Wallerstein: You see, this time is a tricky phrase. Youre assuming a collapse is a matter of a year or even a decade, whereas a collapse of a system takes 50, 70, 80 years. Thats the first thing to be said. The second thing to be said is that all of what youre pointing at are exactly the mechanisms by which you exported unemployment. Basically, the OPEC oil crisis was a mechanism which was very much supported by the United States. Indeed, one could even argue that it was instigated by the United States. We have to remember that the two key governments that pushed for the 1973 oil rise were Saudi Arabia and Iran, then under the Shah of Iran, the most pro-American government in the whole of OPEC. The major consequence of that oil rise and price rise, the first one, was in fact to shift money to the oil-producing countries, which was immediately placed in U.S. banks. It was harder for Europe and for Japan to deal with this than it was for the United States. At which point, I dont know if you are aware of this, but there were people from the banks, who in the 70s, went on missions to countries all around the world and spoke to the finance ministers and said: Wouldnt you like to have a loan, because, after all, you have balance of payment problems that give you political difficulties and were very happy to give you a loan. And that will solve your balance of payment problems in the meantime. Of course, you make some money on the loan. But quite aside from anything else, you create this indebtedness which bursts because loans always have to be paid back.
Chronic US Debt
There was the so-called debt crisis, which is often dated at 82 because of Mexico. I date it at 80 because, I think, Poland started it. And if you analyze the Polish situation, it was a loan problem of the same kind, and they tried to handle it same way by squeezing the workers who rebelled and so forth. As a result of that, all of these countries got into trouble. So we had to find some other loans. The eighties was the period of the junk bonds. Youre getting this mechanism by which companies are buying up other companies and creating junk bonds and making loads of money. Of course, when that explodes, you have to look for new mechanisms.
The new mechanism is the U.S. government and the U.S. consumer. That is the 90s and 2000s. That is to say, we get the U.S. government under Bush becoming indebted. You get the consumer becoming highly indebted, which then gives way to a symbiotic relationship with China and a number of other countries, including Korea, who invest their money in treasury bonds. That creates this incredible situation where the U.S. is totally dependent on the loans, but loans have to be repaid at some point. Were at that point right now. Countries like China -- of course, not only China, its just the one most talked about, its true of Norway, its true of Qatar -- are in this delicate situation where on the one hand they want to sustain the United States so they continue to buy their products and on the other hand the money that theyve invested is losing value all the time because its in dollars. And the dollar is going down. So, its two curves that cross. Youve got to lose more one way or the other.
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US combined deficits, 1960s to present
Basically, theyre moving slowly out of the dollar and the dollar is collapsing. And that adds more to the collapse of U.S. hegemony because the last two pillars of U.S. hegemony in the first decade of the 21st century have been the dollar, which is now kaput as far as I can tell, and the military is useless.
Its useless because you have all this magnificent machinery, 10 times more than I dont know who else and so forth: all these planes, all these bombs and everything that is up to date, but you dont have soldiers. Iraq and Afghanistan and everywhere else have proved youve got to send in soldiers. You dont have soldiers because politically its impossible in the United States. The last time we used actual American soldiers we got a rebellion called the Vietnam crisis. So, we dont use soldiers, we use mercenaries. So you buy the services of the poor: blacks, Latinos and rural white youth. Thats what makes up the U.S. Army and Marine Corps. Theyre being a little bit overused at the moment, so even they dont find it good enough to re-enlist. Then theres the National Guard and those are more middle class types. They never expected to be spending years and years in Iraq, so they dont re-enlist. So, we have no soldiers. Basically, the U.S. has no soldiers it can send anywhere. All the talk about North Korea, all the talk about Iraq, all the talk about Somalia is nonsense. There are no soldiers and you cant just bomb them. It doesnt work. So, we dont have armed power, suddenly everybody realizes this and everybody is saying were not afraid of you because you dont have any power. You dont have military power. Youre spending your money on a big machine, but it doesnt work. You cant win a war with it. Now that people have suddenly really realized that, the U.S. has nothing to play with.
There it is. Its got a big financial crisis, the U.S., worst of all, I suppose. The dollar is just one currency among several and one power among others. From the U.S. point of view, we are in a bad situation, which is why we elected Obama. But hes not going to do any magic. The most he can do is a little bit of social democracy within the United States, which is very nice and Im all for it. It reduces the pain, but he cannot restore U.S. hegemony in the world and he cannot get us out of the world depression by some magic policy of his own. He doesnt have that power, but nobody else does. There we are. This is why its a chaotic situation that fluctuates wildly. Nobody knows where to put their money. Literally nobody knows where to put their money. It may go up and it may go down. It changes almost daily. It is truly a chaotic situation and it will continue to be that for some time. So, its a very unpleasant situation in terms of an ordinary life. A very dangerous one on the individual level and, I suppose, on a collective level. I have a friend who said despite Mumbai, he is going off to India on this trip. I said, OK. It is dangerous, every place is dangerous now. What is a non-dangerous place? It used to be that those nice hotels were the non-dangerous places.
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Suh: Now, theyre the targets.
Wallerstein: Theyre the targets. Theres no way. I mean, so-called terrorists have all the advantage when they can pick the place. Theres no way to defend everything. Theres just no way. You can choose a limited number of places and put up enormous concrete barriers. Thats what the U.S. has done in Baghdad with the green zone. So, you can be relatively safe, but its not perfectly safe. People do manage to get even in there. Its just one unit, if youre outside that unit then...
Suh: Whats different about this time, you suggest, is that we are entering not only a particularly turbulent Kondratieff B phase but we have also entered the terminal crisis of the world economy. If we have been in this terminal stage for some time, what does the current economic crisis do? What does it mean?
