THE MINOTAUR’S DEATH CRAMPS

In this new emerging post-Minotaur system, authoritarianism and liberalism coincide.

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We are already in the midst of a new trade war between the US and China, with the EU slavishly obeying American instructions even when it is clear that they run against Europe’s own economic interests. The general idea is that Chinese exports should be limited due to unfair competition (for example, their electric cars are state-subsidized) or as a protest against political oppression and human rights violations (such as those involving Uyghurs, Tibetans, and pressure on Taiwan). The main measures are either the outright limitation of specific imports or very high import tariffs, which can reach up to 100%.

From the Chinese perspective, such limitations evoke very traumatic memories: when in the early 1800s China prohibited the import of opium from British India, all major Western powers and Japan attacked because, as they put it, a country that limits free trade excludes itself from civilized societies and must be brought back to civilization, even with military means. The result was incredible social and economic devastation in China, which, in a couple of decades, lost more than half of its production. Today, the “developed” West is imposing tariffs on China—a measure of backward countries to protect their obsolete industries. Imports from China were acceptable as long as Chinese factories were just assembling parts engineered in the developed West (recall Foxconn doing this for Apple). However, today, when Chinese industry is becoming inventive and creative, often surpassing its Western counterparts, the West has rediscovered what it despised most in the past.

Even more important than this is the threat to the US dollar as the universal medium of financial transactions. Yanis Varoufakis described this process in detail more than a decade ago. We are approaching the end of an era in the global economic system, and Trump’s flawed vision is nonetheless based on the correct insight that the existing world system no longer works. An economic cycle is coming to an end—a cycle that began in the early 1970s when what Yanis Varoufakis calls the “Global Minotaur” was born, the monstrous engine that ran the world economy from the early 1980s to 2008. The late 1960s and early 1970s were not just times of oil crisis and stagflation; Nixon’s decision to abandon the gold standard for the US dollar signaled a much more radical shift in the basic functioning of the capitalist system. By the end of the 1960s, the US economy was no longer able to continue recycling its surpluses to Europe and Asia; its surpluses had turned into deficits. In 1971, the US government responded to this decline with an audacious strategic move: instead of tackling the nation’s burgeoning deficits, it decided to do the opposite—to boost deficits. And who would pay for them? The rest of the world! How? By means of a permanent transfer of capital that rushed ceaselessly across the two great oceans to finance America’s deficits. These deficits thus started to operate “like a giant vacuum cleaner, absorbing other people’s surplus goods and capital. While that ‘arrangement’ was the embodiment of the grossest imbalance imaginable at a planetary scale /…/, nonetheless, it did give rise to something resembling global balance; an international system of rapidly accelerating asymmetrical financial and trade flows capable of putting on a semblance of stability and steady growth. /…/ Powered by these deficits, the world’s leading surplus economies (e.g., Germany, Japan, and later China) kept churning out goods while America absorbed them. Almost 70% of the profits made globally by these countries were then transferred back to the United States in capital flows to Wall Street. And what did Wall Street do with it? It turned these capital inflows into direct investments, shares, new financial instruments, new and old forms of loans etc.”

This growing negative trade balance demonstrates that the US is a non-productive predator: in recent decades, it has had to absorb a daily influx of 1 billion dollars from other nations for its consumption and is thus the universal Keynesian consumer that keeps the world economy running. (So much for the anti-Keynesian economic ideology that seems to predominate today!) This influx is effectively like a tithe paid to Rome in antiquity (or gifts sacrificed to Minotaur by ancient Greeks) and relies on a complex economic mechanism: The US is "trusted" as a safe and stable center so that all others—from oil-producing Arab countries to Western Europe and Japan, and now even China—invest their surplus profits in the US. Since this "trust" is primarily ideological and military rather than economic, the problem for the US is how to justify its imperial role—it needs a permanent state of war, so it had to invent the "war on terror," offering itself as the universal protector of all other "normal" (not "rogue") states.