Henry C. K. Liu on dollar hegemony

From webmaster <webmaster@chinastudygroup.org>
Date Wed, 01 Dec 2004 13:43:01 -0500
User-agent Mozilla Thunderbird 0.6 (Windows/20040502)


(an excerpt from a longer article by Henry Liu in the Asia Times) :

A sustained trade deficit supported by currency hegemony is the essence 
of finance imperialism. Unlike producers in the industrialized core 
during industrial imperialism, producers in the colonies under finance 
imperialism do not get richer from producing. They are locked into a 
low-wage sweatshop production system so that global inflation can be 
contained to keep an ever-expanding supply of fiat dollars valuable.

Credit is allotted through a central bank regime not to the 
entrepreneurs who can keep wages rising, but to those who can succeed in 
pushing wages down with government blessings. The more dollars the 
Federal Reserve releases, the lower world wages must fall to prevent 
global inflation. The more the dollar economy expands, the smaller the 
wage-to-price ratio in dollar terms. Those economies that defy this iron 
law of low wages under dollar hegemony are punished with financial 
crises that drain their dollar reserves.

Dollar hegemony renders domestic Keynesian demand management 
inoperative. It is no longer economically necessary to manage demand by 
raising wages even at the financial core, since consumption can be 
maintained by lowering prices of products produced at low-wage 
peripheries, paid for by the wealth effect of dollar assets buoyed by a 
rising tide of fiat dollars that the Fed can release without limits and 
with no penalty or reckoning. Thus under dollar hegemony, money takes on 
an additional function as a confiscatory tax on wages, apart from the 
conventional functions of store of value and medium of exchange.

This confiscatory role of money on wages works across all national 
borders, spreading and perpetuating poverty on the working class all 
over the entire globe. Neo-liberal economists call it wage arbitrage 
natural to finance market fundamentalism. They put forward the argument 
that workers are not unjustly exploited by imperialists or capitalists. 
The dismal fate of workers under dollar hegemony, in a neo-Ricardian 
iron law of wages, is the logical outcome of a Hayekian amoral market 

Complete text: http://www.atimes.com/atimes/China/FL01Ad01.html