In the last six months the dollar has dropped in spectacular fashion on the money markets of Frankfurt, Tokyo, and Zürich. Even in London and Paris its standing has declined perceptibly. Since the realignment of currencies in 1971, the dollar has dropped on the order of 33% to 40% in relation to the strong currencies. This is as clear as day. It cannot remain without consequences in a capitalist economy in which money-including paper money—is not only a means of exchange but also a means of paying debts and of hoarding.
To be sure, the dollar has not declined in relation to all currencies. Over the longer range the currencies of several imperialist countries, above all the British pound and the Italian lira, have depreciated as much as the dollar. In the shorter term, the same applies to the currencies of the Scandinavian countries. The Canadian dollar has depreciated even in terms of the American dollar. Furthermore, most of the currencies of the semicolonial countries-with the exception of those of the richest Arab oil exporters—are either aligned with the dollar or have experienced a depreciation even steeper than that of the dollar.
Nonetheless, this does not mean that the decline of the dollar does not have significant consequences for all aspects of the international capitalist economy. It even has repercussions, although obviously in a more limited way, on the economies of the bureaucratized workers states. These stem from the predominant role the dollar has played in the capitalist economy since the Second World War. Because of that role, these repercussions exert a destabilizing tendency on the entire international economy.
The general impression prevalent among commentators of both the right and the left is that the decline of the dollar is the result of a more or less deliberate maneuver by American imperialism, so as to improve its competitive position and to impose its economic proposals on its reluctant competitors, above all West Germany and Japan. The headlong plunge of the dollar, according to this view, is supposed to stimulate American exports at the expense of those of West Germany and Japan, making the former cheaper and the latter more expensive.
To protect exports by their own capitalists, this theory holds, the West German and Japanese governments will sooner or later be compelled to "support" the dollar, that is, to buy it in massive amounts on the money markets. But in doing so they will automatically expand the amount of their own currencies in circulation, thereby finally beginning the much talked about process of "accelerated reflation" the Carter administration has tried to impose for more than a year without great success.
An accelerated monetary expansion in West Germany and Japan will renew inflation there, this theory continues, while at the same time stemming the depreciation of the dollar in relation to the strong currencies. Accordingly, American imperialism will gain on all accounts by allowing the dollar to continue to fall for the time being.
It is true that monetary manipulation, of which devaluation is only one variant, is an instrument used by all the imperialist powers to improve their competitive position. Conditions of economic recession or depression, such as we have experienced for the last four years, favor the use of such techniques. To postulate that the United States has only repeated on a grand scale what Britain, Italy, France, and Sweden had done earlier would therefore seem quite reasonable.
But the consequences of such manipulations are much more complex when they involve the main reserve currency of the capitalist world, including the consequences for the economy of a country that takes the initiative of lowering the exchange rate of its currency.
We should note first of all that although the massive devaluation of the pound sterling and the Italian lira seems to have resulted in effectively reestablishing the balance of payments of these two imperialist powers, the same is not true for the United States. There is no sign that the U.S. balance of payments deficit is on the verge of being rectified-quite the contrary.
Why? Because big business-first and foremost the multinationals, including the American multinationals-expect the U.S. balance of payments deficit to persist. This means continued erosion of the dollar's rate of exchange, which big business is compelled to prepare for, namely by speculating against the dollar, which in turn accentuates and amplifies the drop in the dollar's exchange rate.
We should also note that the extent of U.S. oil imports cannot be the fundamental explanation for the growing trade and balance-of-payments deficits in the United States. With the exception of Britain, the United States relies less on oil imports than any other imperialist power. It is not in regard to oil imports that the shoe pinches but in regard to the trade balance for manufactured products. The U.S. share in world exports of manufactured products continues to decline. On the other hand, its share of imports of such products continues to increase. To be sure, the rate of inflation in the United States, which is higher than in West Germany and Japan, also comes into play here.
But underlying the crisis of the dollar is a structural phenomenon of long duration and not a mere accident of the moment. The United States has lost the "monopoly on high productivity" it enjoyed in the decade following the Second World War. Increases in the productivity of U.S. industrial labor have consistently been less rapid than those recorded by its main competitors.
Apart from the advantage the United States retains in certain fields such as big computers and "aerospace," its edge in nearly all other major export sectors is a thing of the past. These include autos, electrical and electronic equipment, machine tools and electrical machinery, steel, textiles and synthetic products, and shipbuilding. Even in the fields of nuclear power and aviation, where the U.S. monopoly seemed assured, American capitalists have had some of their tail feathers plucked in the last few years.
The figures speak volumes. There is a clear correlation between the evolution of increases in the productivity of labor and the respective share of the world market for manufactured products gained by the different imperialist powers. The least that one can say is that if the decline of the dollar is a step taken to modify this correlation, up until now it has certainly not been a major success.
Between 1964 and 1975, labor productivity in manufacturing in the United States increased at an annual average rate of about 3.5%, as opposed to 5% for West Germany, 6.5% for France, and 10.6% for Japan. Between 1970 and 1974, the average annual increase was, respectively, 3.8%, 5.1%, 5.9%, and 8%.
The U.S. share in world exports of manufactured products dropped from 21.5% in 1964 to 18.5% in 1970, 17.7% in 1975, and 16.5% in 1977. The West German share rose from 19.3% in 1964 to 19.8% in 1970, 20.3% in 1975, and 20.5% in 1977. The Japanese share rose from 8.1% in 1964 to 11.7% in 1970, 13.6% in 1975, and 15.4% in 1977.
In 1959 an American company dominated 11 of the 13 branches of the manufacturing industry. By 1974 this figure had dropped to 7 out of 13. In 1959, 63% of the 156 biggest industrial corporations in the world were American. By 1974 this figure had dropped to 43%, as opposed to 36.5% for the European multinationals and 20% for the Japanese multinationals.
We should add that the "Machiavellian" scenario attributed to the imperialist chiefs in regard to the decline of the dollar has not only turned out to be of little help in terms of exporting goods, but that this is not the only possible outcome of that decline. If the West German and Japanese governments persist in giving the fight against inflation the same priority they have up until now, they could reply to the swelling of the monetary supply provoked by the influx of dollars by instituting both sharp budgetary restrictions and measures to control the movement of capital (as the Swiss have already done). The result would be to precipitate a new contraction of world trade and a new recession, and not an alignment of the mark and the yen with the depreciated dollar.
However, the main weakness of all the analyses that exaggerate the politically induced and sought-after aspect of the decline of the dollar lies elsewhere. It involves a clear underestimation of the consequences of this decline for the movement of capital, a failure to understand the specific nature of the imperialist epoch and the essential role that finance capital and the international movement of capital play in it.
The accelerated depreciation of the major paper currency on the world market undermines its role as the general equivalent and generally accepted means of payment. Even within the borders of a single state, and all the more so on the world market where no sovereign state exists, no extra-economic force can in the long run compel an owner of goods or a creditor to accept an unwanted currency in payment. To suppose the contrary is to close one's eyes to the nature of the capitalist system, which is based on private property and competition.
In the present circumstances the accelerated depreciation of the dollar cannot help but provoke a series of chain reactions, the most important of which appear to us to be the following:
1. If the fall of the dollar favors the export of American goods, then by the same logic it must also make more likely the export of capital by the European and Japanese imperialists. In fact, while investment by the American multinationals in Europe is stagnating or even diminishing (i.e., an actual drop in investment), European and Japanese capitalists are swarming to the United States. There, one after another, they are building factories, taking over American companies, carrying out mergers, buying real estate, and even purchasing farms. If the present tendency continues for a few years, the cumulative sum of direct investment of capital abroad by European and Japanese capitalists will equal or exceed foreign investment by American capitalists. We should not forget that a 40% dépreciation of the dollar in relation to the mark or the yen means that it takes 40% fewer marks or yen for a European or Japanese trust to buy a factory in the United States.
2. The depreciation of the dollar facilitates the expansion of the European and Japanese banks on a world scale. These banks have aggressively gone after business, both in the field of international credit and in issuing international loans. In fact, among the 20 largest banks in the world in terms of total deposits, at the end of 1977 only 4 were American (it is true that 2 of those 4 were still the world's first and second largest). Ten were European, 5 were Japanese, and 1 was Brazilian. And while in September 1977, more than 75% of new Eurobonds were payable in dollars, this percentage had fallen to less than 20% by February 1978 (Business Week, March 20, 1978, p. 150).
3. A growing portion of world trade is beginning to be conducted in currencies other than the dollar, above all the mark and the yen. This tendency is still embry. onic, but is becoming more pronounced.
4. A growing portion of the liquid capital held by the big multinationals, American as well as European and Japanese, has been placed in banks outside the United States, in currencies other than the dollar.
5. The central banks are beginningcautiously and on a scale that is still limited—to hold exchange reserves in currencies other than the dollar. Whereas the share of these "other currencies" in the overall reserves of the world capitalist banks amounted to only 7% in 1970, it has risen at present to 25%. And if you take into account the increase in the price of gold as expressed in depreciated dollarsan increase that at present only the Bank of France and the Bank of Italy take into account in calculating their exchange reserves-the dollar's share in these reserves appears likely to fall below 50% in the first quarter of 1978.
6. The creators of the famous petrodollars-that is, the richest oilexporting countries, essentially Saudi Arabia, Kuwait, Qatar, and the Arab Emirates—have practically stopped accumulating new dollars. They are maintaining their old deposits in dollars but their current revenues are immediately converted into strong currencies. This shift has been under way for more than six months. In February alone, a billion dollars were converted in this way.
7. The decline of the dollar means a loss of revenue for countries whose exports are paid for in dollars, a loss that in the space
of a year has amounted to 10% for the OPEC [Organization of Petroleum Exporting Countries] countries as a whole and nearly 13% for Qatar (the hardest hit). The imminent response appears to be a move to base the price of oil in terms of an average of eleven currencies (The Economist, March 18, 1978, p. 15). That would mean an increase in the price of oil imported by the United States, and therefore a worsening in the U.S. balance of payments deficit, and therefore a new depreciation of the dollar.
In their most extreme form, these chain reactions include the risk of a general withdrawal of petrodollars from the United States, which could lead to a general collapse of the country's credit system.
To be sure, there is little likelihood of such an outcome at the moment. Saudi Arabia, which alone holds $65 billion in dollars, is highly dependent on American imperialism politically, militarily, and technologically. Its rung class has no interest in destabilizing the international capitalist economy in a disastrous way. But the financial sacrifices that it is prepared to accept in return for socio-political considerations have their limits. Altruism does not exist in the universe of the owners of capital, above all among billionaires.
If keeping the famous $65 billion in the dollar zone means a loss in purchasing power on the order of 40% to 50% over the course of a few years, the sheiks will calculate how to limit their losses, like all good managers of fortunes educated at Harvard Business School (which is where the new generation of sheiks have gone for their education). The Arab Emirates were dependent, and still are, from every point of view, on British imperialism. But when the pound sterling was declining sharply they ended up making massive withdrawals from their deposits in London.
What frightens the imperialist world is not so much the fall of the dollar in and of itself. In the last analysis, capitalism has survived the decline of the pound sterling and any number of other monetary and financial catastrophes. What frightens them is that there is no other currency ready to take the place of the dollar, the way the dollar had previously taken the place of the pound sterling as the main reserve currency.
Paradoxically, West Germany and Japan, not to mention Switzerland and the Netherlands, are making frenetic and desperate efforts to avoid having their currencies used as reserve currencies. Apart from the fact that the history of the last forty years shows how dangerous it is to be caught up in the whirlwind of speculation that goes along with the "honor" of exercising such a function, the economies of these countries clearly do not have the necessary scope-comparable to that of Britain in the nineteenth century or of the United States in the period from 1940 to
1975—to exercise such a role.
And it is here that we touch on the core of the difficulties imperialism has encountered in trying to replace the international monetary system based on the gold-dollar standard, the system that collapsed in 1971, with a new one. It would have been difficult enough to do this in a period of relative prosperity. It is even more difficult to do it in a period of depression. The resistance put up by the international working class toward shouldering the burden of the "restructuring process" increases even more the difficulty of the task. Still, however, the main difficulties lie in the fact that in face of the relative decline of American imperialism—which is still by far the relatively strongest powerno other power has risen that is capable of replacing American leadership.
"Collective leadership" will certainly be no more of a success for the imperialists than it has been for the Soviet bureaucracy. In the absence of both a dominant leadership and a collective leadership, it is the absence of any leadership at all that characterizes the political, economic, and monetary scene for the imperialists. The way in which the crisis of the dollar has been "managed," or rather not managed, is a perfect illustration of this crisis of leadership.