This is the 2nd Edition of this article, updated on 07/09/2022
The Louisiana Purchase and Westward Expansion. The Monroe Doctrine. The Ford Model T. The global realignment after World War One and the decline of the British empire. The end of the Cold War and the collapse of the Soviet Union.It is no easy task defining when the American Empire began but while its exact origins are debatable, I contest that the meeting at Bretton Woods, New Hampshire, is where the global American Empire was truly born. It was here in the White Mountains of the Granite State that the elites gathered together and designed the broader framework and infrastructure for an American dominated international order that is still largely in place today. Global governance, multilateral financial institutions whose jurisdiction goes beyond national borders, fully integrated markets, the central role of the U.S. dollar in trade and finance, and American dominance all began to take shape here.
It was here that the broader framework for the American-led global system that we have today was originally conceived. From this point onwards, America assumed the grand position of guarantors of both the world’s monetary system and of global peace and the American Century was truly underway.
The Bretton Woods system is named after a meeting at the Mount Washington Hotel in Bretton Woods, New Hampshire, in 1944. As World War II was drawing to a close, delegates from 44 allied countries negotiated for a month and established the dollar as the global reserve currency and defined a new structure for international trade, finance, and governance.
The system advanced several main objectives:
1) establishing the dollar as the world’s reserve currency under a system of fixed exchange rates, anchored by the dollar’s convertibility into gold at a fixed rate;
2) to rebuild the international trading system and create a fully integrated global economy based on free markets and mutual trust;
3) the founding of the Bretton Woods institutions:
The IMF’s original purpose was to maintain an adjustable foreign exchange rate system that was pegged to gold, as well as overseeing the stability of the market. To achieve this, it would bridge any temporary imbalance of payments that member states might have and correct any currencies that would appreciate and depreciate to levels deemed too large and thus potentially destabilising to the broader system.
The IMF was tasked with ensuring that member states do not engage in the kind predatory economic practices that would threaten the stability of the system as a whole. It ensured that countries maintained a healthy balance of payments with one another.
Lastly, the IMF oversaw a vast fund made up of capital subscriptions from each nation, the fund comprised of both gold and the member states’ own currencies.
The IBRD (International Bank for Reconstruction and Development) founded at Bretton Woods would eventually become part of the World Bank Group, an umbrella organisation that consists of several subsidiary legal and financial entities, of which the World Bank itself is one. It’s stated purpose was to aid the redevelopment of Europe in the aftermath of WWII and foster economic growth through lending. Loans were made to poor countries that could not obtain the necessary finance through commercial lending channels although, crucially, the Bank can demand policy changes and reforms from recipient countries (more on this later). Membership in the IBRD was conditional on being a member of the IMF and to be a member of the IMF you had to agree to its capital subscriptions.
This was first proposed at Bretton Woods but would not be fully ratified until late 1947 in Geneva. The GATT provided the framework for open markets and free trade and eventually became the World Trade Organisation (WTO) in 1995.
Under the Bretton Woods system, all currencies were tied to the U.S. dollar and the dollar was tied to gold. It was believed that having the dollar anchored to gold provided a safety net as it meant that all signatory nations could exchange their dollars for gold at a fixed rate of $35 per ounce, on demand, if they so desired. The IMF would oversee the fixed exchange rate system. Trade imbalances were corrected by gold reserve exchanges between nations or by loans from the IMF. Member states agreed to maintain their currencies within one per cent of their exchange rate, although they were allowed to change the par value of their currencies by 10% should circumstances produce a ‘fundamental disequilibrium’, anything more than this would require IMF approval.
The system meant that, ultimately, the U.S. would be responsible for providing liquidity to the global economy with the Federal Reserve assuming the defacto role of the lender of last resort. It also meant that the United States had to guarantee two reserve assets at the same time: the dollar and gold. Both of these points would prove to be a source of instability further down the line.
The Bretton Woods accords advanced the Wilsonian belief that trade would bring peace and prosperity, with the United States at the centre. The Atlantic Charter of 1941 expanded on this idea and stated firmly that all nations should collaborate together “securing, for all, improved labour standards, economic advancement and social security.” In truth, Franklin Roosevelt, Henry Morgenthau, Harry Dexter White and others had been advancing a system very similar to the one proposed at Bretton Woods years before the conference took place.
It is important to understand that the era preceding Bretton Woods included the panic of 1907, the Great Depression and two world wars, it was a period that was characterised by closed markets, isolationism, high tariffs and competitive currency devaluation (‘beggar thy neighbour’ policies) that led first to stagnation, then to global economic chaos and eventually contributing to outright war.
Following this tumultuous period, it was widely believed that the newly created Bretton Woods agreement and corresponding institutions would collectively promote both world trade and cooperation, boosting prosperity and living conditions in the process. Global peace would be achieved through mutually beneficial trade that would increase economic prosperity thus reducing tensions between nations the world over. If governments couldn’t guarantee peace, then the market would.
In this series I advance the idea of how the dollar is the foundation of U.S. power and supremacy. These foundations were conceived at Bretton Woods. With the advent of the Bretton Woods system, countries now settled their international accounts exclusively in dollars. As I outlined above, global currencies were pegged to the dollar and the dollar was pegged to gold at a fixed rate. In a sense, all currencies were now defined in relation to the U.S. dollar. Global domination is a union between military power and economic strength and by pegging other currencies to the dollar, the U.S. now had considerable leverage and control over the other nations as well as in world affairs more generally.
Only the U.S. was given the authority to print the dollar, audits or supervision of the Federal Reserve were strictly prohibited (and still are to this day). The U.S. pledged to secure every overseas dollar with gold transferred to other national banks on demand. Originally, Washington promised not to print too much money but this was on the old honours system. The terms of the Bretton Woods accords meant that the U.S. had to concede that the dollar would be allowed to accumulate outside U.S. borders and beyond its control.
The U.S. had leverage at both ends of the system. Many feared the U.S. devaluing the dollar, thus making their dollar assets less valuable and reducing its purchasing power in the process. Devaluing would negatively impact Europe’s exports to the United States, making them more expensive and slowing down growth in Europe as a result. The threat of devaluation was like a sword of the Damocles hanging over Europe. To allay these concerns, presidential candidate John F. Kennedy was compelled to issue a statement late in 1960 that if elected he would not attempt to devalue the dollar. The fact is that as so much U.S. debt was in the hands of foreign entities the temptation to inflate away their debts and obligations by devaluing was always there (and still is to this day). Conversely, as other currencies became stronger relative to the value of the dollar, they were forced to revalue in order to maintain parity with the dollar; West Germany revalued twice, in 1961 and 1969, under mounting pressure from the U.S., citing fears that the system may be in serious danger if they didn’t West Germany had little choice. Revaluing meant German exports would be more expensive and thus less competitive and this would obviously have a negative impact on West Germany’s economy as a result; in effect, Bonn was being punished for its success.
I maintain that America’s military, economic, political and cultural dominance is predicated on the dollar being the world’s reserve currency. The dollar was granted this status at Bretton Woods. Without this, it would not be so powerful and influential on the world stage as it is today.
But how does the dollar enable all of this, you might be asking. At present, the U.S. runs enormous deficits as its national debt continues to soar, and they can do this because demand for the dollar is permanently high and, correspondingly, the interest rates it pays on its debts are permanently low because the dollar-based system we have ensures that there will always be buyers of U.S. debt securities and treasury notes, which allows the U.S. to keep running these deficits to pay for its needs. Simply put, the market for U.S. government-backed bonds and treasury notes is the most liquid and reliable financial market in the world today. Domestically, the U.S. can issue cheap credit with low interest rates attached, whilst abroad ‘dollar diplomacy’ and the strength of the dollar and the U.S. economy as a whole gives Washington considerable leverage in international affairs and to pursue its broader geopolitical goals. This is because demand for the dollar is ever-present: countries need dollars in international markets (investment, trade, commodities, assets to name but a few) and for their reserves; the volume and frequency with which the dollar is traded makes it the most liquid currency in circulation but it is also means it is the most secure and stable one too with the greatest purchasing power, meanwhile dollar denominated assets such as debt securities are a safe and reliable investment. This allows Washington to print, borrow and spend dollars without having to worry about the crippling effects of hyperinflation. No other country can do this. And this is all made possible by the fact that the dollar is the world’s reserve currency, a position it assumed at the Bretton Woods conference, a position it has not vacated since.
Fast forward to today and the U.S. dollar is still the world’s reserve currency. World trade, international finance and the global economic system all centre around the dollar because of this unassailable fact. This is a fact that is often overlooked or omitted in the Western media. Future articles will focus on the dollar’s role in geopolitics and the world more broadly and I will explore many of the ideas in the last paragraph in greater depth and detail but it is important to map out its origins first.
It is worth noting that there was an alternative arrangement to the dollar-based system put forward at the conference. John Maynard Keynes proposed something called the ICU (International Clearing Union) a bank that would print its own currency, called the “bancor”, exchangeable for national currencies at a fixed rate and it could also measure the balance of trade between countries. Keynes proposed that neither gold or national currency would be used in international trade any longer. However, Harry Dexter White, the American representative and a senior U.S. Treasury department official, rejected this proposal outright and said that the U.S. dollar should be used as the system’s reserve currency instead. America had all the leverage and so the ICU would be replaced with the IMF, an institution that reflected the interests of the U.S. more than the ICU did.
At the time of the Bretton Woods meeting, America’s military, industrial and economic supremacy was beyond question. Mainland America was untouched by the events of World War II and it was clearly the most stable of all the allied nations. Additionally, the U.S. had two thirds of the world’s gold reserves at the time (during the war many European nations exchanged their wealth into dollars and gold, depositing it in U.S. banks for safe keeping). As such, the United States assumed the role of the primary creditor of the system, a system that was largely engineered by the U.S. to serve its interests, based around the dollar, overseen by multilateral institutions designed and located in Washington, where the U.S. had a controlling influence and built-in veto, whose other significant members were firmly under its sphere of influence.
Henry Morgenthau and Harry Dexter White led the U.S. delegation and by the time Morgenthau delivered the closing address the two had secured highly favourable terms and conditions for Washington, firmly establishing the United States at the centre of the new international order. American hegemony was gradually taking shape and there was little standing in its way.
The Soviet Union was among the first nations to question the foundations of the system. Though present at the meeting, Moscow did not ratify the final agreements and would later denounce the World Bank and IMF as “branches of Wall Street”. For Moscow, the World Bank was “subordinated to political purposes which make it the instrument of one great power”. The Soviet Union saw no distinction whatsoever between the United States, Wall Street, the World Bank and the IMF.
Another country that was very much at odds with the system was France. In France, the Bretton Woods system was called “America’s exorbitant privilege” by Valéry Giscard d’Estaing, the then French Minister of Finance, as it resulted in an “asymmetric financial system” where non-U.S. citizens subsidise the American people, corporations and government. President Charles de Gaulle called the system “abusive and dangerous” and proposed returning to a gold-based system and discarding the dollar altogether. France understood fully the power and privilege that the dollar gave America and the danger it posed to other countries. Additionally, de Gaulle was highly critical of American influence in Latin America and its role in the Vietnam War, ultimately he wanted Europe to decouple from the United States and dedollarising was a big part of that. In February 1965, de Gaulle chose to exchange France’s U.S. dollars for gold at the official exchange rate, sending an armed convoy across the Atlantic to collect their gold and escort it back to France.
What de Gaulle was alluding to was that, from this moment onwards, much of western Europe was now absorbed into the broader American empire; Germany, France, the UK and other nations simply became vassal states under Washington’s domain. De Gaulle saw American influence as malevolent and destabilising and was highly suspicious of the U.S. and UK axis in the world. De Gaulle was also becoming closer with Konrad Adenauer, the West Germany Chancellor, in order to begin to reshape the traditionally hostile and fractious relationship France and Germany had had going back centuries. More worryingly for Washington, he also wanted closer ties with the Soviet Union and in 1966 the French-Soviet Joint Declaration sought to establish closer diplomatic ties in politics, science, and technology. In a famous speech given at Strasbourg in 1959, de Gaulle spoke of a Europe “from the Atlantic to the Ural” which outlined his position in no uncertain terms: de Gaulle wanted a Europe independent of American interference.
Not long after the accords, the Marshall Plan would spearhead the redevelopment of Europe’s infrastructure, industry and economy, allocating billions of dollars in grants to rebuilding the continent but this came at a cost as it meant that Europe assumed a permanently deferential position in its relationship with the U.S., giving Washington the upper hand in trade, diplomacy, finance and foreign policy negotiations whenever the two crossed paths in the future. The Marshall Plan was done to establish markets for U.S. goods and capital to circulate in: the rationale behind it was that once Europe’s economy and infrastructure were rebuilt the demand for U.S. manufactured goods would rise, gradually increasing America’s sphere of influence in the region. Also, under the auspices of the IMF, the U.S. indirectly controlled their exchange rates as well (refer to the previous example of West Germany). If all that wasn’t enough, Europe’s gold was stored at the Bullion Depository, better known as Fort Knox, in Kentucky and at the Federal Reserve Bank in New York.
There are numerous other examples that further demonstrate U.S. power and control in the post-Bretton Woods realignment. At the time, Britain and Keynes were happy to go along with Washington’s proposals at the meeting because they believed that the ‘special relationship’ between the two countries would mean that London would receive preferential treatment in the new international order (incidentally, so too did Harold Macmillan, Britain’s Chancellor at the time). But this was not so. As a precondition to Marshall Plan aid, the U.S. demanded that existing British currency controls be scrapped allowing for current account convertibility of pound sterling into dollars. This led to a run on the pound as foreign holders of sterling rushed to swap pounds for dollars which in turn saw Britain’s foreign currency reserves decline dramatically (the Bank of England saw $1 billion of reserves leave in the first month) leaving the country in a perilous position. Britain’s deferential position would again be exposed by America when, during the infamous Suez Crisis in 1955, president Eisenhower threatened to sell sterling bond holdings if Britain did not withdraw; doing so would have flooded the market with pound sterling once again and would cause yet another run on the pound leading to a devaluation of the currency that could potentially bring about economic ruin for Britain. If Britain pursued policies deemed not in Washington’s best interests, America had all the leverage it needed to bring it back into line.
In his book A Century of War, F. William Engdahl points out that following Congress’ approval of Marshall Plan aid to Europe, American oil conglomerates charged exorbitant prices for oil, more than doubling the price from $1.05 per barrel to $2.22 between 1945 and 1948. Additionally, Marshall Plan aid could not be used to build oil refining capacity either.
American help came with conditions and was made on the proviso that U.S. interests be given precedence over the interests of other nations. By being able to control exchange rates (essentially, currency manipulation), being at the centre of infrastructure redevelopment with the Marshall Plan, having its own currency installed as the world’s reserve currency, the power that the U.S. acquired as a result of the Bretton Woods accords is almost impossible to understate. After Bretton Woods, the ratification of the United Nations (UN) charter in 1945 and North Atlantic Treaty (NATO) in 1949 would further consolidate U.S. power and influence as the United States would go on to spread liberal democracy across the world, gradually building both its formal and informal empire piece by piece. Whether it be where to station a missile defence system, building a military base, the upper hand in trade deals, determining exchange rates, requesting military support for overseas interventions, or where to build oil refineries America unquestionably held, and still holds, the upper hand.
‘The Fund’, ‘The Bank’, The WTO
The meeting at Bretton Woods established the IMF (International Monetary Fund), as well as the first incarnations of the World Bank and the WTO (World Trade Organisation), all of which wield tremendous power and influence across the world today. Indeed, they can legitimately be said to be more powerful than most small and medium-sized countries. I will explore how the role and function of these institutions have changed over time; as the global economy and the geopolitical landscape have shifted so has their sphere of influence. This includes promoting the floating currency system in the early 70s and then aligning Washington Consensus from the 1980s onwards.
Though their mission statement is full of the usual globalist slogans and tropes on eliminating poverty, promoting peace and growing equality, in reality, these institutions are designed to regulate the flow of private capital and consolidate power and influence across the world for the United States and, to a lesser extent, its allies. These are no longer impartial organisations that help arbitrate global trade but are actually outposts of the broader American empire, conduits of U.S. diplomatic and economic power, the eyes and ears of Washington. There are many structural features of these institutions that help reinforce the balance of power in Washington’s favour.
Head of the WB
Contrary to all democratic conventions, the president of the World Bank is personally chosen by the president of the United States. The Executive Directors of the World Bank have little say in the matter. One imagines that the Federal Reserve and the Treasury (and perhaps even the State Department) almost certainly do have an influence on who is chosen. All of the previous appointees have ties to the deep-state or Wall Street. The head of the IMF has always been a European (normally a politician, central banker, civil servant or lawyer) and the IMF “number two” has always been a U.S. citizen, whose influence within the institution is highly significant.
Up until 2019, the president of the World Bank had always been an American citizen. In fact, it wasn’t until 2012 that a non-American had even been nominated for the position.
This is a big ‘reveal preference’ as to where the true intentions of the IMF and the World Bank Group actually lie, as is the fact that they are located in Washington D.C., right next to the White House.
Voting rights are determined according to how much money each member state contributes and the distribution of these voting rights determines how much relative power each member has. Originally, the distribution of votes clearly reflected U.S. and British supremacy across the two institutions. In 1947, these two countries together had over 48% of the votes (34.23% for the United States and 14.17% for the United Kingdom). The voting structure of both organisations has been revised numerous times since then, most notably to increase the voting shares of Saudi Arabia and China, but still overwhelmingly favours the U.S. and its allies such as Europe and Japan.
Built in veto
The voting structure ensures that in both institutions the United States has a built-in veto for all major decisions. The U.S. has imposed an 85% majority vote for all major decisions but because the United States is the only member state with more than 15% of the voting rights they have a built-in veto on all major decisions and can stop the institutions from taking action that isn’t in their best interests. In the case of the IMF, a change in the voting share of individual countries itself requires a supermajority of 85%, ergo without America’s consent, a change in a country’s voting power isn’t possible. Despite the U.S. voting share decreasing over time, it retains the effective veto regardless.
Éric Toussaint, a Belgian political scientist, believes that the U.S. Treasury is the uncontested master on board, with the power to block any change contrary to its interests.
The World Bank requires sovereign immunity from countries it deals with, meaning that they are absolved from all legal liability for their actions.
Facilitating Flows of U.S. Capital
The IMF and World Bank would gradually adopt new roles according to the changing geopolitical landscape. This included expanding capital flows into the U.S. and overseeing infrastructure projects across the world that provide access to those countries for U.S. companies and manufacturers. The goal was to find new areas for intervention to build U.S. power, grow influence and consolidate capital flows.
John Perkins explored this idea in considerable depth in his memoirs, Confessions of an Economic Hitman. Perkins documents extensively how he would go to developing countries and get governments to sign up for long-term infrastructure projects that incur unpayable debts in the process. The goal of this was to maximise payouts to U.S. firms and make these countries increasingly dependent on the United States all the while increasing the reach of the global American empire and its network. He writes:
“private companies specializing in such activities, as well as the U.S. military and defence industry, could expect generous contracts. Their presence would require another phase of engineering and construction projects, including airports, missile sites, personnel bases, and all of the infrastructure associated with such facilities.”
If debtor countries defaulted on their payments these diplomatic envoys from the IMF demanded cut-price access to raw materials and natural resources, control of UN votes or the installation of military facilities to remain indefinitely. They also demanded that countries purchase capital goods from U.S. firms and privatise their utilities (a theme we will revisit later on) as well.
In most respects, it was American companies that benefited from these projects: companies such as Bechtel, Halliburton, the Carlyle Group, Stone & Webster, Brown & Root and others. Another by-product of these ventures was to merge the interests of big corporations, multilateral organisations, international banks and governments together like never before, who together formed a self-reinforcing cycle of power and influence. Perkins helped build the diplomatic channels that gave America access to these countries.
As he documents in considerable depth, countries and their leaders that resisted such encroachment included, among others: Guatemala (under Arbenz), Iran (with Mossadegh), Panama (led by Omar Torrijos), Chile (with Salvador Allende) and Ecuador (Jaime Roldos) and these leaders faced being overthrown if not outright assassinated at the hands of the U.S. military and intelligence apparatus.
Bretton Woods Institutions and the Washington Consensus
In the 1980s the role of the IMF and World Bank were increasingly defined by the principles of the Washington Consensus which worked together to help usher in the new era of neoliberalism. Now, their stated ideological goals were to promote free-market economic policies, broadly defined as deregulation, privatisation and liberalisation, primarily through the implementation of structural adjustment programmes (SAPs) for countries that defaulted on their debt obligations. In essence, these programmes involved redirecting capital and resources from the state to the market and opening up these markets to U.S. corporations, as Perkins describes in his book. As the third-world debt crisis got underway in the 1980s, many Latin American countries defaulted on their debt obligations and the IMF and the World Bank led the highly controversial structural adjustment programmes for the debtor nations.
The Bank and the Fund became intermediaries between the economic policies of the Washington Consensus and the debtor countries.
Policy prescriptions from the IMF for these countries included aggressive fiscal consolidation measures (or austerity), cutting public spending, introducing or increasing VAT and other indirect regressive taxes, removing unions, privatising public utilities and social services, and drastically reducing government subsidies, pensions and other government-funded liabilities all the while maintaining low corporate tax rates and low tariffs on imports. Other policies that were enacted in order to increase foreign investment and capital inflows from abroad included: currency devaluation, increasing domestic interest rates and the liberalisation of domestic financial markets.
From 1973 till the outbreak of the crisis, countries such as Mexico, Venezuela and Brazil borrowed vast sums from both the World Bank and private banks. In the case of Mexico, the World Bank encouraged them to take on more loans because they claimed their GDP would soar owing to oil discoveries in the Gulf of Mexico. World Bank loans to Mexico quadrupled from 1973 to 1981 but a collapse in global oil prices at the start of the 80s and the Volcker Shock in 1980 saw revenues into Mexico plummet and interest rates on existing debts skyrocket. In August 1982, Mexico declared that they could no longer service their existing debts and would have to default. This is where the IMF entered and began to implement the policies as described above that would have devastating long-term effects for Mexico and the Latin American region as a whole.
UNICEF reported that the structural adjustment programs of the World Bank and IMF led to “reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa”. The policy prescriptions had catastrophic consequences: per capita income declined and poverty spiralled out of control. Due to the plummeting employment rate, children and young adults were forced into the drug trade, prostitution, trafficking, and terrorism. Living standards deteriorated and crime increased and as governments were not in a position to redirect funds for much needed social programmes that could arrest their decline which caused widespread anger and resentment from the people. In the late 1980s, Brazilian officials planned a debt negotiation meeting where they decided to “never again sign agreements with the IMF”. The 1980s is known in Mexico as “the lost decade” whilst the region as a whole experienced negative growth of almost 9%. A combination of U.S. monetary policy, hubris on the part of Mexico’s government, along with the IMF and their structural adjustment programmes devastated Mexico’s economy, leading to the huge exodus of people from Mexico to the United States that continues to this day.
Promoting the Fiat System
Originally, the IMF and World Bank played a central role in designing and overseeing the fixed exchange rate system created at Bretton Woods. But after this system collapsed in 1971 (when Richard Nixon removed the gold peg), these institutions would eventually pivot to actively promoting the diametric opposite: a fluctuating exchange rate system, with no pegs or fixed rates, where the value would be determined solely by the market. This is the system that allowed for near infinite credit expansion and the development of the shadow banking system and ushered in the age of “finance capitalism” which prevails to this very day.
At the beginning of the conference America’s military, industrial and economic superiority was beyond question. What they really wanted to consolidate was power and that is what Bretton Woods was about. And the foundation of American power is its currency and its status as the global reserve currency.
Many of the structures and edifices of U.S. power were conceived at Bretton Woods. The Bretton Woods System was the first example of a fully integrated, international monetary order intended to govern monetary relations among independent nations and this is where U.S. power was formalised. This order would gradually go on to spread to other domains as well: areas such as trade, diplomacy, foreign policy, and culture.
From this point onwards, Washington would stop at nothing to defend the dollar’s position as the world’s reserve currency and its role as the global hegemonic power.
By becoming the sole creditor to the new global monetary system, by tying all other currencies to the dollar and fostering the institutions that would oversee this apparatus, the U.S. had centralised power in a way like never before. Developing liquid financial markets, mainly the market for U.S. treasury bonds and debt securities, along with the advent of the petrodollar system on top of all of this would be a significant extension of their power, helping the U.S. consolidate their position as the global superpower, a position it still holds today as I write this now. And this all started at Bretton Woods.