[OPE-L:1257] Re: monetary inflows versus capital accumulation

From: Gerald Levy (glevy@pratt.edu)
Date: Thu Sep 16 1999 - 22:42:08 EDT

Re Rakesh's [OPE-L:1256]:

I had asked previously:

> As for non-economic power, how exactly can US military power be
> translated into a strategic advantage of the US vis-a-vis Japan?

Rakesh replied:

> Consider these two examples (the latter is about Japan-US relations)
> from poli scientist Susan Strange in her last book *mad money*:
> "In Feb 1965 de Gaulle attacked the 'extraordinary priviliges' of the
> dollar in the international gold exchange standard, set up under the
> Bretton Woods Agreement back in the 1940s. He compared this system
> unfavourably with one traditionally based on gold. But his fond dream of a
> united European front agains the US and the almighty dollar soon faded away
> when the Germans failed to stand by the French in the debates on intl
> monetary reform. Germany owed its security fromt eh Red Army to the US
> nuclear umbrella; the price, as the US repeatedly made clear, of the
> implicit bargain was German membership and support for NATO and compliance
> with US interests in the management of money and finance. Gewrman leaders
> all understood this, so that, later, before Nixon unilaterlly devalued the
> dollar in 1971, Germany was the first western ally after Canada to agree
> not to embarrass Washington by asking for gold in return for the dollars it
> held in its growing monetary reserves." p. 64-5

As you acknowledge, this example is not about Japan and is, therefore,
irrelevant to the matter at hand.
> And:
> "The implicit bargain--that the United States provided security and Japan
> paid for it--became more evident in the 1992 Gulf War. In the end, Japan
> paid some $13 billion of the costs of Desert Storm.

The US military would have been used in the Gulf with or without the
support -- financial or otherwise -- of Japan. That is, the US had its
own reasons for fighting the Gulf War independently of what Japan
wanted. Do you think otherwize?

Moreover, I have no doubt whatsoever that had Japan refused to reimburse
the US for military expenses, the war would have been fought the same.

> Some calculations even
> suggested that the US showed a net profit out of the Gulf War.


> Every year,
> moreover, Japan was paying almost 3/4 of the onon salary costs of US bases
> in Japan, most of them in Okinawa, so that it was cheaper for the US
> Defense Department to keep soldiers in Japan than form them to stay at
> home. That the the Japanese govt raised no objection, even when the
> Okinawans did, could be explained by their continued reliance on the US
> forces, especially the US Navy, to act as a police force in the Pacific.

Or one could suggest that had the Japanese government threatened to
prevent a continued US military presence in Japan, then the US might very
well have responded with protectionist devices. I think something like
that happened in the 80's with New Zealand after NZ refused to allow
US Navy ships with nuclear weapons and/or power in their ports.
> "Six years after the Cold War ended, there was rising tension between
> Taiwan and mainland China. In February 1996, the Japanese were
> understandably reassured by an American show of intermediating force in the
> shape of the aircraft carrier Nimitz steaming through the Taiwan staits.

Again: this was something that the Japanese government wanted, but it was
something that the US government wanted as well. With or without Japanese
support, the US would have acted.

> North Korea was another source of insecurity. Would its weak but repressive
> govt, facing a collapsing economy, be tempted to use nuclear weapons
> against the South?


> There were also unresolved conflicts between Japan and
> Russia over the Kurile Islands, and with China over the Spratlys." p. 45-6

Yes, but there is no reason at present to believe in a Russian military
effort there. Nor a Chinese military effort.

Thus my earlier assessment:

> > Yet, it seems to me that the US
> >for its own reasons irregardless of what the Japanese government wants or
> >does not want, uses its military for its own perceived benefit. Thus, a
> >demand that the Japanese government pay for the US military lacks muscle
> >(this is even more the case today since Japan has little reason to believe
> >that China or Russia is a threat to them militarily).

is still valid.

> It also seems obvious to me that the
> US state has greater room for continued sustainable money creation, despite
> a large account deficit, than, say, Thailand, on account of the dollar's
> role as reserve currency, the pricing of crucial commodities in dollars,
> and US technological monopolies over the most advanced aspects of the arms
> industry on the one hand and microprocessors, biotech and aerospace on the
> other hand.

I don't recall talking about Thailand and I don't recall Fred talking
about it either.

And Japan is no more Thailand than a potato is a tomato.

In solidarity, Jerry

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