to watch the video and join us in honoring Lani Guinier’s memory.

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Economic Justice

Robin D. G. Kelley Interview & Forum

As we enter the new year, Voices for New Democracy is proud to announce our next monthly political forum will take place on January 23rd at 4 p.m. PT / 7 p.m. ET featuring UCLA Professor Robin D. G. Kelley.

In anticipation of the upcoming forum, we are reprinting an interview with Kelley from March 2021 by the writer Vinson Cunningham, which delves into key themes of his work and analysis. In it, Kelley discusses Black Marxism and the legacy of Cedric Robinson, highlights the role of the Black radical tradition in the summer 2020 uprising, interrogates and clarifies our understanding of racial capitalism, and highlights the importance of solidarity in advancing movements for justice. Among other wide-ranging topics, Kelly also touches his experience with the Communist Workers Party and his personal history of activism.

The interview (below) was originally published in the L.A. Times. We look forward to joining you later this month in our forum with Professor Kelley.

The future of L.A. is here. Robin D.G. Kelley’s radical imagination shows us the way.

| By Vinson Cunningham |

Robin D.G. Kelley is, for my money, the great historian of our era. He has written groundbreaking works about, among other things, Alabama’s Communist Party during the Great Depression; the life of Thelonious Monk; and the visions of activists and thinkers from the African diaspora. On top of his work at UCLA — where he is a distinguished professor and holds the Gary B. Nash Endowed Chair in U.S. history — he issues a steady stream of limpid, persuasive, almost casually brilliant essays on politics, current affairs and cultural matters for Boston Review and other outlets. He keeps an eye on grassroots movements and on how maintaining a fertile, humane vision for the future creates new opportunities for radical action in the present.

In the year 2000, Kelley led the charge to reissue “Black Marxism,” a great, globe-spanning work of political history by one of his mentors, Cedric Robinson — successfully rescuing the book, then out of print, from near-obscurity. Since then, he has quite accidentally become the foremost authority on the late Robinson’s work and ideas. (“I did not want that,” he told me, sounding good-naturedly harried by the distinction.) Last year, after the deaths of George Floyd and Breonna Taylor, among others, at the hand of police officers, and the global protest uprising that followed, UNC Press decided to reissue “Black Marxism,” which — as Kelley had predicted two decades earlier — had become more relevant than ever.

Kelley wrote a rousing foreword for the new edition of “Black Marxism” and is working on a book called “Black Bodies Swinging: An American Postmortem,” about how the protests of 2020 are connected to a long history of resistance.

———

Vinson Cunningham: I’ve been thinking about you and Cedric Robinson. I love how, in your foreword to “Black Marxism,” this new foreword, you always call him by his first name. It’s like: Marx and Engels and Cedric. That’s moving to me. It reminds me of one of my favorite essays, “Looking for Zora,” where Alice Walker goes to find Zora Neale Hurston’s grave. There’s a kind of artistic and intellectual lineage that’s not only about reading — there’s an affective aspect, something to do with feeling and familiarity. What is it about Cedric for you?

Robin D.G. Kelley: I was a student of Cedric’s. He was on my dissertation committee. I was in awe of him. Reading “Black Marxism” that first time in 1984, it just blew my mind and changed my whole orientation. Everything I do as a scholar can be traced back to that book — everything.

He passed in 2016, and with his passing, that’s the first time I ever really dug into his biography. His widow, Elizabeth Robinson, knew that I was close to Cedric intellectually and in other ways. She said, “Look, no one’s writing an obit. We can’t get an obit anywhere.” And I said, “I’ll write one.” I interviewed her, talked to her, and learned all these details that I was kicking myself. I was like, “If I had asked the question … .” I didn’t ask the question because I’m a very shy person. I know that I’m in the public and stuff, but it’s a different thing.

VC: Why did you think the time was right for this third edition?

RDGK: I confess, I’m not the one who came up with the idea of putting it out again. It was UNC Press: Brandon Proia. In the midst of the protests — you had 26 million people on the street. He emailed me and Elizabeth and said, “Look, now’s the time to put out a third edition.” With the new foreword I wanted, one, to really tell Cedric’s story, to situate his intellectual biography to understand where this book came from. Two, to situate the book in relationship to the rebellion of 2020 and talk about it as a manifestation of a black radical tradition. So much of the conversation in political circles, coming out of or preceding the 2020 rebellion, all use terms like “racial capitalism” more than anything else. So I wanted to try to understand this movement, while also trying to clarify what Cedric meant by (a) Black radical tradition and (b) racial capitalism.

VC: What are the difficulties in defining what racial capitalism means?

RDGK: The slightly more traditional Marxist scholars reject the idea that capitalism can actually be racial. They say, “Race is real. It’s a phenomenon. But it’s not really the fundamental one. It sort of gets in the way of what’s really the root of oppression: the reproduction of a capitalized class.” That’s class reduction. And then meanwhile, the so-called race reductionist position — you could call it Afro-pessimism lite — is that we’re just for Black people. They say, “The whole structure of Western civilization is based on anti-Blackness and anti-Blackness alone. And therefore, there can be no allyship, there can be no solidarity.” This kind of standoffishness, saying Black people need to just be for Black people, is not Cedric’s position at all.

The class reductionist versus race reductionist debate doesn’t really advance us. Cedric advances us by helping us understand how capitalism is based on racial regimes. So, for example, property may be capital, in the Marxist sense, but property values are dependent on things that are nonmaterial — that are ideological, or superstructural — like race. Capitalism is rooted in a civilization that is based on difference. This doesn’t at all mean that white people are the enemy, or that Black people are all victims, which I totally reject. It doesn’t mean that all white people benefit. It just simply means that capitalism is structured through difference.

I have made a point of the fact that Cedric was writing a critique of Marxism — but not a hostile critique. He wasn’t rejecting all of Marx and Engels’ ideas, but he felt like Marxism was a window to understanding forms of radicalism that neither Marx nor Engels, nor Lenin, and others, could really grasp. Ironically, some people have gone to a kind of extreme, saying, “There’s nothing in Marxism that’s useful. It’s just a white man making up some stuff, and Cedric is right.” And I’m like, “No.” I find myself actually becoming more of a Marxist in my defense of Cedric.

VC: What do you view as your role as an intellectual? As you write “Black Bodies Swinging,” how do you make sure that what you’re describing is not only scrupulously true but also feeds into a politics that helps us both survive in the present and get somewhere more free in the future?

RDGK: That’s a great question. I feel like it’s not mandatory but it’s really important for me to be engaged in these movements, to make no pretense about some kind of dispassionate, detached objectivity. I think that we need to practice something that’s even better than objectivity. And that is, as you know, critique. Critique, to me, is better than objectivity. Objectivity is a false stance. I’m not neutral. I’ve never been neutral. I write about struggles and social movements because I actually don’t think the world is right and something needs to change.

As a historian, as a writer, I’ve got to try to be as critical as possible. I’m always trying to be truthful. As I write and produce this work, I learn things that we didn’t see before, but then, the work also reveals things that I failed to understand. And so to me, it’s always a process.

VC: Speaking of that kind of deep involvement, I would love to hear you talk about what California — and maybe Los Angeles, specifically — has meant for you in terms of your life but also in terms of your imagination of struggle.

RDGK: I came to California by way of Seattle in high school at the age of 15. It was in Pasadena. I was able to go to a state university where the tuition or the fees were $90 a semester. Cal State Long Beach. This was a time when we had a lot more Black students and brown students in college. I was involved with the Black student union. I had a part-time study group that was organized by the All-African People’s Revolutionary Party in Long Beach. That’s where I read Walter Rodney and Samir Amin and C.L.R. James — not so much in classrooms but in study groups.

A lot of the young people at the university and older people were working-class people — these were not the elites. In the ’80s we had the invasion of Grenada, we had the sanctuary movement, and the wars in Central America that were just driving Central Americans into Southern California; there was the anti-apartheid movement.

I ended up joining the Communist Workers Party at some point around 1983 or ‘84. I can’t remember when. [Jesse] Jackson’s 1984 campaign was really, really important. We had the Olympics come to Los Angeles in ’84. We organized a whole protest around the Olympics called Survival Fest. And we had a march down Wilshire Boulevard, MacArthur Park. There were like 10,000 people. Got no press, but 10,000 people marching down Wilshire Boulevard. Demanding what? Our demands were jobs, peace and freedom. It was a very exciting time.

VC: I’m glad you mentioned Jesse Jackson, because I have often lamented our resistance to his idea of a Rainbow Coalition. He was explicitly tying rural whites to Latino immigrants to Black working-class people, and putting forward the idea that we can only do this together. Solidarity was in the air.

RDGK: And, of course, where does Jesse Jackson get the idea of the Rainbow Coalition? It comes from Fred Hampton. He coined the term. The Black Panther Party, Illinois chapter, coined the term. And it’s through, specifically, a man named Jack O’Dell. I knew him. Jack was a former Black Communist, a close associate of Dr. King’s and then of Jesse’s, who bridged the generations and brought a left orientation to the civil rights movement. He was the one who introduced the Rainbow Coalition to Jackson. In our current moment, it’s hard to talk about things like a Rainbow Coalition politically. It goes against the white-ally idea, which I’m not really big into, where the ally is perceived to stand aside, standing there ready to be …

VC: … happy to help.

RDGK: Yeah, “happy to help.” The Rainbow Coalition’s more like, “We need to build a movement and we’re all in it.”

VC: And my freedom is a part of yours. I can’t get mine without you getting swept up too.

RDGK: Absolutely. The Rainbow Coalition notion really happened at the grass roots. It had less to do with Jackson and more to do with all the organizing on the ground. When Jackson ran for office, there was a vacuum because the Democratic Party establishment did not like him. The Black Democratic Party establishment did not like him. So that vacuum meant that all of these left-wing organizations basically swept in and became his advisors, Line of March, Communist Workers Party, the Communist Labor Party. I can name them because I was part of it. I was a member of the Communist Workers Party working on the Jackson campaign, all part of this underground of left-wing forces.

VC: You’ve said that in some ways the Black radical tradition comes together at “the crossroads where Black revolt and fascism meet.” What does fascism have to do with our moment, and what resources do we have to fight it?

RDGK: Yes.

VC: In order to fight it, you have to fight it everywhere it exists and be in solidarity with — show love for — everybody who lives under it.

RK: Internationalism is the Raid for the cockroach of fascism. Because fascism, it’s always about using nationalism, and the nation, as a bludgeon to generate support for death policies, on behalf of death governments. For violence and repression and exploitation, internationalism is the antidote, always.

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Forum: What’s The Hype Around Modern Monetary Theory (MMT)?

Join Voices for New Democracy on October 3 for our next forum discussing Modern Monetary Theory (MMT). Our panel will explore how governments pay for our needs; whether (and how) federal deficits and national debt matter; how the U.S. dollar affects the global economy. Ultimately, we will seek to answer whether MMT offers a path fo build a people’s economy, or if its insights represent a new form of imperialism.

Join us on Sunday, October 3, at 4pm PT / 7pm ET by clicking this link.

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Global Peace & Collaboration

Steve Clark Responds to “The Dollar as the World’s Reserve Currency”

| Steve Clark |

In this piece, Steve Clark responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

Thanks to Signe for raising a stimulating comment on Dennis’ piece in regard to Modern Monetary Theory (MMT). I appreciate what Tom had to say and wanted to comment further.

A bifurcated agenda (MMT at home and financial imperialism abroad) would be inconsistent and morally reprehensible for any progressive, and I don’t think anyone in or around MMT takes such a position. Rather, at worst — and like Dennis (and most of us) — MMT advocates don’t have a clearly articulated plan for remaking the international financial order. They know how it works, but they don’t know how to assert popular control at that scale (currently, their focus is on gaining effective influence in sovereign states and, someday, “going global” from such new-found power bases). Rather than criticize MMT for the same shortcoming that we all share, we need to put our MMT thinking caps on, figure out the necessary “next steps,” and advocate for consistent financial restructuring across our both domestic and global economies.  This might require a think tank and a legal corps, but that could set us in the right direction.

It seems to me that when our nation’s progressive wing overcomes dual power (defeats neoliberalism) in the US (that is, for now, in the Biden Administration and the Congress), all nations and people stand to benefit because the world does, in fact, have an integrated, global, financial system (and I think Dennis would agree) in which the US dollar and the US central bank (the Fed) dominate decision-making and financial power (at the IMF/BIS/SWIFT/IIF etc.). 

Given this institutional domination, if/when American progressives gain the power necessary to implement a true, worker-oriented, social investment agenda in the US, we also will gain (or will be on the verge of gaining) the power to pursue a similar agenda at global scale (via the IMF, where we progressives will have just acquired dominant power, or via some new authority that we and the world create to replace the IMF).

Further, given the scale and breadth of today’s crisis, when American progressives finally break the power of finance capital in the US (winning majority control of our government), the rest of the world’s progressives (in countries everywhere) will demand we immediately break that same financial power globally as well. Having gained control of the US votes at the IMF, we will have no choice but to comply (twist my arm!). 

Few American progressives have given much thought to how this “next system” of finance must operate to meet the needs of the whole world, including its impoverished nations. Obviously, “trickle down” from the US to the world doesn’t work, but, for sure, there’s no way some kind of global planned economy will be imposed. Rather, the next system — which has to carry civilization through the era of climate change impact and mitigation ahead — will be some kind of global mixed economy in which private entities and markets operate alongside public investment entities and non-market allocations, both within the world’s many nations and in transnational forms as well (corporations, global NGOs, UN-determined public investments(?), etc.).  

However this next system shapes up, the world is never going back to the gold standard. It will remain on fiat currencies because that is the actual and only way, now, that nation-states and their markets can operate (if anyone can see beyond the era of fiat currencies, please let us know what that might look like!). When US progressives quash dual power and take general control of our government (sometime over the next few election cycles), the dollar will become our currency (the public’s currency!), and we can directly and forthrightly engage China, Europe, Japan, Britain — the other four IMF-approved-for-trade currencies — the Global South, and all other sovereign nations on the matter of how best to reconstruct and democratize global finance for the challenging crisis-mitigation era ahead (including, possibly, setting a new Special Drawing Rights (SDR) currency to replace the dollar as the global reserve… MMT suggests how that might be done).  

I think that forging a new system of global finance is a necessary piece of this era’s struggle, an issue to be resolved sooner rather than later. MMT is empowering because it explains not only how the system works (and, as a corollary, how finance capital exploits the system for its own ends) but, also, how our nation’s democratic majority can impose its will on the system, reprioritize its investment agenda, move on to global financial reform, and, thereby, tackle all the vital problems of our time.

To me, a crucial task, now, is raising the financial consciousness of voters so elected politicians fight for popular oversight of finance in the public interest. That’s how we overcome dual power (defeat neoliberalism) and win progressive legislative majorities over the next few election cycles. Right now, the MMT folks are leading this project, but they need allies as well as broadened popular grounding and intersectional collaboration. I hope we Leftists will walk towards them, learn from them and help them see and link more effectively, beyond the financial realm.

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Tom Clark Responds to “The Dollar as the World’s Reserve Currency”

| Tom Clark |

In this piece, Tom Clark responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

I’m a big Dennis Torigoe fan.  As I told him at the 40th Anniversary event, having never met him before, I miss his writings from the Worker’s Viewpoint days and am very glad to see him still at it after all these years.  His response about Walden Bello last winter was very useful and enlightening.  And, as I commented on the Voices for New Democracy site, I do appreciate Dennis’ timely information about SWIFT, one of the ways the US exercises its hegemony, and INTREX, a potential remedy. He is still an authority in my view.  I’ve thought that we should invite him to present to our Finance Group on how he thinks about financial and economic issues and what his suggestions are for how we should think about them.

So it is with all due respect that I say that I found Dennis’ explanation of Modern Monetary Theory (MMT) to be vague and unsubstantial, and his conclusion about reserve currencies misplaced.  

In his article, he mentions the name Wynne Godley. What he didn’t mention, and might have, is the substance of what that economist’s work is about.  As laid out in Chapter 2 of The Deficit Myth, Godley demonstrated the principle of ‘sectoral balances.’  Simply put, as author Kelton does, the government’s red ink (the deficit) is the non-government’s black ink (a surplus).  Or, more precisely, there is a ‘penny-to-penny’ relationship between the amount of the government’s ‘debt,’ as we so misleadingly call it, and the amount of the surplus held by the non-government sector (what you, me, the business community, the Chinese etc., hold onto in our wallets, bank accounts, 401(k)s etc.) as assets, and didn’t pay in taxes.  As Godley showed, this accounting is a fact, not a theory, and decisively exposes the myth that the national debt is somehow a burden to our descendants, any more than the massive deficits from WWII were a burden to us.

In fact, there was a recent Twitter exchange where someone asked about exactly what [Signe Waller Foxworth] wrote here and what was in Dennis’ article:  Doesn’t MMT get used to maintain US hegemony over the world financial system?  The answer is that framing it that way is backwards:  The dollar acts as the world’s reserve currency because the US is an imperialist power and has the military and political clout to enforce its culture onto other players.  In other words, the dollar’s status as reserve currency is a result, not a cause, of US imperialism.  Of course they use monetary operations (the accurate description of which is the basis for MMT) to further their domination; it’s what we used to call ‘cultural hegemony,’ and part of the ‘code of capital,’ as we have called it more recently.  But the work of Fahdel KaboubLua Kamal YuilleNdongo Samba Sylla and many others demonstrate how the MMT lens and the concept of monetary sovereignty can be used by progressive/revolutionary movements to improve the lives of their constituents as well as further expose the aggressive, oppressive roles played by the US and their neoliberal allies. 

To say one more thing, since you mention military spending.  As we all know the US military budget is nearly 3 quarters of a trillion dollars per year.  But notice that the Dems infrastructure and rescue proposals are for $6T total over 10 years, in other words about $.6T/year, comparable to the military expense.  What the MMT folk say is that we have enough room to do both, at least for a while. The MMT proposition is that there is no need to ‘pay for’ the Green New Deal, Medicare for All, education, childcare, reparations etc. by cutting the military budget or anything else.  Of course doing both seems wasteful and leaves in place an aggressive, damaging institution that we all hate.  (I say we can work on that problem as we go.)  But isn’t it worth it to get the good stuff that we really have to have and to highlight that possibility to those we work with?  I think so.

The point is that believing that we must first cut things like military spending to ‘pay for’ the social programs we know are so acutely necessary, is to swallow the ‘Deficit Myth,’ to accept that the US government has to ‘find’ the money it spends just like households, businesses and local governments must.  It’s just not so.
So the question is larger than, ‘how do we stop so much military spending?’  It’s ‘how do we get people the things they need?’ The MMT lens says we do that by writing and passing budgets that fund the programs we want, at least initially no matter what happens with the military budget.  Let’s do that and then the democratic will of the people we have established by working with everyone who will — what I think Steve means by ‘dual power’ — can decide later what best to fund for the long term, guns or butter, to use the old phrase.  The issue is getting our (small-d) democratic foot further in the door of this appropriations/spending process, using what ‘dual-power’ we can muster, not slaying old dragons no matter how righteous and right we are about how monstrous they are.   

Agree or disagree, I hope this is useful. Again, thanks for your response to my vids about the ongoing mainstreaming of MMT.

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Uncategorized

Signe Waller Foxworth Responds to “The Dollar as the World’s Reserve Currency”

| Signe Waller Foxworth, PhD |

In this piece, Signe Waller Foxworth responds to Dennis Torigoe’s recent article, “The Dollar as the World’s Reserve Currency.”

Thanks to Dennis Torigoe for a very informative piece in Voices for New Democracy about the privileged position the U.S. has in global finance due to the acceptance of the dollar as the world’s reserve currency. I am wondering about the relationship between Modern Monetary Theory (MMT), that has captured the enthusiasm of many of us, and the sovereign role of the dollar in global finance. 

We are excited about MMT because it exposes the myth of deficit spending and describes the actual working of the economy. MMT shows the deceitfulness of rationalizing the government’s failure to provide for the basic needs of the people with excuses like we don’t have the money for this or we would have to raise taxes to pay for that. These rationalizations are false because the U.S. Government is the sole currency issuer and creates fiat money by spending it into existence, a feat none of us can accomplish, at least legally. It is no more difficult to find the money for universal health care, housing, living wages, education, immigration reform and addressing environmental destruction and climate catastrophe than it is to find the money for bombs, drones, guns, corporate bailouts and aid to foreign countries that are human rights abusers. The failure to provide a decent living standard for its population is exposed as due to a failure of political will and moral values, not a shortage of money. MMT opens the door to a more democratic process of managing the U.S. economy.

What I find challenging is what is precisely the relationship between MMT and the international financial arrangements that lead to U.S. dominance over other nations. The sovereign dollar plays a major, if not decisive, role in promoting U.S. imperialism. Could we, or would we even want to, create a paradise in the U.S. by trampling the rest of the world to death with imperialistic and financial action afforded by our privileged position in the global financial system? The relationship between MMT, with its potential benefits toward democratizing our national life, and the global financial system that fosters U.S. imperialism challenges our thinking in the fields of Economics and Ethics.  Could we (is it even economically feasible) or would we want to (is it even ethically justifiable to) utilize the tools of MMT domestically to fund education, housing, living wages, immigration reform, universal health care and avoiding the worst climate catastrophes if the US sovereign position in global finance continues to allow us the latitude to address Americans’ needs by immiserating other peoples?

Categories
Economic Justice

The Dollar as the World’s Reserve Currency

| Dennis Torigoe |

The US dollar is in a privileged position in the world as the global reserve currency which dominates international trade and commerce. As the world’s reserve currency, the US can continue to print as many dollars as it needs, run massive balance of trade deficits and use it to buy the world’s goods, basically swapping our paper for their raw materials and labor. The US can continue to increase its internal and trade deficits as long as it retains this world reserve currency status.

The bottom line: The dollar as the world’s reserve currency has been both an economic blessing and a curse on the workers and people of color in the US.  The US dollar’s role as the hegemonic reserve currency allows the US to deficit spend massively on the military and wars of aggression, while funding certain reforms to quell domestic resistance through targeted programs paid for by massive deficit spending.  At the same time the US dollar is used to plunder developing countries through high interest loans( by its de facto control of the IMF and the World Bank),  to attack other countries’ sovereign currencies and engage in unequal trade with developing countries.

The dollar as the world’s reserve currency has led to the gutting of domestic industry as US corporations, riding on the massive amounts of dollars printed by the US, drive for higher profits through outsourcing manufacturing and with them factory jobs to cheaper producers in Asia and elsewhere.  This has directly contributed to deindustrialization, structural unemployment and widespread suffering for a large swath of the American people.

Not only does the US control the creation of the dollar as the world’s reserve currency, it also controls the mechanism which allows another country to use the US dollar in trade or finance, the SWIFT trade clearing system.  Through it, it has attacked countries like Iran and Venezuela though enforcing trade sanctions and caused untold suffering to the people of those countries,

The reserve currency status of the dollar allows the US to import cheap manufactured goods from other countries, particularly China, while paying for it in dollar-denominated paper or bonds. The US balance of trade deficit has soared, especially since the 1990s, as they give us real goods and we give them paper.

This cheap goods vs. paper payment has contributed to inflation being almost nonexistent, till now, from the 1990s to 2020.

Given the history of the imperialist wars, the plunder through unequal trade and economic and political aggression against the developing countries, the US owes reparations to much of the developing world which have to be repaid over time.  In our view, the only way to repay these historic debts and to raise the standard of living within the US is through unleashing massive postindustrial gains in productivity through a top to bottom reform of the present economic system.

However, we do recognize that replacing the US dollar as a reserve currency will perhaps take decades. In the interim, a Green New Deal-like program could be pivotal in accelerating the fight against climate change and the US’s advance in a post-industrial world.  However, the feasibility of such massive spending assumes the reserve currency status of the US dollar and the US’s own easy access to capital markets. Do the benefits that accrue to American workers from giant government programs come at the expense of people around the world? The answer is yes, thus the US bears a special responsibility to the rest of the world to fight climate change, inequality and injustice. As starters, the US needs to join or rejoin initiatives like the 2015 Paris Agreement, COVAX, the World Health Organization and revolutionize the character of international institutions like the IMF, World Bank, Bank for International Settlements, and the UN.

At the same time, we should seek first to promote alternatives to the US dollar’s reserve currency status and more equitable control of the world’s financial, trading and banking networks.

Commentary:

The US Dollar as the Global Reserve Currency: Is Modern Monetary Theory Only Good for Modern Imperialism?

When Representative Alexandria Ocasio-Cortez was asked how the potentially multi-trillion dollar Green New Deal was going to be paid for, she mentioned Modern Monetary Theory (MMT).  Coming into wider public view since then, it has become the answer for some on the political left to the question of how to pay for any major program proposed, from Medicare for All to Guaranteed Annual Income.

So what is this theory and how does it work, who benefits and who actually pays for what it promises?  We think it is usable by a superpower with hegemonic financial power through the use of the US dollar as the world reserve currency, benefiting the ruling class financially and politically.  It is paid for by the developing countries and their citizens forced to use the US dollar in trade and finance. And while it may give short term benefits to US workers, it creates an unsustainable global economy and prolongs the rule of the monopoly capitalists.

The bottom line: the US dollar’s role as the hegemonic reserve currency allows the US to spend massively on the military and wars of aggression, while funding certain reforms to quell domestic resistance through targeted programs and to continue to use the US dollar to plunder third world countries and engage in unequal trade.

It is one currency, one system.  They are interconnected. Given the history of the imperialist wars, the plunder through unequal trade and economic and political aggression against the developing countries, the US owes reparations to much of the developing world which have to be repaid over time.  In our view, the only way to repay these historic debts and to raise the standard of living within the US is through unleashing massive postindustrial gains in productivity through a top to bottom reform of the present economic system.

However, we do recognize that replacing the US dollar as a reserve currency will perhaps take decades.  In the interim, a Green New Deal-like program could be pivotal in accelerating the fight against climate change and the US’s advance in a post-industrial world.  However, the feasibility of such massive spending assumes the reserve currency status of the US dollar and the US’s own easy access to capital markets. Do the benefits that accrue to American workers from giant government programs come at the expense of people around the world?  As we show below, the answer is yes, and if so then the US bears a special responsibility to the rest of the world to fight climate change, inequality and injustice. As starters, the US needs to join or rejoin initiatives like the 2015 Paris Agreement, COVAX, the World Health Organization and revolutionize the character of international institutions like the IMF, World Bank, Bank for International Settlements, and the UN.

At the same time, we should seek and promote alternatives to the US dollar’s reserve currency status and more equitable control of the world’s banking networks.

Secular Stagnation Takes Hold in the US Economy

We believe that the US economy is in a period of what Lawrence Summers, the Harvard economist, calls secular stagnation.  He cites a number of factors pointing in this direction.

First of all, there has been a decrease in market-based investment demand overall, driven by a shrinking working age population which drives down investment in housing, consumer demand and production equipment.  Also driving down investment has been the lower cost and higher productivity afforded by the technology revolution.  He also argues that increased monopoly power in the US has stifled investment, as well as the refusal of the politicians to fund major infrastructure projects.  The net result has been that infrastructure spending is now one half of what it once was,

The other aspect driving secular stagnation has been the increased savings taking place in the economy.  Much more of the country’s income and wealth is going to the top economic earners, driving up the prices of assets like stocks and real estate, not into productive investments.  Moreover, because of the traumatic experience of the Great Recession of the 2009, people are themselves saving more as a cushion and banks have tightened lending rules, excluding many from purchasing homes and opening businesses.  Of course, the coronavirus pandemic has greatly increased all these factors.

What Is Modern Monetary Theory?

Modern Monetary Theory has been around for a while.  In her recent book The Deficit Myth, Stephanie Kelton, a leading proponent, cites her colleague Wynne Godley who in the late1990’s as a major inspiration for her thinking.  Basically, MMT argues that the government (in the US case, the Federal Reserve) can issue as much money to enable the Federal Government to spend as much money as it wants up to the point where economic demand in the economy outstrips the available supply of goods and services, at which point inflation and higher interest rates set in.  For a country with a sovereign currency, meaning it issues and controls its own currency, MMT believes that it can create money and the government can spend money as long as the goods and services exist for it to buy in its specific currency.

One of the major distinctions made by MMT is that unlike households and private businesses, a government with a sovereign currency does not need to balance its expenses with its revenues.  The government, as the creator and controller of the currency, can print as much money as it wants to pay off its bills.  But this means that governments without control over the currency with which they borrow or trade must use the US dollar to trade or pay off debts denominated in dollars or held by US-controlled institutions.  They are like households.  They need to get US dollars to pay off these bills.

How Does the US Ruling Class Use the Dollar as the Global Reserve Currency to Plunder the Rest of the World?

The countries that have the ability to follow MMT’s policies are the advanced capitalist countries of the world, with the US by far the most powerful.  Like households and businesses, the rest of the world has to get (through trade or borrowing) and use the major currencies of the West, mainly the US dollar but also the euro, the yen, the pound, and to a smaller extent China’s yuan, to engage in trade and finance with the US and major trading nations of Europe, Japan and China.  As we shall see, not only does the US control the creation of the dollar as the world’s reserve currency, it also controls the mechanism which allows another country to use the US dollar in trade or finance. (Unlike the US, the European countries that share the euro are a work in progress. While they share a single currency and a central bank that issues that currency, spending decisions are still made, within limits, by their individual governments.)

The US dollar is in a privileged position in the world as the global reserve currency.  After World War II, the US was the world’s most powerful military and economic power. At the post war Bretton Woods Conference, the major allied powers and other signers agreed to the US dollar as the world’s reserve currency, then pegged at US$35 to an ounce of gold.

The Conference also created the International Monetary Fund, which was to stabilize currencies vis-a-vis the US dollar through loans and the World Bank which was to help develop international trade and finance.  Both were de facto controlled by the United States in its position as the biggest contributor of financial support, with US dollars, a currency that it created and distributed as its sovereign currency.

The US Dollar as the World’s Currency for Buying Oil Shores Up its Dominance

In the 1950s and 1960s, as the world’s economic and military superpower, the US dominated the world economy in trade, finance and manufacturing. Importantly, it also dominated the trade in the world’s most traded commodity – oil.  As the US dollar was the reserve currency in the world, almost all oil produced and exported had to be bought with US dollars. This worked until the US stagflation crisis (economic stagnation AND inflation at the same time) in the early 1970s when the US unilaterally pulled out of the gold standard of US$35 being exchangeable for one ounce of gold.  With US inflation and the dollar’s devaluation — its value “floating” depending on supply and demand — the oil-exporting countries of the Middle East lost purchasing power. They rebelled with the 1979 OPEC boycott by oil producing countries, refusing to ship oil to the West, which made the price of oil quadruple, from a fixed price of US$4 a barrel to US$12 a barrel in a matter of months.  With US dollars now gushing out of the US and Europe to the oil producers in OPEC, a new agreement was signed.  In 1979, the US-Saudi Arabia Joint Agreement on Economic Cooperation, in which Saudi Arabia, the biggest oil exporter, agreed to take only US dollars for its oil and to funnel them back into the US.  This again strengthened the US dollar’s hegemony on the world economic, trade and financial scene.

Since then, the US dollar has kept its position as the only truly world currency, though it is being potentially challenged by the euro and less so by China’s yuan. (On a secular basis, the shift away from fossil fuels, including oil, and the rise of digital currencies, especially sovereign-state-supported ones, pose challenges to the US dollar’s dominance in world trade and finance.)

The US Dollar Hegemony Helps Keep Wages Down Here and Oppress Low Wage Labor Overseas

The new millennium has brought historically low inflation to the United States, especially compared with the decades since the 1970s, as can be seen by the chart below.

At the same time, the US balance of trade deficit soared, especially since the 1990s, or as MMT author Kelton says, they give us goods and we give them paper.  What happened in that period?  The US started importing massive amounts of goods from the rest of the world, particularly China.  While the US has historically exploited cheap overseas labor and raw materials, from the banana plantations of Central and South America to the sewing factories in the Caribbean and Asia, now the US was buying manufactured goods from a fast-growing Chinese economy. At least one study shows that this had the effect of dampening price inflation.  This was especially true after the period of the Great Recession of 2008-2010, when the US economy was recovering.  According to A New York Federal Reserve staff report showing the impact on trade on US prices:

Lower Chinese export prices due to WTO entry reduce the U.S. manufacturing price index by 4.9 percent, while greater Chinese export variety reduce the index by 2.6 percent. The sum of these two values indicates that the total WTO effect on the U.S. price index is 0.076, that is the U.S. manufacturing price index was 7.6 percent lower in 2006 relative to 2000 due to China joining the WTO. Note that this fall is after correcting for any overall inflation in domestic and import prices that is common across industries in the constructed U.S. price index, since common trends would be absorbed by the constant term in (33).

So we interpret this 7.6 percent fall in prices as the real impact on U.S. manufacturing prices relative to inflation. Since manufacturing is only a fraction of the U.S. economy, this seemingly large effect is notably smaller than the aggregate 6.7 percent long-run U.S. welfare increase that Caliendo et al. (2015) estimate from the 2000-2007 China trade shock.

In a period of increasing impoverishment of US workers, this meant that their real wages were buffered by this lowered inflation and thus kept their standard of living from declining even more.  The fact that most of the imports from China are consumer goods and consumer spending makes up 2/3 of our economy means that the standard of living of people in the US is increasingly dependent on the continuation of US dollar hegemony. We are using massive amounts of printed dollars to keep the goods coming.  If there ever was a sudden stop to this, our living standards could fall precipitously.  As quoted by Siddiqui, Paul Samuelson expressed his deep concern about this:

More than a decade ago, Krugman (2007: 437) noted, “The United States has a remarkably large current account deficit, both in absolute terms and as a share of GDP. At the moment the country is not having any difficulty attracting capital inflows sufficient to finance this deficit, but many observers nonetheless find that deficit worrisome. This worriers see an ominous resemblance between the current U.S. situation and that of developing countries that also went through periods during which capital flows easily financed large current deficits, then experienced ‘sudden stops’ in which capital inflows abruptly ceased, the currency plunged, and the economy experienced a major setback.”

The Walmart’s and Amazons depend on the much lower paid labor making manufactured goods from China and the developing countries as an inherent part of their business models.  This was another way that the ruling class kept pressure for wage increases down and capitalist profits higher.  The other way was US companies offshoring production of things like sophisticated electronics at a fraction of the cost of what it would be to produce in the US.  The Apple iPhone is a prime example of this,

And how does the United States pay for this massive trade deficit?  As MMT says, we get real goods, we send them paper.  Basically by printing money that the world is obliged to take as payment. China now has over a trillion dollars of US Treasury notes that it has accumulated in trade with the US, about 7% of the total foreign-held US government debt.

US Global Trade Deficit 1950-2018

Thus the US ruling class continues to reap the profits of exploiting cheap labor from the developing countries in both raw materials and in manufactured goods because of its position as the creator of the world reserve currency.

The Cycle of US Interest Rates and Currency Attacks on Developing Countries 

Federal Funds Rate 1950-2019

In 2007 Joseph Stiglitz wrote an article titled “The Asian Crisis 10 Years Later” in The Guardian, explaining the Asian Financial Crisis which began in 1997.  In it, he laid out the timeline of the crisis:

In July 1997, the Thai Baht plummeted. Soon after, the crisis spread to Indonesia and Korea, then to Malaysia. In a little more than a year, the Asian crisis had become a global financial crisis, with the crash of Russia’s ruble and Brazil’s real.

In that year, George Soros’ hedge fund, the Quantum Fund, bet heavily against the Thai baht, which had recently dissolved its peg to the US dollar. Thailand did this after the dollar strengthened, and Thailand was caught in deteriorating terms of trade and thus an inability to pay the massive loans it had denominated in dollars. That was like blood in the water to the hedge fund sharks and other currency speculators to attack the Thai baht, betting that it would quickly devalue against the dollar.  George Soros’ fund’s $1 billion bet, in fact, wasn’t the biggest of the attackers. Julian Roberts’ Tiger Fund hedge fund bet $3 billion against it.  The attacks continued through the next two years.

What were the general conditions causing this financial crisis? As Stiglitz puts it, “[B]efore the 1997 crisis, there had been rapid increases in capital flows from developed to developing countries – a six-fold increase in six years. Afterwards, capital flows to developing countries stagnated.”   He went on to say, “Indeed, the two most important lessons of the crisis have not been absorbed. The first is that capital market liberalisation – opening up developing countries’ financial markets to surges in short-term ‘hot’ money – is dangerous. The only two major developing countries to be spared a crisis were India and China, both of which had resisted capital market liberalisation. Yet today, both are under pressure to liberalise.”

We think that the cycles of interest rates play a major part in the recurring financial crises. When US interest rates decline and a weaker dollar follows, US companies use the cheap money to buy up assets in these countries and US banks push dollar-denominated loans to them.  Then the crisis hits and the foreign investments become “hot money” and flows out of the country.  At the same time, Western banks stop lending and the economic crisis intensifies in developing countries.

Korea’s experience with the 1997 Asian financial crisis is an example of Western predatory attacks against a weakening currency leading to the attempts at an economic takeover of its most valuable assets.  Korea was  forced to borrow from the IMF to cover foreign loan repayments for its major industrial companies, the Chaebol.  Among other demands, the IMF demanded that Korea “open up” its financial markets to foreign investment, allowing 55% foreign ownership of its companies (Korea dropped limits altogether), which would mean foreign, primarily U.S., control of Korea’s companies.

As one report in 2009 stated in Korea’s attempt to instill anti-takeover poison pill measures:

Domestic M&A laws have been loosened since the 1997-98 Asian financial crisis, and in 2006 activist investor Carl Icahn and hedge fund Steel Partners floated the idea of buying tobacco monopoly KT&G…in what would have been South Korea’s first unsolicited foreign takeover bid, but no official tender offer was filed.

In 2003, SK Group, parent of top mobile carrier SK Telecom…and refiner SK Energy…, clashed with Sovereign Asset Management, which unsuccessfully sought to remove its chairman.

Those cases raised a red flag to unfriendly takeover attempts and led listed companies, including Samsung and POSCO, to spend $55 billion defending their management as of end-January.

“Our country has made hostile M&A attacks easy by removing a ceiling on foreign stock investments, but it has not had any means to prevent hostile M&A,” the justice ministry said in a statement on Monday.

The US Dollar and the SWIFT International Settlement System: Weaponizing the Dollar

On November 5, 2018 Al Jazeera ran the following headline: US Treasury Secretary Steven Mnuchin told reporters that SWIFT could get slapped with sanctions if it provides services to Iranian banks blacklisted by Washington.

The article continued:

The Belgium-based Society for Worldwide Interbank Financial Communications (SWIFT) financial messaging service announced on Wednesday it was suspending access for some Iranian banks “in the interest of the stability and integrity of the wider global financial system.”

What was this about?  Another way the US uses its hegemonic position as the world’s reserve currency is its weaponization of the currency clearing system used in global trade.  Today SWIFT (the Belgium-based Society for Worldwide Interbank Financial Communications) system dominates the international trade payments system, which of course is heavily based on the US dollar,

As a whole, the US dollar is by far the currency of world trade transactions.  As Kalim Siddiqui wrote in his 2018 article “The U.S. Dollar and the World Economy: A Critical Review”:

the U.S. dollar makes up nearly 63% of central banks’ reserve currency holdings, against 17% for the euro and 2% for the yen (Siddiqui 2018a, World Bank 2017).

In the foreign exchange market, 90% of forex trading involves the U.S. dollar. At present, nearly 40% of the world’s debt is issued in the U.S.dollars (World Bank 2017, Willett and Chiu 2012).

SWIFT is basically a financial messaging system that allows its member banks to conduct payment settlements between international trade buyers and sellers,  According to Al Jazeera, the member-owned cooperative connects more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories around the world.  It continues:

Think of SWIFT as the central nervous system of international financial transactions. The messaging platform enables financial institutions to send, receive and track information about financial transactions in a secure and standardised way that facilitates the smooth flow of funds across borders.

When the Trump administration wanted to punish Iran with sanctions, it used the US’ role as the world’s issuer of reserve currency as one of the ways to enforce it.  Al Jazeera states,

Countries cut off from SWIFT can be crippled financially because money transfer information can’t be forwarded to its banks.  When a country’s banks are cut off from SWIFT, it can’t pay for imports and can’t receive payment for exports… In March 2012, SWIFT agreed to not forward messages to any Iranian bank or individual that had been blacklisted by the EU. As a result, Iran’s oil exports plunged from around 2.5 million bpd in 2011 to around one million bpd by 2014.  The 2012 SWIFT ban was widely seen as instrumental in bringing Iran to the negotiating table which led to the 2015 Iran-nuclear deal.  When Iranian banks were reconnected to SWIFT following the 2015 Iran-nuclear deal, oil exports increased again.

While SWIFT is not owned by the US, it defies the wishes of the superpower at its own peril.  Al Jazeera states:

…There could be consequences if it resists US pressure to cut off Iran again. Richard Goldberg, senior adviser at the Foundation for Defense of Democracies, a think-tank, argued in this blog that in 2012, Congress authorised any president to impose sanctions on SWIFT’s board of directors (which includes executives from some of the world’s biggest banks) if it refused to disconnect Iranian banks blacklisted by Washington. 

As can be seen, the US can impose its will on SWIFT and use it as a financial weapon against its intended targets.

Europe Countering US Move on SWIFT

The US campaign against Iran and pulling out of the 2015 nuclear deal, however, has not been supported by the major countries of Europe, who rely on trade and imported oil from the Middle East and want the best deal they can get in buying it,  To have Iran cut off from supplying oil to them and trading with them is a major problem for them,  To counter the US move against SWIFT by banning Iran from it, the Europeans have attempted to set up a separate shadow trade settlement system.

On December 1, 2019, six European countries joined a barter system for the Iran trade.  As reported by TRT World, the Paris-based INSTEX, which has yet to enable transactions, functions as a clearing house allowing Iran to continue to sell oil and import other products or services in exchange, to avoid US sanctions.  Paris, London and Berlin on Saturday welcomed six new European countries to the INSTEX barter mechanism, which is designed to circumvent US sanctions against trade with Iran by avoiding use of the dollar.

As founding shareholders of the Instrument in Support of Trade Exchanges (INSTEX), France, Germany and the United Kingdom warmly welcome the decision taken by the governments of Belgium, Denmark, Finland, the Netherlands, Norway and Sweden, to join INSTEX as shareholders,” the three said in a joint statement. The Paris-based INSTEX functions as a clearing house allowing Iran to continue to sell oil and import other products or services in exchange.

This, in itself, is a step toward freeing the world from the US dollar hegemony that has lasted over 85 years.

Categories
Economic Justice

Commentary: The Root Cause of Central American Migration Is US Imperialism

This post offers commentary on the article, “The Root Cause of Central American Migration Is US Imperialism,” written by Suyapa Portillo Villeda and Miguel Tinker Salas, and recently published in Jacobin. Read the full piece here.

Earlier this week, Vice President Kamala Harris visited Guatemala as part of a series of foreign policy meetings regarding Central American migration. But despite the Biden administration’s promises to close the chapter on Trump-era policies by welcoming immigrants and building a more just immigration system, Harris quickly indicated that tight border restrictions are here to stay. Speaking to migrants in Central America, Harris’s message was explicit: “Do not come. Do not come.”

While Harris’s trip was ostensibly meant to begin discussions with foreign leaders around addressing the “root causes” of Central American migration, the overarching message she conveyed was that the United States will turn you back at the border if you try to come. (It’s worth noting that this is legally dubious; all migrants have a right to seek asylum at the US border under existing immigration law.) And even when discussing the “root causes” of migration, Harris continued to disappoint, focusing primarily on issues of corruption and lack of economic opportunity. As many immediately pointed out, Harris failed to recognize that the United States itself has long been one of the key actors animating these “root causes” in the first place.

In a recent Voices for New Democracy forum, scholar Miguel Tinker Salas discussed the United States’ historic record of involvement in Central America and how it continues to animate migration patterns today. He also recently published a new piece with the scholar Suyapa Portillo Villeda in Jacobin magazine elaborating on these issues in the context of the controversy Harris has provoked.

Does anyone believe that promoting “economic development” by expanding the presence of foreign companies in Central America will slow immigration? Does anyone believe that callously declaring “Do not come” will improve the lot of would-be migrants?

https://jacobinmag.com/2021/06/kamala-harris-central-america-guatemala-visit-us-imperialism

Throughout the last century, they argue, the United States has been deeply involved in shaping a neocolonial reality in Central America, as the American economy relies heavily on cheap Central American labor. With this history in mind, Harris’s gestures towards expanding economic opportunity ring hollow – another justification for American-led development and economic policy more likely to favor multinational corporations than potential migrant populations. Ultimately, if we want to get serious about root causes, we must begin with US empire.

Read the full piece, “The Root Cause of Central American Migration Is US Imperialism,” via Jacobin.