Imperialism Reading Group - Super Imperialism, by Michael Hudson - Week 1 - February 17th to February 23rd

This is a weekly thread in which we read through books on and related to imperialism and geopolitics. Last week's thread is here.

Welcome to the first week of Michael Hudson's Super Imperialism: The Origin and Fundamentals of US World Dominance! I'm reading the Third Edition, but I imagine most of the information is the same if you have an earlier edition.

Looking at the page count for this book, it seems an appropriate pace to read one chapter per week, which, including the introduction, will mean this book will take 18 weeks to read, meaning we will finish in June. Obviously, you are totally free to read faster than this pace and look at my/our commentary once we've caught up to you.

Every week, I will write a summary of the chapter(s) read, for those who have already read the book and don't wish to reread, can't follow along for various reasons, or for those joining later who want to dive right in to the next book without needing to pick this one up too. I will post all my chapter summaries in this final thread, for access in one convenient location. Please comment or message me directly if you wish to be pinged for this group.

This week, we will be reading the Introduction, which is approximately 37 pages.

You're viewing a single thread.

28 comments

I am still a bit mystified on the mechanism of why trade surpluses for exporters to the US MUST be spent on US Treasuries, could anyone reframe it in their own words?
- My understanding is that it is beneficial for the nations that export to the United States to buy US Treasuries as it keeps demand for the dollar high, which maintains the US dollar as a strong currency - meaning that a dollar has a high purchasing power. The strong US dollar compared to the currencies of exporting nations allows the exporting nations to remain competitive.
  Here is my rough understanding of the process. It may not be completely correct though as I'm still trying to figure out all this alchemy...
  Typically if a nation, let's call it Exportia, exports more than it imports (trade surplus) the demand for its currency increases (directly or indirectly) and that causes its currency to appreciate. Exportia's currency becomes stronger which means it has more purchasing power. And because it is stronger and can purchase more, it may require more of another nation's currency to be exchanged to get Exportia's currency.
  So if another nation, let's call it Importia, wants to import Exportia's goods, and if Exportia's currency is stronger than Importia's, then it will require a higher volume of Importia's currency to be converted into Exportia's currency in order for Imprortia buy Exportia's goods (i.e. in order for Importia to import the exports from Exportia). This means that the prices of goods from Exportia that Importia imports will be expensive when priced in Importia's currency.
  As Exportia exports more and more and it's trade surplus grows, its currency appreciates, and from the perspective of other nations like Importia they find these exports from Exportia to be more expensive with time. So over time Exportia's products become less competitive to nations like Importia. Importia find that it require more and more of its own weak currency to exchange for Exportia's strong currency in order for Importia to import Exportias goods.
  The opposite logic holds for Importia's currency. As it imports more than it exports, there isn't strong demand for its currency. So it's currency is weak. While it takes more and more of Importia's currency to be converted to Exportia's currency, it doesn't take much of Exportia's steonger currency to be converted to Importia's weaker currency. So from the perspective of Exportia, products from Importia would be cheap.
  So the general rule: an exporting nation tends to have an appreciating currency which would tend to make its exports less competitive with time. An importing nation tends to have a deprecating currency which makes its exports more competitive with time. At least that's the textbook theory... reality doesnt always work this way.
  If the United States were like any other country with a deficit (importing more than it exports) then it would behave like Importia. Over time it's currency would devalue and it would find imports from the rest of the world growing more expensive while it's own exports to the world would become more competitive than goods from nations with stronger currencies.
  If you are a nation that is exporting to the United States, say you are Exportia, then you will find that over time your exports will grow less competitive as the United States' dollar weakens and yours stengthens...
  ... but you have a way out. Buy US Treasuries. Keep it functioning as the reserve currency. It keeps the demand for the dollar high, which stops it from appreciating. This keeps the dollar strong compared to your (Exportia's) currency, and so your exports remain competitive and America's exports are too expensive to compete with yours.
  Here is Hudson in a recent interview:
  You’ll pay dollars to an exporter, from China or Germany — when there was still a German industry — and they turn the dollars over to their central bank, and the central bank would then say, “What are we going to do with these dollars? If we don’t send them back to the United States, our currency is going to go up against the dollar, and that is going to make our exports less competitive. So we have to keep our currency, our exchange rate, down; and we do that by buying Treasury securities”.
  
  Thanks that clarifies the mechanism really well! My only remaining point of confusion is why countries would be so pressed to export to the US if there is no real beneficial use to the dollars.
  
  That's a good question, and I don't really have a definite answer, but I can provide some thoughts for us to brainstorm. Like I said, I'm also in a process of learning this stuff too. So here are some thoughts:
  I imagine it is because of a combination of reinforcing reasons, not only the ones I mentioned.
  1.) One reason may be simply the proliferation of dollars on the world market. Since the US dollar is the world reserve currency it is used in transactions of goods that don't even (directly) involve the US. So having dollars helps in trade with other currencies. De-dollarization is the process of moving away from this system, but so far it has been slow and use of the dollar as the "world's currency" (and it's debt as the "world's asset") is still the name of the gain. So perhaps having US Dollars is useful even not exporting directly to the US. Also, it is my understanding that many debt payments are in US dollar. So if paying debts to the IMF you will need dollars.
  Until there is an alternative system built, it will stay this way. And perhaps keeping ones currency weak (by buying Treasuries) helps keep an exporting nation competitive to other nations. Though I may be stretching this too far. It likely depends on the exchange rates of the nations currency to other currencies. But, since most trade is in US Dollars, then keeping your currency weak compared to the strong dollar may help with keeping exports competitive even to other (non US) nations. I may be wrong about this, so I'll need to think about it.
  But most flow of global value goes from the Global South to the Global North. There isn't much flow of value between Global South nations, at least from what I can recall from my readings on 21st century Imperialism by John Smith...
  So the system is set up to do exactly this. Have the US drain the value of the South. And for a combination of reasons, the South is locked into this for now.
  2.) Another reason is finance. As Ben Norton put it
  In the international financial system, trade in goods only comprises a small percentage of total transactions; the vast majority involve capital flows into and out of bonds, stocks, and the foreign exchange market, along with hundreds of trillions of dollars of outstanding derivatives (financial bets) – a staggering $715 trillion as of June 2023.
  In contrast, total global merchandise trade in 2023 was $23.8 trillion according to the World Trade Organization. UNCTAD calculated that world trade in goods in 2022 was roughly $25 trillion, and global trade in services was $6.5 trillion.
  The US dollar is still the main tool of international finance. And comparadors and elites of nations will want dollars in order to buy US financial instruments. Even if that hurts the nation (its proletariat) as a whole.
  One function of money is to serve as a medium of safety or a store of value. People want a safe asset. US debt serves as this asset for financiers across the world. It gives something to "sit in" aside from their own or other currencies that may depreciate with time. Though there have been trends to try to move away from this as America undermines the perceived safety of the dollar and it's financial institutions (as it sanctions and seizes other nations assets).
  3.) Another reason may just be US military might. The same mechanism we describe allows the United States to fund its military. And at the end of the day if America threatens to bomb you to oblivion if you even think of moving away from the dollar, then you'll stick with the dollar. We already have had Trump make such military threats to nations that talk of de-dollarizing.
  So those are some of my guesses. There's probably more, or I may be mistaken about some.
  
  First, thank you for your eloquent and thoughtful replies. This is helping me flesh out my understanding a lot even if I can't articulate myself as well. I'm going to keep poking at holes since they indicate the biggest gaps in my knowledge.
  Point 2 seems to obviate the need for exports though. If most transactions are not in the real economy, what motivates movement within the real economy? Although it could be a bit like anthropogenic GHG emissions; they are a small percentage of the total but they are the component of the system moving out of equilibrium.
  My thought is that dollars are desirable in as far as they allow necessary imports—esp. of luxury and capital goods that increase productive capacity an social cohesion. Exports beyond that are desirable because they allow for excess industrial capacity beyond what the domestic market can sustain. Growth of the domestic market and domestic manufacturing capacity is limited by the speed new factories and technologies can be built/implemented AND the requisite labor force can be trained/drawn from the countryside. Exports worth more than can be invested are desirable because it creates an additional pool or margin when/if quicker investment is possible. Otherwise, exports would be made available to the domestic market through higher wages to support greater domestic demand.
  Problem: if these net exporter nations are beyond sufficiency, there would be no Global South Debt. I don't understand how debt can grow AND dollars can be spent on treasuries.
  
  Yeah those are good points. I'm spitballing here, so let's think.
  Many Global South nations are trapped in historic debt that is denominated in dollars. And there seems to be this carch 22 surrounding it. For the indebted nation to pay the debt in dollars it is beneficial if their own currencies are strong enough compared to the dollar so it requires less of their currency to convert to dollars to pay off debts. But before they can pay off dollar denominated debt they have to first earn the dollars. So they have to export something. And since the US dollar is the world currency, they don't have to only export to the US. Other nations use the dollar in transactions too. But, in order to export they must be competitive. And that requires their currency to be weak compared to the dollar.
  So there's a catch 22 there. A weak dollar helps with competitive of exports, but it makes paying off the debts more difficult. And the debts are designed to never really be payed off. These nations are trapped in that regard. A somewhat recent Geoplotical Economy Report discusses this, and you may find it interesting. https://geopoliticaleconomy.com/2025/02/04/trump-tariffs-global-crisis-economist-michael-hudson/
  Another aspect of this is the types of goods that are being imported and exported. Global South nations do not have a high productive capacity and can only export low value commodities that tend to be raw materials. They also, due to legacies of imperialism, tend to have a "mono-commoduty" economy. Colonialsm led them to focus on the export of specific products and hence they dont have diversified economies. They can't turn these raw materials into more "processed" or higher valued goods due to their low productivities. And they are also forced to buy or import "processed" goods, like pharmaceuticals for example, from the Global North.
  Now it may be that there are limitations in how effectively the Global South nations can actually build up their industry, or productive capacity. This requires not just regular commodities, but commodities thay can serve as means of production (capital goods). And although I'm unaware of the exact limitations, I imagine there are limits in place to ensure the Global South can't so easily buy the sufficient capital goods to increase capacity. This mechanism, I admit, I am unsure of. So it's just a hunch for now.
  But I think that there are limitations to how a Global South nations can actually increase its capacity, due to the nature of what it exports and can import and the burdens of its debts. I should explore this in more detail as you raise a good point here.
  Also, there is the theory of Unequal Exchange to consider, which further tries to explain how an extra layer of exploitation occurs here as the Global South has to labor much more (amd produce much more in value) to sell its lower priced (because they forced to be competitive) items to receive, in international exchange, less total value back in imports. Although the individual commodities it imports from the Global North are of higher value (more social labor goes into them by the fact thay they are more "processed"), in total the value of all commodities the Global South recieves back from the North is less than the value the Global South creates. The high prices (in appreciated currencies) of Northern goods ensures this.
  Another issue regarding wages is that due to structural readjusting policies the IMF enforced on nations when they had difficulties in paying debts, the labor conditions of many Global South nations were forced to degrade. Public utilities were privatized, labor laws were uprooted, etc. This led to a further degradation of wages. And the low wages further help keep the price of Global South goods cheap and competitive. So the low wages make it hard, as you hinted at, for there to be domestic demand.
  Capital flight is another aspect. Rich people with dollars in these countries may just store their dollars abroad for themselves, so it isn't used for productive purposes.
  And there is the question of inflation. If these nations started using taking the dollars and converting it to their own currencies it may risk inflation in the local currency. But... I may be talking out my rear about these last few points. I know just enough to be foolish lol
  I think some further areas to inspect is the burden of the debts (which are very large from my memory, we can look for some numbers) and the contradiction I mentioned (need a weak currency to stay competitive to get dollars to pay off debts, but the weak currency makes it harder to pay debts) which traps nations. The difficulty in any single nation in leaving a world financial system run in dollars. As well as the actual difficulties in buying capital goods to build up capacity.

28 comments