> The largest institutional investors, Tokyo and Beijing, have continued
> to support the dollar:
> Essentially, Tokyo and Beijing, state capitalist actors, are the
> largest individual members of the multinational ruling class, but they
> can't participate in US elections, and they can't easily wield their
> economic power to put pressures on the US government, even if they had
> any misgivings about Washington's Iraq War, Iran campaign, or Middle
> East policy in general (it is not clear that they do), for that will
> result in momentous upheavals in Japan and China as well as the USA.
>
> That's the most important gap between the power elite who directly run
> the multinational empire, who are American, and the ruling class, who
> are multinational. In essence, the multinational ruling class can't
> control the US power elite, for the most powerful members of them need
> the USA as their most important export market. No wonder the empire
> is running amok.
==================================
Yoshie has touched upon something important here. Leaving aside the question
of whether the US rulers are still "running amok" or are now thrashing about
wildly trying to find an escape from a Middle Eastern trap of their own
making, the fact that the US remains the central export market for the rest
of the world is the single most important factor underlying its economic and
political domination of the world economy.
Everybody wants to sell their products in the US, which harbours the world's largest and freest spending body of consumers. It's ability to secure cooperation from allies and adversaries by promising to open or threatening to close its home market to them is US capitalism's most potent asset - more important, IMO, that its huge arsenal of high-tech weaponry and vast network of military bases. The USSR and China tried for economic autarchy to relieve their dependence on the US and lesser capitalist markets, but ultimately failed because of their much lower level of economic development. The example of this failure, as much as the removal of the immediate political and military threat which they posed to the US, highlighted and reinforced this dimension of US power coming out of the Cold War.
Unless and until the lure of the American domestic market recedes as a factor allowing the US to impose economic blackmail on the rest of the world, it will remain more accurate to see the capitalist world economy as dominated by "US imperialism" rather than administered more vaguely by a consortium of multinational corporations, states, and lending agencies. Such a change could only be brought about by a reversal in the purchasing power of the US working class and US corporations relative to that of Chinese, Indian, and other workers and their firms.
As Yoshie notes, the addiction to USDs in the form of Treasuries and other securities are a byproduct of the need of exporting countries to maintain exchange rates at a level which will make the cost of their cars, electronics, oil, and other manufactured goods and commodities attractive to US individual and corporate consumers. If the Chinese and Japanese central banks, the two largest buyers of US Treasuries, were to cut back sharply on their purchases, their exchange rates against the dollar would soar, their exports would plummet, and they would face economic crises at home.
Despite the impressive economic growth this symbiotic trading system has produced over the past quarter century, the insatiable spending by US consumers resulting from easy money and low import prices has swollen the US current account deficit to a level which makes sustained investor confidence in the dollar difficult. Any sudden economic or political shock could trigger a sharp fall in its value which could quickly turn into a global financial panic and economic depression.
The world's central bankers recongize this, and are now engaged in a delicate operation to gradually "rebalance" the world economy without precipitating a crash. There is no real "gap" as regards this objective between the "power elite who directly run the multinational empire, who are American, and the ruling class, who are multinational."
The strategy involves the coordinated use of national fiscal and monetary policies to a) reduce consumer borrowing and spending and raise the savings rate in the US and b) encourage consumer spending and borrowing and lower savings rates elsewhere, all of which would have the effect of redressing the imbalance in exchange rates and trade between the US and the rest of the world. In the US, this points to even more austere times for the hugely overindebted American working class with the attempted readjustment from consumer- to export-led growth; in China, to increased social spending and higher wages for Chinese workers, with the attempted readjustment from export- to consumer-led growth.
Obviously,this is viewed as a gradual process, which is why you have not seen any precipitous drop in Chinese and Japanese central bank purchases of USD's which would send the US into recession and cripple their export economies.
There are also two other reasons worth noting beyond the size and strength of the US consumer market to explain why the US attracts foreign capital.
One is the stability of the US political system. The US is still considered the world's safe haven for the global elites - for good reason. Its capitalist class has been to date the most politically secure in the world, with little perceived threat to it from mass movements from below seeking to alter state fiscal and monetary policy to the detriment of private investors. Foreign investors are willing to pay a premium for US stocks, bonds, and other assets for this reason.
The second is the resiliency and continued strength of US corporations. US banks and corporations, including in its ostensibly declining manufacturing sector, are among the most profitable in the world - largely because of the extra surplus they are able to extract from their workers through reactionary labour laws and recent technological and organizational advances in production, and because of the inherent advantages conferred on them by the huge US domestic market. Consequently, the shares and bonds issued by these corporations remain in demand.
It is as easy to forecast whether the world's bankers and politicians will be able to turn the US and world economy about in this way - what is described as a "safe landing" - or whether the contradictions of the system will explode in their face, as it is to forecast December's weather in August.