The confusion about the term ‘imperialism’ can be resolved upon recognising that the term was originally popularised to explain warfare, but not national exploitation, whereas the subsequent evolution of the term sought to explain national exploitation, but not warfare. Therefore, the term ‘imperialism’ must provide an answer to the question, how do relations of national exploitation create the long-term conditions for warfare?
My PhD thesis, Imperialism: How Declining Currency Hegemony Leads to War, argues that the Indian Political Economy (PE) tradition provides useful insights to answer this question, beginning with its foundational claim, which is that from 1757 to 1947, India was drained gigantic sums of wealth by Britain. Dadabhai Naoroji, the founder of the Indian PE tradition claimed that nearly one-third of all tax-revenues raised by Britain from the Indian population was used to purchase goods from India, which were then sold on London’s financial markets in Pounds Sterling.
This drain has been estimated at $65 trillion US Dollars in today’s terms by Utsa and Prabhat Patnaik, two of India’s leading Marxist theorists. However, this drain was explicitly denied by John Hobson, the theorist who coined the term ‘imperialism’ in 1902. It may surprise readers that for Hobson, the definition of British ‘imperialism’ did not include the draining of wealth from any of its colonies, rather Hobson alleged that ‘imperialism’ drained Britain through the outflow of capital, which benefited only the financial capitalists at the expense of the British working class and nation in general.
This general idea was integrated into Marxist discourse by Vladimir Lenin in his 1917 Imperialism pamphlet, which argued that as capitalist states develop, industries form monopolies, which are then further subordinated to banks, resulting in financial oligarchies commanding large sums of capital. Such monopolies seek to export overseas to access cheaper sources of labour and raw materials, thereby compelling states to violently acquire overseas territories as outlets for capital until, eventually, they clash with each other, such as in the culmination of WW1.
Lenin wrote his pamphlet because he was trying to mobilise the working classes of Europe against the first world war that they were being conscripted in to fighting, with the argument that they should use the opportunity to carry out socialist revolutions against their respective capitalist ruling classes. That outcome would not only end the war, but also end the underlying cause of war, namely capitalist class rule.
I argue that the definition of ‘imperialism’ advanced by Lenin in his 1917 pamphlet did not contain the actual means by which nations exploited other nations throughout history. However, in 1920, Lenin explicitly defined ‘imperialism’ as national exploitation, referring to the division of the world “into a large number of oppressed nations and an insignificant number of oppressor nations”. Lenin also said that “70% of the world’s population, belong to the oppressed nations”, which refers to those nations across Asia, Africa, and Latin America that were colonised for the purposes of extracting their wealth.
The export of capital emphasised by Hobson and Lenin as defining ‘imperialism’ was never a mechanism of national exploitation, and never the means by which Britain exploited the nations it had subjugated, rather it was primarily the means by which Britain stimulated the industrial development of states originally founded as British settler-colonies like Australia, the United States, New Zealand, and Canada.
I argue that in Marxist political economy, national exploitation cannot be reduced to class exploitation. This is because with class exploitation the underlying assumption is that both capitalists and workers are paid in the same currency, whereas with national exploitation, the currency of the exploiting nation is backed by wealth extracted from the colonised nations under its control.
From this distinction, the following cyclical law can be observed throughout history. The currency hegemon is the state that extracts the largest quantity of wealth from those nations that it violently subjugates, which allows it to issue the currency that becomes the global measure of value. This hegemon creates its own gravediggers in the form of the mercantile rivals, which are those states that develop their productive forces by producing in exchange for the hegemonic currency. This creates the conditions for hegemon-rival warfare.
The contradiction is that the currency hegemon must keep its markets open to incentivise countries to hold its currency. However, this leads to its own deindustrialisation, which gradually disincentivises states from holding its currency. Meanwhile, the nations subjugated by the hegemon and the rivals are prevented from developing, or become ‘underdeveloped’, and thus tend towards the production of periphery commodities like food and raw materials.
From 1870 onwards, Britain’s mercantile rivals like the US, Germany, France, Italy, and Japan industrialised by producing in exchange for Pounds Sterling, which in turn was backed by the draining of Britain’s extractive colonies like India. Eventually, Britain found it difficult to meet its gold liabilities as those rivals began buying gold to establish gold standard currencies of their own.
Through the lens of my thesis, one major reason why the Soviet Union faced hostility was because it championed the ‘right of nations to self-determination’ as its foreign policy. This angered states like Britain, France, Holland, and Belgium that feared that the colonised nations under their control could liberate themselves with Soviet help. This policy also worried those states, like Germany, Italy, and Japan, that lacked the colonies needed to feed their industrial ambitions.
These would-be Axis states had industrialised from 1870 onwards by producing in exchange for Pounds Sterling, but in 1931 Britain ended the convertibility of its currency to gold. The ensuing depression compelled the Axis states to establish their own relations of national exploitation, that is, to acquire what they lacked through military conquest, thereby initiating WW2. However, these attempts failed primarily because the USSR and China resisted.
My thesis argues that inter-imperialism ended after WW2 as a consequence of the former empires, including the Axis powers, ceasing hostility with each other, and huddling under the leadership of the United States, leaving only a single imperialist alliance, led by the US, also known as ‘the West’.
Does imperialism persist in the absence of formal empire after WW2? Yes, because the West inherits an interest in keeping its former colonies poor in order to suppress inflationary pressures on the US Dollar. Therefore, imperialism must also include in its definition all attempts to maintain the trade relations historically established through violent conquest.
After the US ended the convertibility of the Dollar to gold in 1971, new pillars were needed to support its currency. To that end, OPEC agreed to price its oil in Dollars in 1975, and the post-Soviet space was bled by capital fleeing to Western banks after 1991. Meanwhile, China produced large quantities of goods in exchange for Dollars, thereby rapidly industrialising in the process to become the leading mercantile power of the current cycle.
The industrial productivity that propelled the US Dollar to its hegemonic status in the first place has been eroded by decades of deindustrialisation as shown by trade deficits since 1977. After WW2 the US was the largest absolute net-exporter of capital, then it became a net-importer of capital from 1989 onwards, and today the US is the largest absolute net-importer of capital by way of its enormous net-external debt. As the technological gap between East and West closes, demand for US Dollars will decline.
The hegemony of the US Dollar embodies all economic advantages won by the West at the expense of the rest, but those advantages are unravelling. Upon recognising that the global tensions being witnessed today have their parallels in past lifecycles of currency hegemony, the question arises, can the same fate be avoided?