-Caveat Lector-
Subject:
Hidden Hand of American Hegemony
Date:
Sat, 23 Oct 1999 10:54:08 -0400
From:
Doug Henwood <[EMAIL PROTECTED]>
Reply-To:
[EMAIL PROTECTED]
To:
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[Rakesh writes...]
Date: Sat, 23 Oct 1999 03:19:07 -0400 (EDT)
From: [EMAIL PROTECTED] (Rakesh Bhandari ([EMAIL PROTECTED]))
_______________________
Reading note:
David E Spiro, The Hidden Hand of American Hegemony:Petrodollar Recycling
and International Markets. Cornell University Press, 1999. [the same series
in which Gregory Nowell's book appears]
From the inside jacket: "Between 73 and 80, the cost of crude oil rose
suddently and dramatically, precipating convulsions in international
politics. Conventional wisdom holds that international cpaial markets
adjusted automatically and ramarkably well: Enormous amounts of money
flowed into oil rich states, and efficient markets then placed tha tnew
money in cash third wolrd eocnomies. THis massive rellocation of wealth is
labeled 'petrodollar recycling.'
"Spiro has floolwed the money trail, and the story he tells, based on
interviews and a painstaking accumulation of fragmentary evidence,
contradicts the accepted beliefs both in the particulars and in broad
outline. MOst of the sudden flush of new oil wealth did not go to poor oil
importing countries around the globe. Instead, the United States made a
deal with Saudi Arabia to sell it US securities in secret, a deal resulting
in a substanial portion of Saudi assets being held by the US govt. With
this arrangement, the US govt violated agreements with its allies in the
developed world. Spiro argues that American policy makers took this action
to prop up otherwise intolerable levels of US public debt. In effect,
recycled OPEC wealth subsidized the debt happy policies of the US govt as
well as the debt happy consumerism of its citzenry.
"Petrodollars were recycled not by the hidden hand of market forces but by
the hidden hand of American hegemony..."
_________________________________
>From this remarkable book:
"So long as OPEC oil was priced in US dollars, and so long as OPEC invested
the dollars in US govt instruments, the US govt enjoyed a double loan. THe
first part of the loan was for oil.The govt could print dollars to pay for
oil, and the American economy did not have to produce goods and services in
exchange for the oil until OPEC used the dollars for goods and services.
Obviously, the strategy could not work if dollars were not not a means of
exchange for oil.
"The second part of the loan was from all other economies that had to pay
dollars for oil but could not print currency. Those economies had to trade
their goods and services for dollars in order to pay OPEC. Again, so long
as OPEC held the dollars rather than spending them, the US received a loan.
It was therefore important to keep OPEC oil priced in dollars at the same
time that the govt officials continued to recruit Arab funds...
"The Saudis...had the greatest proportion of dollar denominated reserves in
OPEC. This meant that their reserves were diminished by the [post
12/77-rb]depreciation of the dollar (compared to the basket of their
imports)> But it also meant that they had the most to lose if a shift by
OPEC to a basket of currencies [note: urged by Kuwait!!!--rb] threatened
intl confidence in the dollar. Having agreed to invest so much in dollars,
the Saudis now shared a stake in maintaining the dollar as an intl reserve
currency...
Oil is still priced in dollars." pp. 121-4
___________________________________________________
Just to take another remarkable passage:
"In an attempt to continue the recruitment of Saudi funds, and in
competition with other industrial powers, the State and Treasury Depts went
to extraordinary lengths to prevent the Congress from gathering infomration
[on the Saudi purchase of T-bills and various other instruments--rb]. The
secretary of the treasury even went to the trouble
of making sure the CIA remained secretive [!]. It was this secrecy not
accorded the investments of any other nation, tha tled the Commerce Dept to
complain that it was unable to compile accurate data on either foreign
investment in the US or its balance of payments." p. 126.
__________________________________________
And a good question: "We do not know for instance whether the investment of
billions of dollars by one govt (Saudi Arabia) in the treasury obligations
of another govt (the US) was economically rational or motivated by non
monetary considerations [provision of security umbrella?rb]. Should this
exchange of value be called a market or political deal." p. 76
______________________________________
Spiro includes a statistically rigorous analysis of how the adjustments
from the oil price hikes were imposed on the LDCs (except for a few newly
industrializing ones).
I could not recommend this book more highly. I had been hoping that a
Marxist would have written such an analysis long ago, though the late Eqbal
Ahmad made many suggestions in this direction.
Yours, Rakesh
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