US grand strategy

US grand strategy is a subject that is usually ignored by politicians and a compliant media. For even acknowledging that there is in fact a US grand strategy implies that the US is in fact an empire and dismantles its carefully constructed image of a benevolent, albeit misguided, superpower, labouring - at its own expense - to export democracy and free markets to the furthest reaches of the globe.

When it is analysed US grand strategy is typically provided by conservative political scientists using a conventional geo-political model. However, using an eco-political banking model to describe US grand strategy not only reveals its true nature but dovetails neatly with its international and domestic policies.

At the end of World (Empire) War II most of the war weary European nations lay in ruins, their economies bankrupt and their empires dismantled with their colonies gradually gaining their freedom. The US, and its only remaining competitor, the USSR were the only empires remaining.

The US, holding 80 per cent of the world’s gold reserves, took the role of “World Banker” from the UK, under the banner of capitalism, whereas the USSR behaved more like a “Credit Union”, effectively subsidising its client states within the Soviet bloc, under the banner of communism.

The competition for economic “market share” during the Cold War saw the US consolidate its client states and ensure that the communist contagion did not spread into its sphere of influence. Any client state that appeared ready to “change banks” became victims of US covert and, at times, overt intervention. This saw the US entangled in numerous costly conflicts throughout the world such as the Korean War and the Vietnam War.

However the costs of the Vietnam War and of maintaining its empire under the Bretton Woods economic system using a gold-backed dollar proved too great. In 1973, the effectively bankrupt US government only just managed to maintain its economic supremacy by implementing an ingenious plan that would be known as petro-dollar recycling.

Petro-dollar recycling called for the control of the Middle East - a region the US State Department had described in the 1950s as, "a stupendous source of strategic power and one of the great material prizes in world history". It required the US government to maintain its economic supremacy and its control of world capital flows, by secretly transitioning from a stable gold-backed dollar to a volatile black-gold backed dollar also known as the petro-dollar.

Unfortunately with the US having reached peak oil in 1970 and the majority of the black-gold reserves that it needed to back its dollar sourced from the Middle East, the region’s wealth could only be recycled back into the US economy by controlling the entire Middle Eastern oil production to transaction chain. Thus, with US government support, Anglo-Saxon oil conglomerates extracted, refined, distributed and sold the oil, strictly in US dollars on the two dollar denominated oil exchanges - New York's NYMEX and London's IPE - before depositing (recycling) the petro-dollars with the major US banks.

The petro-dollar recycling plan required the help of both the UK and Wall Street’s big banks and oil companies which effectively acted as “shareholders” in the plan. To the benefit of the UK financial industry, the UK government gained access to the world’s capital flows and became the first “franchisee” guaranteeing that British oil companies and the oil exchange under its jurisdiction fulfilled their part of the plan.

The plan transitioned the US from a conservative world banker to a bold world venture capitalist (PDF 489KB), and the US set about raising the “seed money” required to provide it with venture capital, and in the process benefit its “major shareholders” in the banking and oil industries. . The US began by manipulating the 1973-4 Arab Oil Embargo to raise oil prices by 400 per cent. This unilateral move however alienated its European and Japanese allies, and impoverished the rest of the developing world. To ensure that the plan worked the US set up the Trilateral Commission and was forced to offer some of the major European nations along with Japan access to the world’s capital flows, in effect turning them also into G8 “franchisees”.

The US had previously been using the World Bank to lend the developing world money in return for allowing trade barriers to be dismantled by the WTO. The US then changed course and raised interest rates to unsustainable levels in 1979 causing many developing nations to default on their loans and the IMF, acting as “liquidator” for the US, was sent in to further privatise and restructure the defaulting nation’s economy.

As the US world banker it had tied its dollar to gold guarded by Fort Knox. As world venture capitalist a new Middle Eastern based security force was required to guard Middle Eastern black-gold reserves and with the US bogged down in Vietnam, “Fort” Israel became the ideal candidate. In time it would be joined by the security forces of the US, its “franchisees” in the G8 as well as other aspiring mercenary nations. Australia and Poland are two such nations that provided their diplomatic and military support - effectively acting as “brokers”. In return for this support these nations gained increased access to world capital flows via global trade, and in some cases were locked into FTAs and received lucrative commissions in a process that would come to be known as globalisation.

Faced with an economic blockade and continued aggression the USSR “credit union” became bankrupt. This led not only to the US accepting Russia as a “franchisee” in the G8 it also accelerated the globalisation of deregulated financial markets. The US dollar became the primary reserve currency internationally as petro-dollar recycling morphed into dollar hegemony in 1993.

The US world venture capitalist’s “profit” or the US Empire’s tribute was astronomical. In 2004 alone the returns on its assets and the offsetting its risk to the rest of the world via external adjustment of its liabilities earned it an estimated dividend of $462 billion (PDF 489KB)!

The US’s marketing division utilises the services of five main worldwide media conglomerates, which are dependent on revenue from the “major shareholders”, to deliberately mask the true purpose of US interventions, initially marketing the Cold War marketing campaign and today marketing the War on Terror campaign. They help to mask the US’s rejection of international law and environmental standards through vetoing or refusing to ratify agreements with the UN, including the ICC. Controlling 90 per cent of US information flow the “marketing” department consists of NBC (General Electric), ABC (Disney Co.), CBS (Viacom), FOX (News Corp.), and CNN (AOL Time Warner).

The US Empire’s grand strategy is therefore quite simply to maintain its economic supremacy by maintaining its position as world banker turned world venture capitalist. This economic supremacy is dependent on the ever increasing control, sale and consumption of oil - primarily Middle Eastern - in US dollars.

The current “War on Terror” was designed to not only “head off” a possible competitor, in the shape of a future petro-euro, but to also secure US military bases in the heart of Middle Eastern energy reserves and control the oil pipeline in Afghanistan that links up to the former USSR’s black-gold reserves in Central Asia and the Caspian Sea.

The maintenance of petro-dollar hegemony and the enforcement of, what has been termed, the Washington Consensus militarily is not the only price to pay. With so much petro-dollars flowing into the US financial system, high inflation, systemic corruption and wholesale financial deregulation have led to cyclical boom-bust cycles. Severe global financial crises have become a recurring theme most notably in the 1987 crash, the 1997 Asian financial crisis and the recent 2008-9 Global Financial Crisis.

The other price to pay has been environmental. The US’s acknowledged “addiction to oil” is a direct result of its petro-dollar based economy and has greatly contributed to the Greenhouse Effect - a crisis that threatens all the world’s nations with severe environmental repercussions.

Using an eco-political model to define the US grand strategy shows not only how interconnected the world’s problems of empire, economy and environment truly are, but it also highlights the system’s weakness and provides a strategy and tactics that the rest of the world can take to rebalance the world.

Table 1: Eco-political breakdown of the US as it morphed from the world banker to the world venture capitalist.