Q5: The former chief economist of the World Bank, Professor Justin Yifu Lin, puts the blame for the financial crisis on the US in his latest book, Against the Consensus: Reflections on the Great Recession, and several related speeches. He believes that the problem is the lack of regulation of financial markets in the US, and the global role of the US dollar makes the crisis global. Since the US has to borrow money to finance the wars in Afghanistan and Iraq, this has also worsened the problem. Do you think that the US war policy is linked with the financial crisis?
It is part of what makes the system work. In this sense he is right, but he only looks at one aspect of the problem.
The US dollar is still the hegemonic currency. And the US is still able to centrally print money in order to maintain its imperialist policies and military presence abroad. All are derived from its global role and part of its hegemonic function. That has effects on the US debt and the finance of the entire world.
China has been expanding on the basis of the export to the US and the rest of the global north. Without that demand created by those means, China would find it far more difficult be able to develop rapidly.
China has trillions of dollars of reserves in its hands, so it is naturally worried about the hegemony of the dollar. And China would like to have a bigger financial role within the global economy, which means the US dollar has to be moved away from the central position it has today.
But China, at least the current Chinese economic development model, has also been based on this dollar-centric system. So in a sense, the U.S. and Chinese economies are tied together. In some way, you can say it is one system. You cannot say that we like this part of it, but not that part.
The US tolls trillions of dollars from China as its foreign reserve. If you owe a million dollars to another country, you are in trouble maybe, but if you owe trillions of dollars to another country, they are in trouble. Thus, China is naturally worried about the stability of the dollar and this has, in a sense, keep China in line with the US and its economic policies. Q6: What do you think about the real causes of the crisis? How is it linked with the US military and globalisation?
In my paper, The Epochal Crisis in the October 2013 issue of Monthly Review, I explained that there are three mutually reinforcing trends: monopolization, stagnation and financialisation, as causes for the current crisis.
The global financial crisis came to be widely recognized after the collapse of Lehman Brothers in 2008. However, it is pretty clear that the Western rich economies have stagnated for decades. In the US, Canada, Europe and Japan, all these countries’ real economic growth rates have been slowing down. The growth rates in the 1970s were below those of the 1960s, 1980s below 1970s, so on and so on; the growth rate in the first decade of this century is slower than that of the 1990s. We do not know about this current decade yet, but it appears slower still. The economy is slowing down on the basis of stagnation of investment. In our Marxist interpretation it is the problem of over-accumulation. This situation has been developing over a long period of time.
The strategy of profit maximization has monopolized all corporations. As I mentioned before, the top 500 global corporations in 2006 (before the crisis) accounted for 30% - 40% of the global revenue. In the US, the top 200 corporations accounted for approximate 30% of gross profit nationally.
Now, on one hand the advanced economies of the West can obtain most value added even without production, since basically monopoly powers still control technologies, global production systems and markets. On the other hand, this grabbing of the economic surplus of much of the world does not really help developed economies to grow rapidly, because of over-accumulation. The giant firms cannot re-invest very easily in the developed economies. Wages and salaries of working people in the Western economies are paralyzed because of globalisation in many ways, such as internationalisation of production, or they might call it global labour arbitrage; and indeed labor share of income is falling simultaneously in most countries of the world.
The only way to lift the US economy out of stagnation in the 1960s was military spending, such as Cold War military spending, and spending on the Korea War and Vietnam War and so on. The US maintained a high level of military spending, as high as possible, during these wars. The military spending had not been enough to maintain the system at the beginning of the 1980s. The financialisation of the system becomes responsible for economic stagnation. The surplus capital was being invested in and subsequently flooded into the financial sector, a phenomenon of over-accumulation.
The financial sector also created all kinds of financial instruments, such as derivatives, junk bonds and so on. The debt structure of the economy, particularly the debt of private non-financial and financial corporations, and that of households (now less evident) has been growing for decades, but the underlying economy is stagnant.
This means that you have financial bubbles, which periodically bursts. The US Federal Reserve and other countries’ central banks have the responsibility and the resource to bail out the financial sector, but it’s becoming harder and harder for them to manage and control this system by themselves.
Although growth has slowed this has not helped the environment much, because as the economy slows down the main forms of ecological damage do not recede proportionately. The system is trying to find a way to pull the economy from stagnation, and one of the things that it does in such circumstances is encourage all sorts of waste and relax environmental regulations. This worsens environmental problems. | 
