Contextual Content

The Dollar: Dive or survive? Pt.2

Leo Panitch: Lower dollar will harm developing countries; will offer little help to US workers


Story Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. We’re talking to Professor Leo Panitch about the declining American dollar. Thanks for joining us again, Leo.


JAY: So for American workers this must be sort of a mixed message, the decline of the dollar. I guess it will make American exports a little cheaper. It might be a bit of a stimulus. On the other hand, the long-term consequences might be what?

PANITCH: Well, you know, there’s no doubt that it will allow for the American trade deficit to be rebalanced somewhat, which people have been calling for. It’s true that the American dollar has been very highly valued visa the other currencies. And especially Asian currencies have explicitly, by their governments and central banks, been tied to the American dollar, right, in order to keep their relatively low ratio to the American dollar and therefore export more easily. This will mean that it will become more expensive for Wal-Mart to be importing stuff from China. And in that sense it’ll probably save a few American jobs. But given that so much of what Wal-Mart imports from China is made by American firms who invest in China, it’s not clear how this is going to balance out, because the very companies that workers may be saving their jobs on on one side by virtue of not as many exports are going to say they’re making less profits. So, you know, it’s hard to know how it’s going to balance out, even for American workers. Moreover, you know, the American trade unions make too much of the importance of exports, the need to limit imports. You know, it’s still the case that the American economy, less than any other, is dependent on exports. It’s an enormous market in and of itself within the United States, and American jobs don’t nearly depend as much on exports as American labor sometimes say they do. That said, it’ll make it easier for people, there’s no question. And it would not be a good thing in the middle of this crisis, given the level of unemployment, where it is and where it’s likely to stay, for the American dollar to be raised in this context. Now, as soon as you say that, that means, of course, you’re saying at the same time that Canadians who depend on exports to the United States and Germans who depend on exports to the United States and Chinese workers who depend on exports to the United States—.

JAY: Or Indians and Pakistanis and—.

PANITCH: And the whole world depends on the United States as the world’s final consumer, consumer of last resort. They will, in the context of what is also a difficult situation already for them, be facing greater difficulties. But you have to keep this in proportion. The American dollar has so far only fallen to where it was in 2007. The American trade deficit started getting corrected already, even with the dollar going up after 2007, because the amount of world economic activity had declined and there wasn’t as much exporting going on, simply because workers couldn’t afford, even with the high dollar, to be buying much. So, you know, nothing much has yet changed [inaudible]

JAY: Now, but do you think the dollar continues to fall? Or at some point do the central banks get together and say is enough’s enough?

PANITCH: Oh, yeah. I mean, it may fall a little lower than where it was in 2007. But, of course, the American state, together with the central banks of Europe and Japan in particular, are managing a global economy. They’re managing it together. The Americans are top dogs in this. They do most of the coordinating of the G-20, etcetera. It’s done right in Washington. But, of course, they’ll be monitoring this carefully in terms of how far this can go. And the American state has to have an interest in the German economy not tanking, either. And it does have an interest in it, and that’s partly because General Motors still owns a piece of it and Ford still owns a piece of it. And that’s true in every country of the world. And, in any case, it has geo-political consequences. And the American state is also managing NATO and have concerns about the NATO states coming into Afghanistan and not pulling out of Afghanistan. No, this is a global system that the American state is at the center of managing, a global capitalist world now, and the American state will not let the dollar tank to such an extent, even if it is beneficial for American industry in a very narrow sense. But remember most American big capital is multinational corporations. Right? But even if it is in a very narrow sense, they won’t let it go at the cost of the rest of the world.

JAY: Now, for some of the poorest countries, this could be quite disastrous, ’cause it’s already disastrous.

PANITCH: It could be serious for them. I think that that’s true. And that raises very large questions of a very fundamental kind about having bought into what’s called export-oriented capitalist development, which the Americans have been pushing since the 1960s, since the Kennedy administration changed policies from aid to lending. And the condition of lending is that you’ll pay it back, and therefore you have to export in order to get American dollars in order to pay the loans back. Right? It’s been going on since the ’60s, and this is what the whole free-trade movement was about, trying to get everyone to follow the Japanese and Korean example of developing a capitalist economy on the basis of export-oriented production. And most Third World countries were induced to buy into this after the debt crisis by the World Bank, by the IMF, etcetera. And they need to start looking very, very seriously at whether they want to be following that path. And I must say that those who appear to be critical in the G-20 of globalization as we know it, including Lula [da Silva] as often head spokesman of this, is actually calling for a fairer globalization in the sense of export-oriented production, that is, more access for Brazilian agriculture into the American market or the European market. But that ends up tying Brazil’s agricultural production to the export of one or two crops, like soy, that are needed in China or needed elsewhere, rather than producing the kind of balanced agriculture that 200 million Brazilians need in order to survive. So this takes you to a very, very fundamental question. It’s not that one doesn’t want to challenge the way the world has gone under an American-led globalization with the American dollar as the global currency; it’s that one needs to challenge it in a much more fundamental way than hoping that the American dollar by itself is going to tank.

JAY: For American workers, what kind of policies should they be the demanding if in the long run, as you said in part one of this interview, at some point the Americans are going to defend the dollar, and one of the ways they’re going to defend the dollar is through what they call entitlement programs—they’re going to raise interest rates, and it’s all going to be done on the backs of American working people? So what’s the alternative? What policy should they be asking for?

PANITCH: Well, at a minimum they should be asking for a change in American public expenditure so that it’s oriented away from military expenditure to social expenditure. They should of course be demanding that Wall Street does not have the degree of control and influence in this administration as it did in the Bush administration. They should be ensuring that what you read in The Wall Street Journal is what is not being repeated in the US Treasury. And, to some extent, insofar as the US Treasury is letting the dollar go down, is not restructuring expenditure or raising interest rates immediately in the face of it going down, you know, this is reflective of a democratic administration rather than a Republican.

JAY: And a fear of the levels of unemployment.

PANITCH: Yes, and the costs of what this would entail in the middle of this crisis, no question. And not only in the United States—worldwide I think they’re looking at this. But you need to go much further than that. You need to look at the kind of role the American state has played in promoting the kind of neoliberal economy, the kind of neoliberal globalization that it has, really since 1945, but with great gusto and success since 1980. And that involves taking on the Democratic Party, which has been central to this, as much as the Republican Party. It means, you know, having ambitions for changing the nature of the American state in a far more democratized fashion than has been on the agenda of American working people. It’s not just about, you know, having a lower dollar or having more protections against exports. This is all marginal stuff. It’s about, you know, introducing the kind of policies that go beyond the New Deal of the 1930s.

JAY: And then, within that, two issues: one being what’s going to happen with the unemployed and in terms of what policy in the very short-term as should be demanded by unemployed people and other working people, and wages, because on both sides, nothing seems to be changes. Wages are stagnant or going—actually, not stagnant. Wages are going down and unemployment numbers are going up.

PANITCH: You need at a minimum the kind of massive public infrastructure program that you did get in the second New Deal under Roosevelt, where the massive dams were built that put enormous amounts of people to work. This means you need public capital invested. You need the kind of public planning capacity that has been atrophied in the American state for such a long time. You know, the American civil corps of engineers has lost much of its capacity. It’s one of the reasons you had the disaster in New Orleans during Hurricane Katrina. You need to build up that public capacity again. You need to give it the ability to provide a lead, not be following private capital’s lead, in terms of what is needed in terms of new capital investments. And there need to be public capital investments in the United States. You can put a lot of people to work on that. You need to convert a lot of production into, yes, a green New Deal, but one that is really transformative. So that means not just saving General Motors, but it means transforming General Motors so that the tool and die makers who have enormous skills—which are being thrown away, which are being wasted—are making solar panels rather than automobiles. And it isn’t just a matter of turning to, you know, the kinds of automobiles that are run on electricity as well as fuel, petrol fuel, because electricity also requires coal-fired plants to get going. You need to change the whole transportation infrastructure of the country. And the people who have skills who are losing their jobs ought to be part of that. You’re throwing away a legacy of skilled workers, of plant, of whole communities that sustain this. And it’s a tragedy, and in many ways it’s irrational.

JAY: Thanks for joining us.

PANITCH: Okay, Paul.

JAY: Thank you for joining us on The Real News Network. And don’t forget, if you want to see more of this, you’ve got to click the Donate button that’s either up there or down there, depending on what player you’re looking at. But we need you to click “Donate” if you want to see more of this type of interview. Thank you very much.


Please note that TRNN transcripts are typed from a recording of the program; The Real News Network cannot guarantee their complete accuracy.