Blowback, Second Edition: The Costs and Consequences of American Empire

Over time, however, this pattern produced gross overinvestment and excess capacity in East Asia, the world’s largest trade deficits in the United States, and a lack of even an approximation of supply-and-demand equilibrium across the Pacific. Contrary to Communist analyses of how neocolonialism should work, these terms proved surprisingly costly to the imperial power. They cost American jobs, destroyed manufacturing industries, and blunted the hopes of minorities and women trying to escape from poverty.

Judith Stein, a professor of history at the City College of New York, has detailed how the de facto U.S. industrial policy of sacrificing American workers to pay for its empire devastated African-American households in Birmingham, Alabama, and Pittsburgh, Pennsylvania. This is, of course, but another form of blowback. She writes, “At the outset of the Cold War, reconstructing or creating steel industries abroad was a keystone of U.S. strategic policy, and encouraging steel imports became a tool for maintaining vital alliances. The nation’s leaders by and large ignored the resulting conflict between Cold War and domestic goals. Reminiscing about elite thinking in that era, former Federal Reserve Board chairman Paul A. Volcker recalled that ‘the strength and prosperity of the American economy was too evident to engender concern about the costs.’ ”² Moreover, American economic ideologues always dominated what debate there was, couching the problem in terms of protectionism versus internationalism, never in terms of prosperity for whites versus poverty for blacks. The true costs to the United States should be measured in terms of crime statistics, ruined inner cities, and drug addiction, as well as trade deficits.

U.S. officials did finally start to negotiate more or less seriously with the Japanese and the other “miracle economies” to open their markets to American goods. But the attempt always collided with the security relationship. In order to level the economic playing field, the United States would have had to level the security playing field as well, and this it remains unwilling to do.

In East Asia, to create industries that could export to the American market, design the right products, and achieve competitive prices and levels of quality, governmental industrial policies became the norm. Japan was the regional pioneer in creating model collaborative relationships between government and industry. In part, it drew on its history as one of the world’s most successful late industrializers and on its wartime production system, in which the government and the huge zaibatsu, or corporate combines, had worked together to produce the weapons that Japan needed. After the onset of the Cold War, the Americans did very little to prevent the Japanese from re-creating the combines (now called keiretsu) and the legal structure that supported them, largely because occupation officials either failed to recognize what was happening or were blind to its implications.

To base a capitalist economy mainly on export sales rather than domestic demand, however, ultimately subverts the function of the unfettered world market to reconcile and bring into balance supply and demand. Instead of producing what the people of a particular economy can actually use, East Asian export regimes thrived on foreign demand artificially engineered by an imperialist power. In East Asia during the Cold War, the strategy worked so long as the American economy remained overwhelmingly larger than the economies of its dependencies and so long as only Japan and perhaps one or two smaller countries pursued this strategy. But by the 1980s the Japanese economy had become twice the size of both Germanies. Anything it did affected not just the American but the global economy. Moreover, virtually everyone else in East Asia (and potentially every underdeveloped country on earth) had some knowledge of how to create such a miracle economy and many were trying to duplicate Japanese-style high-speed growth. An overcapacity for products oriented to the American market (or products needed to further expand export-oriented economies) became overwhelming. There were too many factories turning out athletic shoes, automobiles, television sets, semiconductors, petrochemicals, steel, and ships for too few buyers. The current global demand for automobiles, for example, seems to have peaked at around 50 million vehicles at a moment when capacity has already grown to 70 million. To make matters worse, as a result of the global economic crisis, auto sales in Southeast Asia fell from 1.3 million in 1997 to 450,000 in 1998.