If the Cold War can be said to have had any virtues, at least it kept the major capitalist powers from each others’ throats. Of course, this peace came at some cost — repression and manipulation of client states, proxy wars in the Third World, squandering money on weapons of unimaginable horror, and a constant if subliminal fear of universal annihilation. But given centuries of history during which economic and political rivalries were resolved through increasingly bloody wars, five decades of relative peace is no mean achievement.

Now this bipolar, hierarchical world is gone. The Bush administration and its triumphalist supporters would have us believe that it is simply a matter of “our” victory and “their” loss; part of the rationale of Operation Desert Shield is to demonstrate that the post-Cold War world has one boss, not two. The triumphalists’s allies in the end-of-history school argue that the end of the world’s great ideological division means that the blessings of liberal capitalism will bring peace and prosperity to all: The whole world now aspires to the condition of the United States of America.

A closer look at Operation Desert Shield begins to reveal the political and economic flaws in the argument. Though largely a US affair, this massive deployment of flesh and armor to the Persian Gulf has required both subsidies and legitimation from foreign powers. While the political angle — maintaining the illusion that a war on Iraq is the collective project of a new civilized order, and not merely the strangely personalized and not fully explicable obsession of a portion of the US elite — is important, the current configuration is also a sign of Washington’s chronic fiscal crisis.

This crisis is partly self-imposed, a legacy of the mad experiments of Reaganomics and a sustained arms buildup. But the Reagan program was itself a manic attempt to restore the US preeminence that was lost sometime in the 1970s, and so it is hard not to see something mercenary about Operation Desert Shield. Some of Washington’s nominal allies apparently agree. As an unnamed “senior Gulf official,” apparently ignorant of the racial composition of the US military, told the Wall Street Journal: “You think I want to send my teenaged son to die for Kuwait?… We have our white slaves from America to do that.” [1]

Several days earlier, the same paper expressed a concern, as the headline put it, that Japan and Germany are “shirking” their Gulf duties with “nary a peep from the White Rouse.” [2] Journal correspondent Walter Mossberg rued the fact that the two countries were not putting the lives of their citizens on the line in the Gulf, and that their financial contributions were relatively puny. Japanese aid to Jordan, Turkey and Egypt is mainly in the form of loans, not grants, and much of the military hardware contributed by Germany is “cast-off gear from the defunct East German army.” Though senior administration officials are quiet, the middle levels are discreetly angry, and Congressional and popular opinion is likely to throw discretion to the winds if Bush decides to go to war.

The US press has been even less diligent in reporting foreign reservations about US behavior. Hella Pick, diplomatic editor of the Guardian, reported that “behind the public facade, in London as well as in Bonn and Paris, there is impatience and not a little exasperation with the US administration. It is the classic case of taxation without representation,” an unidentified diplomat told Pick, precisely the same phrase that European Community President Gianni de Michaelis used early in the crisis. [3]

A European veto, of course, would contradict the probable rationale for the entire mobilization: the assertion of US military preeminence in the face of economic and even political decline. Though you often hear leftists argue that the point of Operation Desert Shield is to assert US control over Middle Eastern oil — and thereby to gain leverage over Europe and Japan — I find this analysis overwrought and under-sourced. What precisely does it mean to “control” Middle Eastern oil? And even if the US were in a position to control it, it is hard to imagine Washington cutting off supplies to its major rivals anytime soon.

The world oil market is no longer a cartel, dominated by either the Seven Sisters or OPEC. Since the development of spot and futures markets for both crude oil and refined products, the business has entered the capitalist mainstream. Just as no one can control the copper or pork belly markets, no one can really “control” oil anymore. Even if Iraq had invaded Saudi Arabia, it probably would have made little difference to the price or supply of oil. And the economic damage has hurt the most energy — inefficient and financially weakest of the big three power centers — the United States. Since the over-militarization of the US economy has been a windfall for Japanese and European business, it makes perfect sense for Japan and Germany to stand back and watch the swaggering bullies of Washington damage their own economy.

This economic rivalry, the major source of tensions among the Big Three power centers, only seems likely to intensify in the 1990s — especially as US political influence over its allies fades along with the Cold War. The recent failure of trade negotiations is a case in point. Almost as soon as Ronald Reagan took office, the US began pushing hard for a new round of talks — known as the Uruguay round, after the country where they began in 1986 — under the General Agreement on Tariffs and Trade (GATT). As Chakravarthi Raghavan argues in his excellent book, Recolonization, Washington sought to push GATT’s mandate beyond trade and into the reorganization of production on a global scale. [4] The Reaganites thought that besides being ideologically pure, the worldwide elimination of investment barriers and trade subsidies would redound to the benefit of US multinationals.

Washington’s aggressive stance continued throughout the four years of low-level negotiations, which were supposed to have prepared the way for a high-level agreement in December 1990. Instead, the Uruguay round collapsed. The ostensible reason was US and European inability to agree on reductions in farm subsidies — the US is pushing for the virtual elimination of agricultural subsidies around the world. The subtext was a rising level of economic and political tensions sparking across the Atlantic.

Europeans have found the US negotiating strategy — approach your nominal allies with six-guns blazing — rather offensive. But they, too, have contributed to this evolving economic Cold war. Over the last couple of years, for example, Europe has restricted imports of US meat products, alleging failure to meet EC health standards. Restrictions on Yankee pork, imposed in November 1990, followed a total ban on US beef, imposed in 1989. [5]

Another important area of economic tension between the US and Europe is the low level of the US dollar. (A weak dollar cheapens US goods in world markets — or, conversely, an expensive Deutschmark can price German goods out of world markets.) Worse than the current levels, to European eyes, is the US hope of letting the dollar fall further in the hope of stimulating exports. (For the US to turn to devaluation is basically a confession of economic weakness: Since its goods are not competitive on their merits, its only hope is driving the dollar into the bargain basement.) The fight is unpleasantly reminiscent of the series of competitive devaluations of the early 1930s. Adding to Washington’s European worries is the realization that with the waning of NATO — the mechanism that Washington used to corral its junior partners for 45 years — Western Europe is drifting into a neutralist, even pacifist, independence. [6] As Europe speeds toward economic unification in 1992, and probably political federation soon thereafter, the US fears that Europe will turn inward, and it will be frozen out. It is clear, too, that the US will have a relatively minor role in shaping post-communist Eastern Europe.

On the other side of the world, there is that old perennial, US-Japanese trade tensions: American complaints, largely seconded by Europeans, about the relentless Japanese export machine — hardly mollified by Japanese direct investment in these countries — and about restrictions on foreign firms trying to sell or invest in Japan. In December 1990, for example, the US Treasury asserted that Tokyo was dragging its feet in opening its financial markets to foreign firms; Japan’s finance ministry replied that the accusations were “an excuse for people who are not doing well in business in Japan.” [7]

A fresh, if ominous, angle on this bickering with Japan is offered by Ronald Morse, an analyst with the Economic Strategy Institute, a Washington-based think tank financed by Motorola, TRW, Milliken and other US multinationals. He darkly notes that political and military tensions almost always follow upon economic tensions. While another war between the US and Japan is pretty hard to imagine at this point, Morse points to Japanese attempts to develop their own fighter plane, the FSX (though the Reagan administration was happy to offer US assistance). [8]

One “threat” of the FSX is its contribution to a greater political and military independence on the part of Japan, but there is a commercial threat as well. The aerospace industry is one of the few areas where the US dominates a world market. Japanese firms are currently working as subcontractors to Boeing and GE, as well as European aerospace firms; it is inevitable that Japanese firms will eventually become serious players in civilian airliner markets. [9]

All these tensions have grown during a time of relative prosperity, when “globalization” and “integration” were the favorite buzzwords of the global business elite. With the world economy now in its first recession in nearly a decade, it is hard to imagine the situation getting anything but worse. Businesses will be scrambling for shrinking markets, and it will be a rich temptation for politicians to blame foreigners for hard times. If the GATT talks cannot be successfully reconvened, or if a protection-minded Congress rejects a trade deal, then it is quite possible that the world will break up into three major trading blocs — a US-dominated one in the Western Hemisphere, with Latin America in a subsidiary role; a German-dominated European bloc, with Africa in the subsidiary role; and an Asian one, dominated by Japan. Since about 45 percent of world trade occurs within these three major blocs, that would leave over half of world commerce vulnerable to restriction — a portion reminiscent of the 1930s trade contraction.

Whatever all this means, it certainly does not sound like the end of history.


[1] Wall Street Journal, December 28, 1990.
[2] Wall Street Journal, December 24, 1990.
[3] Guardian, December 14, 1990.
[4] Chakravarthi Raghavan, Recolonization: GATT, the Uruguay Round and the Third World (London: Zed Books, 1990), p. 75.
[5] Business Europe, November 2, 1990.
[6] Guardian, November 16, 1990.
[7] Financial Times, December 13, 1990.
[8] Interview with Morse.
[9] Business Week, December 31, 1990.

How to cite this article:

Doug Henwood "After the Cold War, Economic War?," Middle East Report 169 (March/April 1991).

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