Introduction to The Evil Axis of Finance

The US-Japan-China Stranglehold on the Global Future

From the early stirrings of crisis in 2006-7 through the darkest days of the 2008-9 meltdown into this second decade of the 21st century, waves of financial and systemic crises have swept the world. First came trillions of dollars in emergency first aid for “victims” – Wall Street’s private multinational banks and financial intermediaries, insurance companies and mortgage lenders, as well as assorted non-financial multinational corporations. Second, the blame game: Was it the fault of snoozing regulators, rating agency conflict of interest, a “shadow banking system” of derivatives traders, delusions of ivy league “quants,” Ponzi-scheming criminals, or some combination of them? Third, were surveys of spreading mass public trauma: collapse of local banks, burgeoning personal debt peonage, increasing homelessness and spiraling unemployment in the US and elsewhere. Fourth, there was hope.

In the US and across the world many breathed a big sigh of relief as Barrack Obama ascended to the Presidency. It was not only a question of US wars, secret rendition and torture. But here was a former university professor who actually read books and could understand policy advice given to him and act accordingly. Fifth came hope’s pledges. Trillions more dollars were injected into the economy to prop up what were effectively worthless, yet deemed vital, assets.1 Legislation was promulgated for universal health care, “green” infrastructure, public sector employment, small business tax incentives, and so on. Finally the sages, like Federal Reserve (FED) Chairman Ben Bernanke, took to the stage with numbers that proclaimed the “recession” effectively over. True, there have been aftershocks: the near collapse or rating agency-deemed fragility of the banking systems of outlier states like Portugal, Ireland, Greece, Spain (the so-called PIGS) and persistent financial institution duress in the US heartland requiring more “stimulus” rescues, ongoing home foreclosures, and so on. But political elites remain on message: “It’s the recovery stupid!”

Throughout all of this, there emerged one indisputable growth industry—that of meltdown books. I have read many of these, perhaps too many, as my credit card spending record with online retailers reveals. The best books from both mainstream and more radical sides of the political spectrum move beyond the blame game to probe the deeper systemic causes of the crisis, many redolent of an ominous déjà vu. Almost uniformly they zero in on processes of economic, political and legal change commencing in the US from the 1980s. Central to the accounts is the rise of Wall Street itself, populated at its apex by mega banks—these melded into financial behemoths through orgies of mergers and acquisitions (M&A)—that are now “too big to fail.” Economic power translated into political influence as law after law instated following the 1929 Great Depression was rescinded. The US then leveraged its weight in the world economy to compel such “liberalization” and “deregulation” of finance across the globe. With the unfettering of international finance and its commanding heights institutions a spate of novel financial instruments and creative accounting practices quickly spread with the intention of increasing short term rewards for the ever riskier activities of the global financial sector headquartered on Wall Street. Government played its part through low interest rate “easy money” policies and tacit “wink-wink, nudge-nudge” assurances like those marking the Bush 1st bailouts during the US savings and loan (S&L) crisis of the 1980s. With Wall Street power becoming ever more herculean and politically buttressed, exotic credit instruments proliferating, rewards for swashbuckling risk taking investors growing, and money so easy that a new social class of NINJA’s (no income, no job or assets) were encouraged not only to “buy” homes but use them as ATMs, so came the deluge.

But, as entertaining a read as the mélange of meltdown literature has been, the pages go blank at precisely that point where they should be elucidating what is really both the crux and the darkest side of the story. The task taken up by this book is to fill in those blank pages. Such an enterprise is most pressing because without crisp clarity on the real workings, actual purpose and endgame of what we blithely refer to as the “global economy” we will find ourselves being lulled into complacency by such widely acclaimed policy proposals as “small government,” “tax cuts,” “quantitative easing (QE),”2 Basel III,3 EU bond issuance or combinations of these even partially ameliorating our abysmal current economic condition.

The plain fact of the matter is that scholars and pundits alike have never stopped to ask, much less answer, a set of searching questions like: How did such an enchanted world come to pass where even after the US-originated 2008-9 meltdown, trillions of dollars of global wealth continue to be driven away from a myriad of other potential investment destinations and right back to a Wall Street centered casino? How are we to understand the very existence of such an ever bloating ocean of funds in economies, the centerpiece and forte of which across the past two centuries has been the production and satisfying of social demand for mass produced material goods? What if any is the relationship between the tides of money sloshing through Wall Street (along with global satellites in London, Zurich, Singapore, Tokyo, etc.), and the “real” substantive economy of production and trade that undergirds human material reproductive existence? What are the ramifications for our future of the persistence of such a bloating ocean of funds, along with continuing political support for their institutional accoutrement and the speculative excesses the funds engage in? Why has government bolstering these funds by injecting trillions of dollars into failing commanding heights financial institutions and businesses in the meltdown’s aftermath failed to create even the minutest fraction of new jobs (and where jobs being created fall into the “Mc-jobs” category)?

But, while answering these questions helps us make great headway in understanding the world we live in, the issue cannot be left here. In both academic and popular circles there exists a provocative yet hugely mistaken belief that the economy operates akin to a force of nature. Yes, according to this view, we can predict conditions where an economic tsunami might befall us. We can erect early warning systems, and even some protective infrastructure, but the force of nature itself is beyond human control. And, it will thus always be with us. Such a disempowering position is reinforced by the mainstream economics profession with its spurious physics-like approach to its subject matter and its rigid ideological patrolling of economic curricula in our schools. However, the social world, our societies, economies and whatever happens within them are all in the end products of our human agency.

The capitalist economy may appear to be orchestrated with an “invisible hand,” to take Adam Smith’s much used metaphor, or to function like a “fetish,” endowed with extra human powers before which we prostrate ourselves, as Karl Marx famously put it. But ultimately it is our human agency or the purposive actions of real people that set “the economy” in motion. This basic understanding then permits us to easily envision human agency of other sorts stopping Smith’s hand dead and discarding the fetish along with our habit of prostration, freeing us to transform our economic life in fashions which better engender genuine human flourishing. Of course, in class divided societies, some humans and their organizations have much more “agency” or power than others. This holds as well for a world divided into political entities we call states. Therefore, if we really want to get to the bottom of what is happening to us and provide the most complete answers to the questions raised above we need to explore the asymmetric structures of agency and power at the national and international levels of our polity and society.

The question here involves the quarter ton gorilla in the room that no one wants to see or talk about: Under what global conditions is it possible for the US and Wall Street to play a central role in international political, economic and financial affairs when the US has the world’s largest national debt, fast approaching $15 trillion, an annual trade deficit of around $400 billion, a capital account deficit (where the value of foreign claims on the US exceeds that of all US-originated investment abroad) of close to $3 trillion, a budget deficit zooming past $1.5 trillion and—this is the kicker—where personal savings in the US economy as a whole has been hovering near zero for over a decade?4 So, if we rephrase this economics textbook defying question in language used by the characters played by Cuba Gooding Jr. and Tom Cruise in the film Jerry Maguire, “show me the money!” the response should be a resounding, None! But there is money. And it flows from a sinister, rigged global game based on the role of the US dollar as world money or hub currency. A game where, for the cost of running a printing press, the US parlays dollar seigniorage benefits5 into a mode of domination more total than the jus primae noctis right of medieval lords in ages past. However, for this game in particular, major committed supporting players are required. These are first Japan, and later, with a vengeance, China. Together with the US, they form the evil axis of finance.

Now the US-Japan-China evil axis did not spawn the bloated ocean of funds sloshing from Wall Street across the globe. How these funds agglomerated and the changes in major global economies, their business systems and government policies, as well as in the character of international investment and trade flows at the root of hypertrophic finance are dealt with in the early going of this book. Nor is the US-Japan-China evil axis the progenitor of US dollar seigniorage. That stage was set following World War II (WWII) in the emergence of the US as the world’s paramount benefactor and architect of the brave new “free world.” The seigniorage play itself, however, debuts in the 1970s though its major acts really open only in the 1980s and 90s. Through no coincidence, these periods correspond to the respective ascendency of Japan and China in the world economy. But the lead in the play is always held by the US. With an economy accounting for over 25 percent of global GDP during the period in question it is common sense to expect that any significant changes in the US economy would drive changes across the globe in both other major economies and international institutions that the US had assumed a primary role in creating. And so they did. And the US, particularly its corporate and financial elites within the top 5 percent of households,6 along with the political class they bankroll into office to do their bidding, rode shotgun over the wave of change to a windfall from the new dollar seigniorage global game cemented by financial machinations.

How does the evil dollar seigniorage game work? Well, in the simplest terms it works like this. Imagine a country, the US in this instance, ensnared in the economic predicament the truth-telling figures cited above capture: its citizens dependent on the world for the goods ranging from televisions to toothbrushes they voraciously consume (and with little to trade in return given how much of its own industry has been sliced, diced and shipped abroad); its businesses facing a dearth of investment funds, in part due to woefully inadequate domestic savings, and also because outflows to foreign claimants of domestic assets exceeds the take from US international investments; its government not only with a debt almost equal to GDP but with domestic and international spending commitments which outstrip its annual tax and other revenues by well over a trillion dollars. Add to this picture the fact that the currency of this country is not only its money, but world money (bracketing for later discussion a host of other reasons pools of dollars are accumulated by foreign banks); money that is the lingua franca of international transactions and thus necessarily held by all for that purpose.

What then if one country, Japan, hones its economy into a competitive efficiency machine in producing everything from sophisticated factory equipment to automobiles and electronics. As US businesses and individuals buy these (with little to trade in return) Japan accumulates dollars. While Japan uses some of the dollar booty to purchase major globally traded commodities like oil, the price of which is rising, it is still saddled with a huge surplus. Surplus dollars can only problematically be exchanged into Japanese yen to fuel domestic investment because Japan’s hyper-productive economy rapidly spawned burgeoning overcapacity with respect to domestic demand and even international demand for many goods. So commencing in the late 1980s and spiking upward through the 1990s Japan, faced with US arm twisting compounded by narrow vision among its elites, saves the dollars—the global reserve currency and lingua franca of international transactions—in dollar denominated securities.7

For the US, this is Manna from heaven. First, it acts as an auto-borrowing mechanism for the US to finance its budget deficit. Aggregate spending in the US economy is thereby spurred under the most charmed conditions. On the one hand, US government spending increases in a fashion that does not “crowd out” private sector borrowing. On the other hand, it does not compel a rise in interest rates even though domestic savings as we have noted hover close to zero. And, in the end, the US is able to spend significantly more than its economic wherewithal—its domestic savings plus collected taxes—without instigating price inflation.

Second, the fact of the dollar as global reserve currency, drawing global savings into US denominated savings instruments, largely Treasury Bills in what I refer to elsewhere as the T-bill IOU standard of global reserves,8 helps maintain well lubricated and practiced financial markets in the US (these, of course centered on Wall Street). It is well to note here how prior to the recent meltdown the US coveted approximately 70 percent of all international financial flows to finance its deficit which constitutes over 1.5 percent of total global GDP.9 Looking at this from another angle, between 1999 and 2006 US borrowing of over $4.4 trillion equaled 85 percent of net external financing emanating from the totality of states with surplus “savings.”10

Third, the interest paid by the US on what amounts to conscripted loans to it is low in international terms. Thus Wall Street finds itself in a privileged position of being able to leverage these funds across the globe through both private financial intermediaries headquartered there as well as conduits such as the World Bank (WB) and International Monetary Fund (IMF), both essentially managed by the US. We will have occasion in this book to examine the insidious way in which what has been dubbed the Washington Consensus utilizes Japan’s and China’s dollars to bludgeon weaker economies of the world into submitting to wholesale reorganizations in facilitation of the evil axis game.

But now, let us further imagine another country, China in this case, bursting onto the global trading scene to increasingly monopolize supply for US demand for low cost consumer goods. The rise of China offers solace for Japan as an investment locale for Japan’s burgeoning overcapacity and market for Japanese technological expertise and high value added exports. And the low cost goods that this international investment in China propels toward the US keeps US consumers well stocked with all the gadgets they have become enamored with, even as wage levels in the US stagnate. Put succinctly, the “American way of life” is presently made, low cost, in China. But, where China exponentially augments Japan’s Manna from heaven to the US in the rigged seigniorage game is not through the simple equation of a lopsided trade imbalance, as remarkable as that is. Rather, it is due to the trillions of dollars of surplus savings that flood into US financial markets largely via T-Bill IOU’s, and the $100s of billions in “hot money”11 bound for other domestic US assets as well. This surplus can only perilously be converted into Chinese yuan, partly due to the appreciation of China’s currency such a move will spur, though it is questionable whether that alone would completely compromise China’s export bonanza. Indeed, the Chinese yuan has appreciated 55 percent since 1994. And as it appreciated 20 percent between 2005 and 2008 alone, the US trade deficit with China leaped from $202 billion to $268 billion.12 Of greater significance, however, as dealt with in Chapter 6, is the fact that should China abdicate its holding of US dollars and assets its core current economic structure and brutal authoritarian polity would unceremoniously unravel.

We will bracket for later discussion as well the intricacies of Wall Street’s multiplication of financial benefits from the plethora of China’s (and not to be forgotten, Japan’s) dollars. The crucial point to be made here concerning the rigged game of US dollar seigniorage is something not well understood, given the ideological cloud cover on economic writing in both academic circles and the mainstream press: that in the half decade or so preceding the meltdown’s onset, the compounding economic impact of the US-China nexus (this includes asset inflation in the US which in turn underwrote the US consumer spending spree inflating Chinese production and wealth) contributed (depending on the estimate source) between 45 percent and 60 percent of all global growth!13 In this way, the US-Japan-China axis today is the prime current enabler of both the bloating ocean of funds at the disposal of the Wall Street casino and the sinister US dollar seigniorage game. And it is ultimately the persistence of this evil axis of finance that places the stranglehold on our global future as per the subtitle of this book.

The most visible embodiment of the stranglehold placed on our future by the axis of finance is the template for international production, investment and trade—in short, global development per se—imposed upon the world economy as a whole through machinations of the axis and the self-serving policy collaborations among axis powers. Long gone are the days of colonialism and imperialism where, as occurred in the 19th and beginning of the 20th century, it was the navy and army of dominant powers that invaded much of the world to create transportation networks for resource extraction and establish mediate industrial processes to their own advantage. Rather, today, through dollar seigniorage and the architecture of global finance, Wall Street constitutes the new command center from which the US, supported by evil axis partner dollar hoardings, manages the world economy by “remote control” for its own self-aggrandizement. Though with Japan and China along with major European Union (EU) and select Asian and Latin American states feeding at the trough.

However, the stranglehold placed on our global future is not just about finance and its relationship to the economy in any straightforward sense. Where the promised filling in of pages left blank in meltdown writing builds to a chilling crescendo is in the graphic portrait this book paints of human society presently trapped in a twilight zone between a decaying world and one struggling to be born. And the evil axis of finance in all its manifestations tethers us to the remains of that world, cosseting ideas and ways of doing things that are increasingly becoming not only terribly anachronistic but downright deleterious to the human species.

Nowhere is this point more glaringly reflected than with regard to the field of economics. Whether one approaches economics from the mainstream, neoclassical Right side of the field or from the radical, Marxian Left side the reality to be faced is the same. On the Right, it is not simply a question of economists’ seduction by views of market “perfection” or their proclivities for dazzling mathematical formulations with scant attention paid to history or institutions as treated by Nobel Laureate Paul Krugman in his beseeching piece in the New York Times14 about how sages failed to “predict” the looming US meltdown. Rather, it is a matter of the whole thrust of the discipline, from its foundational claims about supply and demand equilibration to those on efficient allocation of resources, being based (irrespective of their veracity) on economic workings of material production centered societies that exist today at best as remnants. From the Left, Marxian economic analysts also have a penchant for burying their heads in the sand (unadorned of course with Nobel Prizes of their opposite numbers). Looking into the rear view mirror at the economic ups and downs of the past century Marx’s understandings of capitalist wealth asymmetries, exploitation of the industrial workforce, one-dimensional profit orientation, cycles of overproduction and crises, as well as imperialist territorial aggrandizement certainly have a truer ring than mainstream myths about economic harmony or “free trade.” But the current enchanted world of hypertrophic and footloose finance, including the 2008-9 meltdown, and machinations of the evil axis, owe little to those dynamics.15

And lets us make no mistake about it. There is no going back to repair the decay and resurrect the world lost. Indicator after indicator of global modernity now points to a wholly divergent and uncertain future. In prominent Organization for Economic Cooperation and Development (OECD) states the proportion of employed populations in industry plummeted from a high point of 50 percent in the mid-20th century (in select states) to 20 percent or less by the century’s end—as agricultural employment plunged below 10 percent and services spiked upwards to constitute over 70 percent and more of total employment.16 In the US today, services comprise close to 80 percent of employment and manufacturing 10 percent. Across the globe as a whole, particularly taking account of change in the non-developed countries (generally referred to optimistically as “developing” or “emerging markets”), mass population shifts from 2006 onwards have not been out of agriculture into industry as characterizing the past two centuries of capitalist development. Rather, the movement is out of agriculture and into services.17

In countries like the US, where the new “take-off” first occurs in the mid-1970s, astute observers quickly grasped the bifurcated nature of the emergent service sector,18 where a small band of highly paid globe-trotting urban business, legal, high tech professionals are serviced by brand name retailers, sushi chefs, limousine drivers and so on, with these in turn serviced by an exploding cohort of impoverished fast food restaurant workers, maids, janitors, low end retail sales clerks who in turn somehow manage to service themselves. And it is not only a question of the service sector acting as groundswell of depleted popular earnings. In 1960, for example, material goods production directly employed 17 million Americans from a total workforce of 68 million. Yet, in 2004, the much cheered financial services industry employed only 8 million Americans from a total of 131 million in the US workforce as a whole.19 Keep in mind as well that 100 jobs in manufacturing had created a further approximately 422 jobs attendant to them while personal and business services along with retail create respectively 147 and 94 only.20 And evidence indicates that the recent meltdown has exacerbated trends toward outsourcing even higher end services to offshore locales21 relegating ever more of the US work force to bottom tier service sector jobs or no job.

Across the non-developed world there is a confluence of trends in the shift of work into services that portends the most frightening of future scenarios. First is the swelling of the so-called “informal” workforce where an average of 60 percent of all new employment is occurring. In “high growth” Asia the figure for informal employment as a percent of total employment is 78.2 percent. This in turn feeds into a burgeoning “shadow economy,” of which the informal economy is a part, that in Asia, Latin America and Africa is equal to 34.9 percent, 39.7 percent and 40.1 percent respectively of GDP.22 The move of populations into services in the non-developed world glaringly illustrates the two-tier employment structuring of that sector. Even India’s much vaunted internationally competitive business and communications service industries constitute only 5 percent of all service sector employment and 1 percent of total employment in India as a whole.23 The reality of service growth in India as elsewhere in the non-developed world is rather the ubiquitous street corner shoe shine boys, rag pickers and sex slaves.

Second is the flooding of humanity into titanic urban agglomerations. The United Nations (UN) estimates that by 2050, 7 out of 10 people in the world will be living in these “cities.” We put cities in quotation marks here because a figure fast approaching 1 trillion people living in them the world over are destined to inhabit ever-expanding urban slums!24 Such rates of urbanization as are occurring in the non-developed world outstrip those of the industrial revolution heyday and in many locales exceed rates of economic growth to the extent that the UN itself labels the urban flood “pathological.”25 What is also extremely disconcerting is the fashion in which urban slums emerge as the nodal point where the melding of informal and formal employment occurs across the non-developed world.26) This is where what professional business literature refers to as “global value chains” of major non-financial multinational corporations (NF-MNCs) all pass through to prey on the benignly dubbed “vulnerable” workers. NF-MNCs that as we shall see have a greater incentive to maintain such horrendous international work circumstances rather than change them. And, while scant studies exist on informalization within the US economy itself,27 as one exploration of the phenomenon in Los Angeles vividly displays Americans can be assured that all this is happening in a city near you!28

Finally, and it is this point that vitiates claims about current trends simply exemplifying phases or development sequences of modernity: shifts out of both agriculture and industry toward services are occurring at lower and lower levels of GDP. Thus states where manufacturing employment as a percent of total employment is more reminiscent of pre-modernity than the century of West European industrial revolution, and in which per capita GDP hovers around a dismal $3000 (at current prices), are already experiencing what is referred to as “premature deindustrialization.”29 And, as this book shows, the recent meltdown further exacerbates the disintegration of existing material goods production30 such that what industry is emplaced around the world is radically decoupled from industrialization as is what masquerades as “growth” decoupled from development. In short, the very model of progress that defined the modern era is consigned to the dustbin of history.

And let us also not be misled into viewing the global meltdown of 2008-9 as a harbinger of progressive change. Meltdowns, this book makes abundantly clear, are an integral aspect of the evil axis of finance dollar seigniorage game. And despite public wrangling among evil axis members on matters of currency appreciation and depreciation (a largely spurious debate as we shall see) there is scant diminution in appetites among axis members for the T-Bill IOUs which undergird the global financial architecture and the rigged Wall Street centered game. The vaunted G-20, with its hop-scotch around the world where much of this currency charade has played out of late, is but a clone of US Treasury Secretary and consummate Wall Street insider Timothy Geithner.31 And we still see China and Japan vying with each other for the top holder of US Treasuries spot.32 It can further be remarked in passing that Japan has actually reaped a net gain from its US dollar holdings of $280 billion over the years. China, on the other hand, as it plunged into the business in a serious way between 1999 and 2007, actually lost (through successive currency devaluations) over $300 billion from its US dollar “nest egg”;33 that was estimated by 2009 to be $2.3 trillion reserves and $1.5 trillion asset holdings34 (yet China preservers in building these as we will see)! Remember, we noted above how the US-China nexus alone accounted for between 45 percent and 60 percent of global growth across the first half of the opening decade of the 21st century (let us offer a compromise figure for future reference of “well over 50 percent”): This figure significantly exceeding the combined US-China 38 percent share of world output during the same period. Prior to the meltdown 40 percent of China’s exports went to the US. Of Japan’s total exports 24 percent go directly to the US and another 14 percent to China (and we know where most of the latter’s output ultimately ends up).35 One will therefore be hard-pressed to construct an argument for dominant forces within the evil axis of finance seeking to opt out of the game (and that is the operative word) whatever the short term losses or rifts.

Outline of The Evil Axis of Finance

Of course, as startling as the figures and studies cited across the pages of this book are, its revelatory power resides in the meticulous connecting of dots between each and every facet of our deteriorating human existence and the evil axis of finance machinations.

To execute our task Chapter 1 recounts read more.

  1. Lest there be any doubters Bill Gross of PIMCO global investments estimates that in the US alone assets were overvalued by $15 trillion before their “re-inflation” by government bailouts following the meltdown. See Bill Gross, “Midnight Candles.” []
  2. The FED (or another central bank) “creating” money by digital fiat which is used to bolster financial institution reserves so that banks and other financial institutions may continue lending even in an adverse economic environment for credit issuance. Though, “credit” issued in this fashion is simply more debt on the other side of the balance sheet. []
  3. What are known as the Basel Accords derive from “committees” set up in the mid-1970s by central bank Governors of the leading capitalist states: Basel I as it is known constitutes the first agreement reached in 1988 over “capital adequacy” (basically, the relationship between the assets of a bank and loans it makes) as well as globally acceptable norms of supervision of banking practices. Basel II, set out in 2004, sought to extend compliance to more jurisdictions and strengthen existing pillars of the agreement. Basel III strives to raise capital adequacy requirements and institute “buffers” that will protect major banks against future “stresses.” Basel III also seeks to expand regulatory coverage to a congeries of non-bank financial intermediaries such as insurance companies and hedge funds. For the intricacies of this refer to The Bank for International Settlements (BIS). []
  4. These numbers are all easily accessible on the US Department of Commerce, Bureau of Economic Analysis (BEA) web site. []
  5. The understanding of dollar seigniorage in this book is far broader than its more conventional usage in reference to the direct profits flowing to the US from the fact that as hub currency foreigners must necessarily hold US dollars and transact with them. See Eric Helleiner and Jonathan Kirshner, “The Future of the Dollar: Whither the Key Currency?” in Eric Helleiner and Jonathan Kirshner (eds.) The Future of the Dollar (Ithaca: Cornell University Press, 2009) p. 5. []
  6. By 1996 the top 5 percent of US households garnered 21.4 percent of total national income, the highest proportion ever since data was collected. See, Center on Budget and Policy Priorities, “Poverty Rate Fails to Decline as Income Growth in 1996 Favors the Affluent.” []
  7. From approximately $50 billion in 1986 the dollar holdings of Japan leap to near $250 billion by 1997. See Akio Mikuni and R. Taggart Murphy, Japan’s Policy Trap: Dollars, Deflation, and the Crisis of Japanese Finance (Washington, D.C.: Brookings Institution Press, 2003) p. 121. []
  8. See my earlier book, Political Economy and Globalization (London: Routledge, 2009) chapter 4. []
  9. Raghuram G. Rajan, “Global Imbalances – An Assessment.” []
  10. Matthew Higgins and Thomas Klitgaard, “Financial Globalization and the U.S. Current Account Deficit,” Current Issues in Economics and Finance, 13, 11 (2007). []
  11. Despite capital controls in China a large volume of speculative Chinese private capital investment found its way into US dollar holdings of various types from mid-2006. See the Economist, Economic Focus: “Not quite so SAFE,” April 23 2009. []
  12. Wall Street Journal, “Higher Yuan May Not Mean More US Jobs,” October 4 2010. []
  13. Rajan, “Global Imbalances – An Assessment,” is the source of the 45 percent estimate. Niall Ferguson and Moritz Schularick, “‘Chimerica’ and the Global Asset Market Boom,” International Finance, 10, 3 (2007) p. 228 is the source of the 60 percent estimate. []
  14. New York Times, “How Did Economists Get it So Wrong?” []
  15. Readers interested in the high theory here may turn to my book Political Economy and Globalization. The argument will not be recapitulated in this volume. []
  16. See Charles Feinstein, “Structural Change in the Developed Countries During the Twentieth Century,” Oxford Review of Economic Policy, 15, 4 (1999). []
  17. International Labor Organization (ILO), Global Employment Trends (Geneva: International Labor Office, 2008). []
  18. Bennett Harrison and Barry Bluestone, The Great U-Turn: Corporate Restructuring and the Polarizing of America (New York: Basic Books, 1988). []
  19. Kevin Phillips, American Theocracy: The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century (New York: Viking, 2006) p. 281. []
  20. William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism (New York: Touchstone, 1997) p. 217. []
  21. Gary Gereffi and Karina Fernandez-Stark, “The Offshore Services Value Chain: Developing Countries and the Crisis,” The World Bank Development Research Group Trade and Integration Team (April 2010). []
  22. ILO/WTO, Globalization and Informal Jobs in Developing Countries (2009) (See, in particular, figures 1.1 to 1.5). []
  23. UNCTAD, Trade and Development Report, 2010: Employment, globalization and development. []
  24. UN-HABITAT, State of the World’s Cities 2010/1011: Bridging the Urban Divide. []
  25. State of the World’s Cities 2010/1011, Box 1.2.1. []
  26. An exception here is the excellent study by Robert J.S. Ross, Slaves to Fashion: Poverty and Abuse in the New Sweatshops (Ann Arbor: University of Michigan Press, 2004. []
  27. ILO, International Labor Conference, 90th Session 2002 Report IV. Decent Work and the Informal Economy. []
  28. An exception here is the excellent study by Robert J.S. Ross, Slaves to Fashion: Poverty and Abuse in the New Sweatshops (Ann Arbor: University of Michigan Press, 2004). []
  29. See, Sukti Dasgupta and Ajit Singh, “Manufacturing, Services and Premature De-industrialization in Developing Countries: A Kaldorian Empirical Analysis,” Center for Business Research, University of Cambridge Working Paper no. 327. []
  30. Robert C. Feenstra, “Integration of Trade and Disintegration of Production in the Global Economy,” Journal of Economic Perspectives, 12, 4 (1998). []
  31. Robert Wade, “The First-World Debt Crisis of 2007-2010 in Global Perspective,” Challenge, 51, 4 (2008) cites an anonymous source to the effect that G-20 participants were selected by Geithner during a phone call. []
  32. Wall Street Journal, “China’s U.S. Treasury Holdings Rise.” []
  33. See Daniel I. Okimoto, “The Financial Crisis and America’s Capital Dependence on Japan and China,” Asia-Pacific Review, 16, 1 (2009) pp. 47-8. []
  34. Economist, Economic Focus: “Not quite so SAFE,” April 23 2009. []
  35. Stephen S. Roach, “The Fallacy of Global Decoupling,” Morgan Stanley – Global Economic Forum. []

Richard Westra is Designated Associate Professor, Graduate School of Law, Nagoya University, Nagoya, Japan. His work has been published in numerous international refereed journals. He is author and editor of 10 books including Confronting Global Neoliberalism: Third World Resistance and Development Strategies, Clarity Press 2010. Read other articles by Richard.